If you under estimate your economic loss you cannot recoup it at a later date. So check you claim very carefully before submitting it. And even if it has been developed by a professional, your accountant for example, check it YOURSELF to be absolutely certain that it is correct. During the last 11 years we have assessed more than 5,500 economic loss claims on behalf of an international compensation fund and a surprising number have been shown to be undervalued.

The second main point is that you cannot claim a loss until it has been sustained. So if your business is flooded and you estimate that it may take 10 weeks to get it trading again, you may need to claim after the period has run its course – check with the insurer.

So what are the key steps to follow when claiming?

Estimate Your Loss of Revenue
Identify your revenue trend – if it increasing then ensure that you take this into account. Many professionals average the last three years of income to arrive at the projected loss and this is probably the main reason why claims are undervalued.

Now I do not condone increasing revenue estimates for the sake of it and falsifying accounts. What you should do however is consider, realistically and honestly, how and why your business trading levels may have increased.

Think carefully about internal changes in your business and make sure they are taken into account. Think:
price increases,
changes in tariff structure,
increases in trading capacity whether due to increased space, higher staffing levels or any other reason why trade should/would have increased.

Consider external changes that could have led to increased trade:
loss of a main competitor,
development of a fresh income stream,
increases in local market activity,
improvements in access, car parking capacity or the development of further demand generators for your business.

Whatever the cause of the increase, estimate a realistic level for your revenue and subtract the actual to estimate your loss of revenue.

If possible find external data – tourism or general business statistics – that will support your claim.

Now Calculate Your Savings
One you have calculated this loss, deduct the appropriate variable costs – otherwise known as savings as you have saved this expenditure.

Variable costs are those costs that vary as a result of a change in the number of units produced. This includes product costs, other associated direct costs and an element of wage costs. For example, a restaurant should include food cost and an element of variable costs to cover say disposable items, laundry etc.

Some saving in staff costs should also be included – but generally this does not mean you apply the full wage cost percentage to the labour saving. Remember that if trade falls for a short period, management labour charges are normally fixed – the saving is only made in say service staff.

Total the savings and subtract this total from the loss of revenue. Do not include fixed costs, such as rent, rates, interest charges and insurance.

Any Other Costs or Income?
Finally consider whether you have incurred any other costs as a direct consequence of the event – increased advertising costs, increased staff costs or repairs and renewals fo example – and add these to the total claimed, before deducting any income you have received as a result of the incident.

Types of Feasibility Studies
There are two main types of feasibility study – and many people confuse the two. Architects will undertake a development feasibility study to determine what is possible on a site. The results should not be confused with a market feasibility study that determines the financial viability of a scheme based on the market(s) for which it will cater.
The results of such a study should then be used to inform the architect’s work to ensure that project budgets are reasonable.

Feasibility Study Objectives
Market feasibility studies are required to:
• raise funding,
• satisfy grant awarding bodies, where appropriate, both financially and in terms of project outputs,
• satisfy the directors that a project is viable,
• determine the optimum facility mix to maximise revenue,
• ensure that all parties agree on the key elements of a project,
• form the basis for initial market and project planning,
• in some cases, provide the argument for business closure or change of use applications/ planning appeals,
• enable third parties to value operating contracts (for example, enable museums and other visitor attractions to vale catering contracts).

What Does the Study Identify?
Hotel, restaurant, leisure and retail market feasibility studies should be completed for any capital project. It is essential that they weigh up all of the market information available dispassionately and relate the findings in potential revenue estimates. These estimates should show the number of units (rooms, meals, memberships etc.) estimated to be sold and the expected tariffs to be achieved, resulting in estimates of revenue and project outputs.

Factors Considered
The information used to form the base for the above assumptions should include the:
• location and visibility of the proposed facilities in respect of the key sources of demand,
• existing and known future competitors, including possible substitutes,
• current and forecast levels of demand and market trends – taking into account known levels of current demand, latent demand, frustrated demand. This data may include information in the public domain, competitor research, market surveys and demographic analysis.
• impact of non-direct but influencing changes in the competitive environment.

Seasonality factors should also be taken into account showing when demand is likely to be highest and lowest – viability can be greatly different if a business opens at the end or start of a trading season.

End Products
Estimates of the project outputs will enable the study to identify the optimum facility mix and also determine the costs of the operation: costs of sales, staffing costs, marketing expenditure, maintenance, insurance etc.

The end results therefore should be statements of revenue and expenditure for the first five years of the project, clearly showing the links between the markets and the forecasts. From these statements will then follow balance sheet and cashflow forecasts, and estimates of project value upon completion.

