Hey Hot Potatoes,

Welcome to the latest edition of the Hot Potato Newsletter. Now, who out there is thinking of starting their own little food business? I must admit, this is something I have thought long and hard about… I’ve always had a few ideas (like most people), but I never get past the idea stage (also like most people!) Well in today’s newsletter, we’re going to take you through the beginning stages of a food business; how to write a business plan, considerations you need to make and what to think about when it comes to finances. Let’s get into it!

In today’s email: Vision to Reality: How to Build a Hospitality Business Plan.

Read Time: Approx 5 mins

Starting your business plan.

Source: Toast

When writing your business plan you should focus on your executive summary, company description and highlight your products and services. This will set the scene and be the basis for your entire business concept.

Key Points:

1. Executive Summary: This should tell your story, cover your idea, have a description of your offering, your goals, the revenue targets, the customers you want to appeal to, what your competition looks like and who makes up the management team. Ensure it is a concise overview of your business and write it in a way that gets the audience interested and wanting to read more.

2. Company Description: This will start to add flavour to you as a founder e.g. what you’re about, your mission, the culture you want to create, the service you want to give and what your menu or offering will look like. It will also delve into the finer details, such as company ownership, where you might want to locate your business, what you want your restaurant to look like and the chosen colours and styles of your brand.

3. Products & Services: Of course, be sure to dive deep into the product or service you are proposing to provide. What problem does your product or service solve? What is your competitive advantage? What will your pricing strategy be?

Eat App have a useful business plan template that you can fill out yourself, covering all the steps required, from your executive summary to your finances. Check it out here.

Marketing and operations plan.

Source: Eat App

Your marketing plan should show you have an understanding of the current landscape and how you can stand out with your offering. Your operational plan looks at all your processes and business needs.

Key Points:

1. Marketing Plan: This is all about understanding your market and encompasses a number of key areas; the market research you have carried out (primary and secondary), barriers to entry and how you'll overcome them, threats and opportunities, product or service features and benefits, your target customer profile, and key competitors. Use a SWOT analysis to assess the strengths, weaknesses, opportunities and threats to your model to really evaluate its potential.

2. Operational Plan: This looks in detail at your production methods, quality control, location details, legal environment considerations and personnel needs (including roles, staffing, and training). Give some thought on who your potential suppliers could be and what sort of inventory you might need.

Your marketing and operations plan are both key to your research phase. They help you start to build a picture of what your business offering will look like and how it will all come together. To start getting some thoughts on paper, use the Eat App SWOT analysis here, which is super useful.

Getting your finances in order.

Source: Eat App

Make sure you’ve got your investment plan written, revised and rewritten to ensure you understand the financial outlook. Work through your P&L (profit and loss statement) and break-even analysis when predicting your cash flow.

Key Points:

1. Investment Plan: In the simplest terms, this is how you’ll deploy your funds and resources in your first year. Think kitchen gadgets, snazzy decor, the all-important payroll, legal must-dos, marketing blitzes and rent.

2. Projected P&L Statement: Creating a P&L before you open will be a bit of a challenge as there are many unknowns, so a lot of assumptions will need to be made. Gauge your expenses and sales figures using insights from your restaurant’s ambition, your target customers, and the local scene.

3. Break-Even Analysis: I don’t know about you but I like working off targets, it makes me feel organised and motivated. This is why it is important to have clarity on monthly revenue targets needed to break-even. Be sure to add up all the overhead and operating expenses and spotlight those variable costs that could sway your figures. Forecast a few different scenarios e.g. breaking even, the base case and then best case to know what success looks like.

4. Expected Cash Flow: Forecasting cash flow requires knowing your inventory purchase cycles, staffing size, wages and the payroll timeline. Once your restaurant is in full swing, anticipate ebbs and flows and how you will navigate during quiet periods.

At the end of the day, you could have the best business idea in the world, but if your numbers don’t stack up, you’ve got to go back to the drawing board. You can download a useful P&L template from Toast to help you start planning your numbers.

Typical cost model.

Source: Toast

We wanted to do some rough calculations for you, so below you’ll see numbers that are based on starting a small takeaway business in London. Take a look at the typical costs you would come across when starting out.

Initial Setup Costs

1. Lease/Rent Deposit: Central London rents can vary significantly; for a small retail space (around 300 square feet), you could expect to pay anywhere from £2,000 to £5,000 per month. Note that a deposit might be 3 months rent.

2. Renovation and Fit-Out: This includes kitchen equipment, counters, lighting, and seating (if any). The renovation and fit-out costs can range between £20,000 and £50,000 depending on the complexity and quality of materials.

3. Licensing and Permits: Food hygiene certificates, a business license, and any other local requirements could amount to £500 - £2,000.

4. Initial Inventory and Supplies: Ingredients, packaging, cleaning supplies, etc. For starting stock, you might need to spend around £3,000 to £5,000.

5. Marketing and Branding: Initial marketing campaigns, website and signage would possibly cost between £1,000 to £3,000.

Operating Costs

1. Rent: As mentioned, £2,000 to £5,000 per month.

2. Utilities e.g. electricity, water, gas: May cost between £200 to £500 per month.

3. Salaries: For two staff members working a typical 40-hour week based on the UK living wage (around £11/hour), a monthly salary for one person would be approximately £1,900. Total for two would be about £3,800 per month.

4. Ingredients: The monthly cost for ingredients could come to £2,000 - £3,000, it largely depends on the scale and menu offering.

5. Insurance: Public liability, employer liability and property insurance could cost between £500 and £1,500 annually.

6. Maintenance and Miscellaneous: Regular upkeep, repairs, and small unforeseen expenses could add another £200 to £500 monthly.

7. Marketing Costs: Ongoing marketing efforts may cost around £200 to £500 monthly.

Additional Considerations

1. Contingency Fund: Always have a buffer (10-20% of your estimated costs) to cover unexpected expenses.

2. Business Rates: Depending on the location, these can vary widely, so check with local government resources.

All in all, there are a fair few costs and it’s easy to understand why hospitality can be such a tough industry to crack! For more advice, check out Gabriel Unger’s article here (founder of Chai Guys and Chai Guys Bakehouse), where he gives tips on signing a new lease and negotiating a better deal.

Today we’ve run through what a business plan looks like and the steps involved for writing one. I’m curious, has this inspired you to get going on your own venture? What’s one new thing you learnt today that you didn’t know before?

For our last edition of the year we want to set you up in good stead for 2025, so we’ll be looking at five ways you can achieve quick wins and build your revenue without needing big investment… you wont want to miss it.

Thanks for reading and don’t forget to subscribe to stay updated weekly on all things hospitality!

Bon appétit,

Max Shipman, Founder, Hot Potato

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