How does one do financial projections for a new restaurant without history?

A. Financial projections are always difficult to prepare without any history. 

In short one needs to do a detailed market study to see how the concept will fit within the make up of the market.  

Here are some steps that may make it easier to do financial projections:

• Do a market study first.

• Go to the CRFA and ask them for the most recent copy of Foodservice Facts, its annual publication (usually at a fee to non-members but well worthwhile).  In it you will usually find industry wide average checks by sector and sales per seat or sales per square foot. This will provide you an indication of that sales per seat that you should be able to obtain given the size and style of your restaurant.

• Go to The Bottom Line and obtain the latest annual performance results of the industry by sector, region and 20+ more matrices to determine the costs that you are likely to incur on a percentage of sales basis.

• Use your market analysis results and weigh them against industry sales per seat and determine why and whether you will outperform or underperform those results and then apply the industry averages found in The Bottom Line to obtain a reasonably realistic financial projection for your first year. 

I have written articles on market analysis and you can find them on my web site at www.fhgi.com.

About Doug Fisher:

Doug Fisher is foodservice consultant specializing in franchise development, strategic planning, mergers and corporate sales, business planning and litigation support. He is currently President at FHG International – Foodservice & Franchise Consultant.