Because our concept is unique to this area, we do not have any direct competition. However, we do have indirect competition which may attract the same demographics. These restaurants are listed below.

? Drive-in Burger Restaurant – Pet owners frequent this drive-in restaurant because there is outdoor seating available which means their pets can be with them as they eat. However, the quality of the food is only average, and the customer service is very limited. No food choices are available for the dog.

? Take-Out Fast Food Restaurants – After activities with pets, many owners simply go through a drive-thru in order to purchase food since they can not leave the dog alone in the vehicle to go inside and dine or to pick up an order. Again, the quality of the food is usually poor and no real customer service is available. No food choices are available for the dog.

3 – Marketing Strategy

People and Their Pets Outdoor Cafe has a limited start-up budget for advertising. As a result, we must keep our campaigns simple and must make sure to get the most from our investments. Staying within the constraints of our budget will also be important.

3a – Market Positioning

We plan to position ourselves in the market as a one-of-a-kind dining experience for pet lovers while emphasizing the quality of our food for people and for pets, as well our customer service.

3b – Marketing Channels

Our marketing campaigns will utilize the following channels:

? Joint marketing with local pet stores
? Direct mailings to surrounding residential areas
? Flyers posted in animal-related environments
? A radio spot during afternoon commuting
? Pres releases to local newspapers and regional trade related magazines

3c – Marketing Goals

Our goals for these campaigns will be as follows:

? Establish a solid base of customers within the first two months of operation
? Increase number of customers by 10% each month for the remaining eight months of the year
? Increase revenue by at least $2000 per month for the first year

4 – Marketing Budget

As stated previously, our marketing budget is limited. Below is a list of campaigns we plan to conduct in the first year of operation, and the budget we have set aside for each campaign.

Campaign 1 – Joint Venture Partnership with Pet Stores – For this campaign, a local pet store will be giving coupons to its customers for our restaurant. In return, we will give 40% of the profits from sales made to those customers back to the pet store. – We will have no expenses related to this campaign.

Campaign 2 – Direct Mailings – For this campaign, we will put together a promotional postcard that will also be a coupon. We will mail 1,000 of this postcards to residential neighbors within 25 miles of our restaurant – Our budget for this campaign is $2,000.

Campaign 3 – Flyers – For this campaign, we will create one page flyers advertising our restaurant. These flyers will be posted at a variety of animal-related locations, including humane societies and pet shops – Our budget for this campaign is $500.

Campaign 4 – Radio Spot – For this campaign, we are going to produce a 30-second radio spot that will run on the radio station during the hours of 3 pm to 7 pm daily, as well as the mornings on the weekends. – Our budget for this campaign is $700.

That brings us to the end of our sample marketing plan. Hopefully, this will give you an idea of what information you should include. Remember you may want to add in more details and graphics. In the end though the most important thing is to make your marketing plan a tool that will help your restaurant succeed.

Elements of a restaurant marketing plan, part 1 and part 2 are available here.

People & Their Pets Outdoor Cafe will provide a unique dining experience for consumers. By allowing diners to bring their pets to the restaurant and by serving both human and pet food options, the restaurant will be catering to a growing number of pet lovers who do not want to leave home without their beloved companions.
(Note: If this was your marketing plan, you might spend some additional time talking about any restaurant experience you have had or about the success of similar restaurants in your area or similar areas in other parts of the country).

2. Situation Analysis

The pet care industry has been booming in recent years because people are spending more money on their pets than ever. This rise in spending has also seen an increased interest in pet-friendly hotels and pet-welcoming retail stores. Based on the research, people seem to want to spend as much time as possible with their pets.

Because of this trend, this seems to be a good time to open a restaurant that not only permits customers to bring their pets but also provides food and beverages for both.

2a. Market Summary

People & Their Pets Outdoor Cafe’s target market is going to be pet owners in general. However within that group, we are going to be targeting a certain segment which tends to pamper their pets more than others.

That segment consists primarily of individuals or couples who have no children but who have middle and upper middle class incomes. Most of these people will have active lifestyles and are concerned more about quality and experience than about price.

Our secondary market is going to be families from the same income levels. Small families – parents, one or two children, and their pets – may also enjoy the experience because they are able to eat outdoors (which is attractive to children) and can bring their pets along for the outing. The children may also enjoy being around the other pets.

