Business Plan Competitive Analysis
Every business has competition. That is guaranteed. Show me a business owner who says he doesn’t have any competition, and I’ll show you a business owner who is either lying, or is delusional. Whether they are willing to admit it or not, the competition exists.
Part of the problem is that many new business owners try to define their competition so narrowly, that they filter out many businesses that really are competitors. As a restaurant, your competition may not even be another restaurant. In reality, your competition is any business that competes for your customers limited entertainment dollars. If the customer has a set amount of money to spend on entertainment, and he has to decide between going out to eat or going to a movie, then the theater is your competition.
Many restaurant owners try to exclude too many other restaurants. When I was working for a new Italian restaurant, the owner kept discounting the completion of the other restaurants in the area because the type of food they served was different. He just didn’t understand the concept of limited resources. Families only have a given amount of money to spend. They make choices about how and where they send that money. So what if the other restaurant is a burger joint and you serve Italian cuisine. If the burger joint is taking money that might have been yours, they are your competition.
When you’re writing your business plan it’s a good idea to separate your competitors as direct and indirect competition. Your direct competition would be the other restaurants in your area. They are the ones that you are competing with for a dinner crowd. Any other business that competes for the customers entertainment dollars, like movie theaters, roller skating, and even miniature golf, is the indirect competition.
Don’t be afraid to talk about your competitors. It really is a good thing for a couple of reasons. First, you want to show investors that you are aware of your competition. You need to show that you have given some thought about how you will compete. If investors feel like you’re wearing blinders about your competition, they may feel that there are other important areas you’re ignoring as well.
Second, competition is not a bad thing. Have you noticed that restaurants seem to clump together in the same area, especially in high traffic/high volume areas? Experts have learned that restaurants in the same area actually help each others business. Customers that aren’t sure where they want t go to eat many times will head to a location where several restaurants area located and not make a decision about where to go until they get there. Restaurants that are located by themselves do not have that drawing power.
Take advantage of this opportunity to learn all you can about your competition. What are there strengths and weaknesses? What can you do to win customers away form them. That knowledge can be useful not only for business planning, but also in refining your marketing message.
Don’t be afraid of your competition. It doesn’t matter who you are or what kind of restaurant you are opening, your competition exists. Learn who they are, and what they do, and craft a plan to defeat them.
