Getting Funding & Planning Your Finances

Introduction to Restaurant and Pub Finance

Restaurant finance is more than checking the bank balance at the end of the week. A strong operator plans how to fund the business, forecasts sales and cash, and understands what the restaurant or pub may be worth. These three skills help you open, survive slow seasons, add seats, replace equipment, or prepare for a sale without guessing.

A useful starting point is prime cost. Prime cost equals food and beverage cost plus labor cost. As a general operating target, many full-service restaurants aim to keep prime cost near 55% to 65% of sales, although the right number depends on concept, rent, menu, and service model. Food cost percentage is food cost divided by food sales. Labor cost percentage is payroll and related labor expenses divided by total sales. Track these numbers before asking a lender for money. Funding cannot fix a restaurant that loses money on every busy night.

Funding

Funding is capital used to open, repair, or grow the operation. Sources may include owner cash, a bank or Small Business Administration loan, equipment financing, a line of credit, landlord concessions, or an investor. Each source has a cost and a risk.

For example, a pub may need $90,000 for a walk-in cooler, bar equipment, furniture, and opening inventory. The owner should separate one-time opening costs from working capital. Working capital pays rent, payroll, utilities, insurance, vendors, and taxes while sales build. A lender will want a clear use-of-funds schedule, personal financial information, a business plan, and realistic projections. Do not borrow only for construction and forget the cash needed for the first eight to twelve weeks of operations.

Build a funding request around proof. Show historical sales from Toast POS or Square POS, average cover, table turnover rate, food cost percentage, labor cost percentage, and prime cost percentage. Explain how the new money will improve sales or reduce costs. Replacing a failing fryer may prevent lost service and reduce repair bills. Adding patio seats may increase covers, but only if staffing, permits, kitchen capacity, and seasonal demand support the plan.

Forecasting

Forecasting means estimating future sales, costs, and cash needs. Start with a 13-week cash forecast. List expected cash in from dining room sales, takeaway, delivery, private events, and bar sales. Then list cash out for payroll, rent, food and beverage vendors, taxes, debt payments, utilities, insurance, repairs, and owner draws.

Use a base case, a strong case, and a weak case. Your base case might assume 720 weekly covers at a $42 average cover. Your weak case might assume 600 covers and higher labor because of training. Test whether cash remains positive in each case. Forecast by day and service period when possible. Friday dinner and Saturday night may carry the week, while Monday lunch may not justify a full team.

Update the forecast every week using actual results. Compare forecast sales with actual sales and calculate the variance: (actual sales minus forecast sales) divided by forecast sales. A useful working goal is to keep monthly sales forecasts within 5% to 10% of actual results. Also compare projected and actual prime cost. A busy week can still damage cash if overtime, waste, discounts, or high-cost menu items are not controlled.

Paid tools such as QuickBooks Online, Toast POS, and 7shifts can help connect sales, payroll, scheduling, and reporting. A Google Sheets workbook is enough for a simple 13-week forecast. Homebase Free can support basic scheduling and time tracking, while Square POS Basic is a practical lower-cost sales system for some smaller operations.

Valuation Reports

A valuation report estimates what the restaurant or pub could sell for today. Buyers usually examine normalized profit, sales trends, lease terms, equipment condition, licenses, brand strength, and how dependent the business is on the owner. Revenue alone does not establish value.

A buyer will review seller's discretionary earnings or adjusted operating profit. Add back expenses that will not continue for a new owner, but do not exaggerate. A family meal, unusual legal bill, or one-time repair may be reviewed. Regular payroll, rent, insurance, merchant fees, and food purchases are real operating costs and should stay in the analysis.

Keep clean monthly profit and loss statements, vendor records, payroll reports, sales tax filings, inventory counts, and equipment lists. Show stable food cost percentage, controlled labor cost percentage, and a healthy prime cost percentage. A pub with documented recipes, trained managers, clean books, a transferable lease, and repeat local guests is easier to value than one that depends on the owner to bartend, order, schedule, and solve every problem.

The Importance of Restaurant Finance

Restaurant finance is a decision tool, not an accounting exercise. It tells you whether to add a shift, change a menu price, delay a remodel, refinance equipment, or preserve cash. The National Restaurant Association and respected restaurant operators consistently stress disciplined cost control, labor planning, and cash awareness because small percentage changes have a large effect on a thin-margin business.

Real-World Application

Imagine a neighborhood pub planning a $140,000 patio and kitchen refresh. The owner first measures current covers, average cover, table turnover rate, food and beverage margins, prime cost, and available cash. The owner then builds a 13-week forecast with construction downtime, loan payments, seasonal demand, and extra staffing. Finally, the owner prepares a valuation-style review showing current profit and the expected effect of the project. That process creates a funding plan based on operating facts rather than hope.