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Restaurant Business Plan

A restaurant is judged on three numbers: what a table is worth, how many times you turn it, and what it costs you to be open. This guide sets out how to build each one honestly, what a lender checks first, and the costs first-time operators consistently underestimate.

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What a bank or investor checks first

Restaurants have a poor survival record and lenders know it, so the plan gets read sceptically. The questions are always the same, and the plan should answer them before they are asked.

  • Covers, turns and average spend, stated separately. Turnover has to be built from seats multiplied by table turns multiplied by spend per head, for each session of the week. A single annual figure tells a lender nothing and reads as though it was chosen to make the plan work.
  • The split between food and drink. Wet sales carry a much higher margin than food, so the mix drives blended gross profit more than the menu does. A restaurant forecasting 20% wet sales has a materially different profit profile from one forecasting 40%, even at identical turnover.
  • Whether the kitchen brigade is properly costed. Chef pay has risen faster than menu prices and recruitment is the binding constraint in most UK towns. Plans built on a head chef who is also the owner, working every service, get discounted heavily.
  • What happens in February. Restaurant trade is seasonal and January and February are brutal. Show the monthly cash flow rather than an annual average, and show the reserve that carries you through the quiet quarter without missing rent.

Typical startup costs

The dominant variable is whether the unit already has a commercial kitchen. Taking on a former restaurant with extraction, gas, drainage and grease management already installed can save more than every other cost decision combined.

Cost Typical range What drives it
Fit-out and shopfitting £60,000 – £300,000 Front of house, bar, toilets and decoration. A shell unit needing extraction and three-phase power sits at the top of the range.
Commercial kitchen equipment £25,000 – £90,000 Ranges, combi ovens, extraction canopy, refrigeration and stainless steel. Second-hand from a closed site is common and cuts this substantially.
Furniture and tableware £10,000 – £40,000 Around £200 to £500 per cover including glassware, crockery and cutlery, with breakage replacement ongoing.
EPOS, booking system and card fees £1,500 – £6,000 Plus per-cover booking platform charges and card transaction fees on every sale.
Premises licence and professional fees £2,000 – £8,000 Licensing solicitor, personal licence, architect and planning where a change of use is needed.
Rent deposit and first quarter £10,000 – £45,000 Six months rent as deposit is standard for a new company without a trading record.
Opening stock £6,000 – £20,000 Food, cellar, bar and packaging. The cellar is the larger half if you have a serious wine list.
Working capital £25,000 – £75,000 Wages, rent and supplier payments while trade builds. Restaurants pay staff weekly or fortnightly and suppliers on 30 days, so the cash gap opens early.

Indicative UK ranges for a 40 to 70 cover independent restaurant outside London prime. Treat them as a sense check on quotes rather than a budget.

The numbers that decide whether it works

These are the figures a lender turns to first, and the ones SquarePlan calculates for you as you enter your sales and costs.

Food gross margin

65% – 72%

Menu price against food cost, after wastage and staff food. A menu engineered around a 70% target still averages lower in practice because the popular dishes are rarely the profitable ones. Cost every dish rather than applying a blanket multiplier.
Wet gross margin

70% – 78%

Beer, wine and spirits. Wet sales are what make a restaurant profitable, which is why the food and drink split deserves its own line in the forecast rather than being blended away.
Labour cost to turnover

30% – 38%

Kitchen and front of house, including employer National Insurance and pension. Above 38% the site is either overstaffed for its volume or underpriced for its offer.
Rent and rates to turnover

Under 12%

Restaurants carry higher labour and food costs than cafes, so they can afford less property cost, not more. A restaurant paying above 15% of turnover in rent needs everything else to go right.
Table turns per service

1.2 – 2.5

How many parties use each table in a session. A relaxed dining room turns once; a bookings-led site with two sittings turns twice or more. It is the difference between two entirely different businesses in the same unit.

Licensing and regulation

Restaurants carry more licensing than most food businesses, and the alcohol licence in particular has a lead time long enough to derail an opening date if it is left late.

Registration with the local authority
Free, and required at least 28 days before opening. It cannot be refused, but it triggers your first Environmental Health inspection and your food hygiene rating.
Premises licence
Required to sell alcohol or provide regulated entertainment. Applications are advertised and can be objected to by residents, the police or environmental health. Allow eight to twelve weeks, and expect conditions on hours if you are near housing.
Personal licence and designated premises supervisor
Every premises selling alcohol needs a named Designated Premises Supervisor who holds a personal licence. That means someone in the business has to complete the qualification and obtain a DBS check before you can trade.
Food hygiene rating and HACCP
You need a documented food safety management system in place before inspection, along with allergen information for every dish under Natasha's Law. Allergen matrices are one of the most common inspection failures in new restaurants.
Planning and change of use
Moving a unit into restaurant use, or adding extraction ducting to a listed or residential building, may need planning permission. Check before exchanging on a lease, not after.