2a-1. Market Demographics

Our target market will be

? Male and Female
? Professionals
? Between the ages of 25 and 50
? Earning $40,000 or more per year
? Pet owners
? Concerned about pet-related issues
? Interested in pet activities

2a-2. Market Needs

Our target market has the following needs:

? A restaurant where they can comfortably bring their pet
? Casual, high-quality food
? Nutritional, tasty food for pets
? Customer service geared towards meeting the needs of the customer and their pets

2a-3. Market Trends

As competition in the restaurant market continues to grow, restaurants are meeting the needs of niche markets or are providing unusual dining experiences.

Additionally, pet owners are more focused on engaging in activities with their pets, instead of boarding them and/or leaving them alone at home. Even tourists are beginning to make their travel decisions based on pet-friendly attractions.

2b. SWOT Analysis

Below is an outline of People and Their Pets Outdoor Cafe’s strengths, weaknesses, opportunities, and threats.

2b-1. Strengths

? Great location – a short walk from the city’s most popular dog park and two miles from a highly trafficked pet store which permits dogs
? Trained staff – our staff has been hand-selected to provide superior service to customers and to their pets
? Quality food – our custom menu provides a mix of healthy and delicious casual options for customers and their pets

2b-2. Weaknesses

? Lack of restaurant experience – None of the primary figures in the venture has significant restaurant experience. This may cause us to have a sharper learning curve as we start the business.
? Weather Issues – Because the restaurant is an outdoor cafe, weather may interfere with our ability to serve consumers. We may be forced to close during the winter months and need to develop an alternative for rainy days.

2b-3. Opportunities

? Unique concept – No other restaurant caters to pet owners in this way so we have limited competition.
? Merchandising – Within a month of opening the restaurant, we are going to start selling shop-related merchandise, including pre-packaged versions of some of the pet foods.

2b-4. Threats

? Trend changes – If trends related to pet owners and their pets change, then our business may suffer.
? Economic changes – While our target market currently has the disposable income available to frequent our establishment, a change in the economy may change that.

So far we’ve covered a portion of the marketing plan. In Part 2, you’ll see a sample of how to put together information about your competition and your marketing strategy.

Marketing Strategy
The next big thing that needs to be included is your marketing strategy. While some of the other elements could be a little vague, you really want to be specific here about how you’re going to sell your business to customers and what channels you think will work best in reaching those customers.
Let’s say your restaurant sells gourmet pizzas. How are you going to sell yourself to customers so they’ll give you a try when they can already get pretty good pizza from chains and local mom and pop pizza places? You might focus on the large amount of topping choices, including some exotic options like squid. You might focus on the upscale ambiance of your restaurant or the level of customer service your customers will receive. Whatever you would choose to do needs to be included in the marketing plan.

How to Promote
The channels you choose for conveying your marketing messages are also important. If you target families with children, then how do you most likely reach those families? Would a television commercial be more effective than a radio spot? Would a newspaper ad get more attention than mailed coupons? Those are the types of questions you need to answer for your marketing plan – and once you have opened make sure that you track which of your marketing activities is generating customers for you.

Goals/ Objectives
Additionally, you’ll need to develop some goals for your marketing. The bottom line is that if you don’t know what you want then you’ll never know if you achieved it. That might work for some people in some parts of life but if you’re serious about making it as a restaurant owner then you need to start setting some goals.

Your goals shouldn’t be vague either. “I want to increase my restaurant’s revenue” is not a real goal. You need to be specific: how much do you want to increase your restaurant’s revenue and over the course of how much time?

Finally, you have to address the financial aspects of your marketing. It’s wonderful to be able to plan to do a television campaign to market your new restaurant but if you can’t afford that type of promotion you need to know it now.

While you could get very detailed with your financial information and you could include charts and graphs to illustrate your spending on different campaigns to attract different audiences, this isn’t really necessary. A simple list of the campaigns you plan to do over the first six months or a year, along with your budget for each campaign and your anticipated results is sufficient if your marketing plan is for your eyes only.

Of course, if your marketing plan needs to be reviewed by a lending institution, a franchise operation, or potential investors, you might want to add in a few more bells and whistles. If the marketing plan is simply going to be a tool that will help you prepare for your restaurant’s future, then it needs to be practical and easy to put together not aesthetically pleasing.

One last thing about your marketing plan – it needs to be written out. Some business owners claim that their marketing plan is all up in their head and they think that’s enough. It’s not. For one, you’re not going to remember your entire plan or your research months down the road, especially not if you’re trying to juggle all of the aspects of running a business. You also need it in writing so it’s concrete and unchangeable. It’s easy to change our minds about what we hope to accomplish or how much of a budget we can spend, but if it’s written down those changes take a lot more effort.

