How to write a restaurant business plan: overheads
This is the fifth guide in the series on writing a business plan for your restaurant (there are 10 in all). Make sure to go back and read the introduction and previous guides if you have missed them. A new cash flow model which accompanies this guide is on our website hospitality page - go and download it now.
This week we are going to talk overheads.
What kind of overheads are you going to have to pay
How much will the overheads be
Now, let's be honest. Overheads are pretty boring.
When it comes to thinking about your new restaurant it's so so so SO boring compared to everything else.
As it is boring (and because I'm having to write this post on my phone), we're going to keep this short.
BUT IT'S BLOODY IMPORTANT
Just because we're keeping it short, it doesn't mean it's not important - we've got a great overheads sheet on our cash flow model for you - head over to the bottom of our hospitality page on the website to download the sheet.
This sheet will give you far more info than this post does so do give it a look.
You need to put in your rent figure based on you research (see our earlier guide on finding a property).
You'll be paying business rates on your property - a good rule of thumb here is that your rates will be 40% of your rent.
This is a rule of thumb and some properties (especially London properties) are well above this figure, so make sure you confirm the rates amounts when you are looking at new properties.
Buildings insurance - this will be sorted out by your landlord and paid by you - this can really vary but let's assume 6% of rent.
Water, electricity and gas - for these we'll use a % of total sales - check out the spread sheet for details over on the hospitality page.
Refuse - here we're talking about bin pick ups mainly - this really depends on the size of the operation so we'll use a percentage of sales again.
Maintenance - this covers stuff like extract cleans, PAT test, fryer checks - as always it depends but let's stick in £250 a month for now
Repairs - you'll find you're always getting things fixed - £300 a month and let's hope it's not more
Replacement crockery, cutlery and kitchen utensils - you'll burn through this stuff - tongs and chopping boards always need replacing, plates get chipped, glasses smash or looked scratch from the glasswasher - Let's say 1% of turnover
WiFi, phone, epos, IT etc - pffff...so many variables - £200 / £400 / £600 a month, really depends on your epos more than anything
Credit card fees - Say 0.9% of turnover
Other services - you may decide to have a Food safety company to help you remain compliant with hygiene standards and perhaps a pest control contract to keep mice at bay. Call this £250 per month.
Advertising and promotion
This really is down to you and how you intend to do things. It could be a very big number or small, so think honestly about how you are going to approach this.
Don’t leave this figure at nil(!) and say you'll do it all through organic social.
In a restaurant you have a very high fixed cost base - therefore getting sales above the breakeven line as quickly as possible is very important. When you open, no one knows you're open, unless you are shouting about it. And you can shout very loudly with a decent budget.
All the other things you need to incur to run your business but not specifically linked to restaurants - accountants, payroll, HR support, bank fees - say £500 a month assuming you are happy to get your hands a little dirty with admin tasks.
Overheads aren’t exciting. But here is something that is interesting.
It is easier to save a pound, than to make a pound.
Let’s put this in context - if you want to make a pound, you need to sell something. If you are running with a gross profit of around 45%, you need to sell goods worth £2.70 when accounting for VAT to make £1.
So to make £1, you need to sell some chips.
Now gross this up - to save £2.5k you need to switch your electricity supplier and implement some ‘green’ policies in terms of lighting and power usage in your venue.
To make the same amount of money you need to sell two and a half thousand portions of chips.
Sorting out your electricity is easy. Squeezing another two and a half thousand portions of chips out of your customers is hard.
As I said - it is easier to save a pound, than make a pound.
So pay attention to your overheads and don’t waste YOUR money!
(Note: that is not to say you should view your overheads with a ‘cost only’ view - the name of the game is sales so you always need to consider the impact on the customer of cutting costs)
Quick notes on how to use the new overheads sheet
The sheet this week is a bit more involved than normal so a few pointer on how to use it. There are 5 columns for you to look at:
Annual amount - if the box is white, you need to fill in an annual net figure. If it is grey, move on
Amount as % of turnover - again, if the box is grey, nothing for you to do, fill in the white boxes
How often paid - this is a cash flow so we need to know how often you will be actually paying things - select from a drop down box
VAT - select from a drop down whether something has VAT on or not - not sure? - we've filled in the common answers for you so you won't go too far wrong (except on rent, which can be 0% or 20% and will have an impact so check for your circumstances).
Start week - from what week will you start incurring this cash outlay - you would not expect to be paying for credit card fees before you open your store for instance.
Fill in each line. This then all feeds into the cash flow, so you can spend more time planning your restaurant and less time messing around with columns on a sodding spreadsheet.
NEXT GUIDE - SOMETHING FAR MORE EXCITING - MENU PRICING AND FOOD COSTS!
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