Turnover is built, not chosen

The most common weakness in a restaurant plan is a turnover figure that appeared from nowhere. It is usually recognisable because it is a round number, and because dividing it by 52 and then by the number of seats produces something the room could not physically deliver.

Build it from the room instead. Count the covers the dining room actually seats once you allow for service access and the tables nobody wants to sit at. Decide how many times each table turns in each service, and be honest that a Tuesday lunch does not turn at all in most towns. Set average spend per head from your own draft menu — starter attachment rate, main price, dessert attachment rate, and how much wine a typical table drinks. Multiply through for every session in the week.

What comes out is a weekly turnover with a shape to it: heavy Friday and Saturday evening, thin Monday and Tuesday, and a lunch trade that either exists or does not depending on where you are. That shape is the plan. It sets the rota, and the rota sets the wage bill, which is the number that decides whether the site works.

Food cost is not one number

Applying a single multiplier across the menu hides the problem it is supposed to solve. Restaurants rarely sell an even spread of dishes: two or three items typically account for a large share of mains sold, and those are frequently the ones with the tightest margin, because they are popular precisely because they are generous.

Cost each dish individually, then weight the costs by how many of each you expect to sell. The weighted figure is your real food cost, and it is usually several points worse than the menu-average figure. Add wastage, staff meals and the trim you throw away, and it moves again. A plan that has done this reads completely differently from one that has not, and lenders who know the sector can tell within a minute which they are holding.

The winter reserve

Restaurants are seasonal in a way that annual averages conceal entirely. December is often the best month of the year and January and February the worst, and a site that opens in autumn will meet its first serious cash test before it has had time to build a regular trade.

The plan needs a monthly cash flow that shows the trough, and a working capital facility sized to cover it with room to spare. Rent falls due quarterly whether or not anyone booked a table, staff are paid weekly, and suppliers who extended thirty-day terms during the busy period want paying in January. This is what closes restaurants — not the concept, and not the food.

Where SquarePlan fits

You enter covers, turns, spend per head, the menu costs, the rota, the rent and the equipment list. SquarePlan builds the monthly cash flow, the break-even point, the profit and loss and the VAT and payroll calculations underneath. Change the wet sales mix or the rent and the break-even point moves in front of you, which is what you want while you are still choosing between two units.

How this gets funded

Restaurants are hard to fund conventionally because the assets are specific and the failure rate is high. Most independent openings combine several sources.

Start Up Loan
£500 to £25,000 per person at 6% fixed over one to five years, government-backed, with mentoring included. Business partners can each apply, which is how many restaurants assemble a meaningful opening budget.
Asset finance on kitchen equipment
Ovens, refrigeration and extraction can be leased or bought on hire purchase. It costs more over the term but preserves the working capital that gets you through the first winter.
Brewery or supplier loan
Pubcos and drinks suppliers will fund fit-out against a tie or a minimum volume commitment. Model the higher cost per barrel or per case across the full term before treating it as cheap money.
Bank term loan
Available to operators with security, an existing profitable site, or a strong personal balance sheet. A first-time operator on a leasehold unit will almost always be directed to the Start Up Loan scheme instead.

Frequently asked questions

How much does it cost to open a restaurant in the UK?
Typically £100,000 to £400,000 for an independent restaurant outside London prime. The range is wide because it depends almost entirely on the unit: a former restaurant with a working kitchen and extraction can cost less than half what a shell unit costs to bring into use.
What profit margin does a UK restaurant make?
Gross margin runs around 65% to 72% on food and 70% to 78% on drink, but net profit after rent, wages and overheads is commonly only 3% to 8% of turnover. That thin net margin is why the rent and labour percentages matter so much.
What licences do I need to open a restaurant?
Register the premises with your local authority at least 28 days before opening. To sell alcohol you also need a premises licence and a Designated Premises Supervisor holding a personal licence. Music or late-night refreshment brings further conditions, and a change of use may require planning permission.
How do I forecast restaurant turnover?
Build it up rather than picking a figure. Take the number of covers the room seats, multiply by realistic table turns for each service, multiply by average spend per head, and do it separately for weekday and weekend trade. The weekly pattern that produces is also what your staff rota and wage bill have to be built from.
Why do so many restaurants fail in the first year?
Almost always cash rather than concept. Trade takes months to build, January and February are severe, and the deposit, fit-out and opening stock consume the reserve before the site has found its level. A funded working capital line, forecast month by month, is the difference.

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