The main idea of a marketing plan is to help you figure out who your market is going to be. Without this information, you’re not going to know how to position your business, how to advertise effectively, even where to send marketing materials. You could end up wasting a lot of time and money with poorly planned marketing campaigns, and you stand a much better chance of being one of the millions of restaurants that goes under in its first year.
With that said, let’s talk a little about what a marketing plan includes.

Situational Analysis
One aspect of your marketing plan is going to be the Situation Analysis. In this section, you’ll be given some background about your restaurant, about its potential for growth, and about its actual target audience. Putting this material together makes you take a long look at who is going to be buying your product so you’ll be better prepared to meet their needs.

Understand Your Market
Although you can do a fairly simple marketing plan, it’s a good idea to include some demographic information about your target audience, as well as a list of some of their needs and the trends in the market right now. For example, if you recognize a trend toward customers choosing healthier food options then that might give you a good marketing angle for some of your menu items.

SWOT Analysis
Your marketing plan should also include a SWOT analysis. SWOT is an acronym for Strengths, Weaknesses, Opportunities, and Threats. You need to take a long, hard look at what your business has to offer and what might stand in its way of success. Only by being honest about these elements can you maximize or combat them.

For example, if one of your strengths is the quality of your food, then you’ll want to emphasize this in your marketing. You might want to pass out free samples at a local event or invite customers in for a sandwich – you want to do anything that will get your food to tingle their taste buds because that’s what going to bring back the business.

Competition
Another important section of your marketing plan is a look at your competition. Who might steal your potential business? Why might you lose that business? These are the questions you need to be asking here. Make sure to be thorough when you are thinking about your competition. Remember that many customers aren’t choosing between two Italian restaurants or two Mexican restaurants – they are actually choosing between all of the restaurants in the same price category. Maybe you specialize in sub sandwiches – that doesn’t mean McDonald’s won’t possibly steal away some of your customers.

When you’re analyzing your competition, you should make sure to watch for weaknesses. If a competitor consistently delivers poor service, then that’s something you can emphasize at your establishment to lure away his business. If a competitor is expensive, then your selling point might be that you offer high quality food at reasonable prices. Hopefully, you get the idea.

So far we’ve only covered a portion of what you need to include in your marketing plan. Read The Elements of a Good Restaurant Marketing Plan Part 2 to find out what else you need to include.

Once you have a better understanding of the market, you should now focus on the building and ‘the deal’.

1. Base the value of the business on trading profits and not the number of seats in the restaurant. Whatever you think you can add to the revenue should not be included in the price. This is your risk and your premium.
2. Separate the revenue generated by food and beverage and the sale of other services. Do the proportions of revenue indicate under-performance in one area or another?

3. The purchase price should be between 4 and 8 times profit, except in exceptional circumstances, nd excluding any living accommodation.

4. Purchase price should be .75 to 2 times annual revenue.

5. Total loans should be less than 70% of the purchase price – and preferably be much less!

6. Is the property freehold or leasehold. Determine how future rents will be fixed – will you end up paying more due to your own investment? And at the end of the lease will you have anything to retain – such as a second income from a business you can develop through the restaurant operation – an outside catering business, a catering consultancy etc.?

At this point I wish you every success with the transaction and future operation of your restaurant.

During the last 14 years we have worked with many operators in many different markets, areas and countries.

If the market is the most important consideration when buying a restaurant, what do you need to know?

The following quick guide is designed to help you channel your thoughts in the right direction:

Who are the current customers? Are they: business people, shoppers, theatre goers, car or train travellers, day trippers, visitors to local attractions, people looking for a gastronomic experience, people celebrating special occasions, local residents who wish to save time cooking, people enjoying a night out visiting your restaurant as part of a established circuit? You will probably find that your intended restaurant is currently serving a number of different markets differentiated by time of day, so you need to find out all that are relevant – and visit at different times of the day.
What are the demographics of the main customers drawn by each market? In other words are they: young, old, male, female, singles, families, small or large groups of friends? Once again you will find that it will not be just one type of person but there is normally a predominant group attracted to the restaurant. Are these the type of people you want to continue attracting or will some of your proposed changes lead to some loss of trade?

Ask the existing owner for details of any major customers. These may be local companies, group operators or local attractions etc. If you can track down some of the current customers, do so and find out their views.

Consider the match between opening hours, menu style and the different types of customer. Can changes be made that will improve trading?

What is the image of the restaurant in the local area? Can you change or improve it or do you want to preserve it?

