I am researching to see if a restaurant would work in a certain area. I have no idea how I am supposed to forecast sales because local business will not give me any info. How do I figure out if my restaurant will work in this area and how do I create a business plan for my investors?
researching a restaurant
Well, you need to do a market survey and there are a multitude of ways t accomplish that.
First, a little "industrial espionage", totally legal, BTW.
- List EVERY restaurant that might be competition in your area, probably by category, i.e. fast food, quick service takeout, casual, upscale, w/adult beverages, w/o adult beverages.
- Gather menu(s) to discover what the current market prices are.
- Observe and count covers at each restaurant as well as seats in each restaurant, that will provide you with total numbers of people that eat out as well as providing average turns (covers/seats) for each restaurant.
- How long are the waiting lines?
- You may want to categorize the covers as well, i.e. singles, couples, families, seniors, yuppies, etc.
- If possible, you could also interview patrons, probably as they leave to learn how often they go out, how they select where to go, how much they spent, what would they like to see available, etc. Be prepared to be frustrated.
- Find out where the owners,chefs, cooks, servers congregate after work and hang out there, maybe even buy a round or two, start networking, most welcome competition, if they don't, they are not your competition
- Crunch the numbers, that will provide you with the gross market numbers.
Now you have to make some assumptions.
- How will you differentiate your menu offerings to attract customers?
- Are you going to push low cost or high value?
- Serve adult beverages?
- Determine target cover price.
- Guestimate (conservatively) how many customers you will attract, probably low at the beginning.
- Are you going to advertise, social network, join the chamber?
- Target the breakfast, lunch, dinner, or late crowd?
- underestimate revenues and overestimate costs
Crunch the numbers, now you'll have a basis for payroll (you'll only need people to serve your market), a starting figure for your food & beverage costs, and a pretty good idea for your menu items.
Crunch again by reducing revenues by 10-20% and increasing costs by 10-20%. This will give you information for a SWOT analysis, Strengths, Weaknesses, Opportunities, Threats.
Recalculate everything again and again until YOU are convinced you have the right numbers.
Your competition is any food establishment that might attract a potential customer of yours!
Think: "Hey, let's grab a bite, where do you want to go?", every response is your competitor!