Calculate the average spend per different type of customer and also the range of spend. This latter point is frequently missed and can alert you to additional trading opportunities. For example, people may spend at the low and high ends of the scale meaning that the average spend is a misnomer. Concentration on the higher end may be more viable – or even high volume at a lower spend may be the key.

Determine whether a significant volume of existing trade is generated by the existing owner. This may include his/her membership of local organisations or simply a reputation built up over the years. Is this level of trade really transferable to you – or will it be lost? Restaurants can be very personal businesses, built around the character of the owner.

Ask for details of past marketing activity, including copies of marketing literature and details of how the restaurant has been promoted. How extensive was the activity? Are there gaps you can exploit? Can you match the activity previously undertaken? What can you do better? If the restaurant was previously owned by a group, can you replace the business currently generated by national or regional image or promotional activity?

Once you have identified which are the main markets for your restaurant, ask yourself whether the existing restaurant is catering well for the needs of these specific visitors. For example are the opening hours the right ones, is the menu in line with the market, could more be made of wine, drink and the sales of other items? Visit the restaurant as a customer and sample the sales process as well as the food and drink offered – visit at different times of the day and night and on different days of the week.

Visit competitors. Consider how competitive your potential new restaurant is in terms of facilities, price, service, standards and location relative to the main markets you are seeking to cater for.

Consider how you can raise revenue, either by increasing seat turnover, the average spend or both. This may mean a change in service style, booking systems, if any, menu format, increased promotional activity internally and externally. It may also mean the introduction of more efficient operating and food production methods.

Consider whether you can increase the number of customers by increasing marketing activity, drawing different types of customers, re-focussing the menu, adding new services such as private dining areas, changing the opening hours, offering take-away services, providing delivery services, increasing repeat trade through improved promotional activity and special theme events.

Finally consider capacity, the one key factor missed by many. A 40 seat restaurant will obviously support lower levels of revenue that 80 seats. Can you survive on the current capacity – or can it be increased?

Next: Six restaurant value checks.

From this one decision will flow everything else you do in your life – until you sell it. The security of your investment – and your family’s future financial health – depends upon this one, simple decision.

Of all hospitality businesses, restaurants are probably the most fickle. It used to be said that the average restaurant lasts for just two years – and the last few months of that short time are probably horrendous!

Its Different for My Type of Restaurant

The type of restaurant you are buying does not make any difference to your approach. Whether you looking at a pizza restaurant or a £50 per head French restaurant, the questions are the same. Don’t believe that your business is any different because it operates on a low or high average spend per head. The key issues remain exactly the same.

So don’t believe that buying decisions for one type of restaurant are different from those used for others.

And the number one trap is that people think they are buying a building! They look at the eating area, the kitchen, the grounds, the car park and believe that that is what they are investing in – and whilst these are very important, they aren’t the key.

Understand What You are Buying

When buying, don’t limit your focus to the building, the physical structure. Don’t believe that the building marks the extent of your purchase.

What you are really buying is access to the eating out market. That’s it. Nothing more and nothing less. If you don’t believe this, just think about some of the restaurants in your neighbourhood that flourished and then died, with the buildings turned into homes, shops or simply demolished. Or just consider how past shops have been turned into restaurants or take-aways.

This may sound dramatic, but the fact is that a restaurant only remains as a restaurant whilst it can trade profitably. Once that is no longer the position, its just a building looking for another purpose – but with much less value.

The restaurant is the funnel through which you will draw your revenue. It is the customers who will provide the cash. So research the market the first and concentrate on that as much, if not more, than the building.

Details of key restaurant buying questions here.

But one key factor that rarely seems to get the attention it deserves and seems to be holding back so many businesses is: articulating and agreeing the key objectives and plans to achieve them. This includes confirmation of the company’s objectives from management to staff and even confirming that managers and directors share the same objectives.

Agreeing Objectives
During the last year I have been amazed to find husband and wife teams who have never agreed service standards, business partners who admit that they instruct staff to perform tasks in different ways to achieve different objectives when doing identical tasks and partners who actually want different outcomes: one who wants to sell in 12 months whilst the other sees the business as a job for the next 20 years.

Perhaps equally confusing are those directors and managers who do not know where their business is heading or have any targets for it. This begs the old question – If you don’t know where you are going, how will you know when you get there?

It also highlights one other big business issue: can your business actually achieve the results you want? In other words if you have a target for financial security in 10 years and can identify what your monetary target is, is your business actually capable of achieving it?

The lack of clear objectives, poor planning and working on assumptions rather than facts, seems to me to be holding back many businesses.

As the New Year starts, isn’t it time to agree your objectives with those who count and then agree the action to be take? If you do, then 2008 could be your year.