How Do You Build a Pro Forma for a New Restaurant Location?

What is a pro forma for a new restaurant location?

A pro forma is a month by month projection, built from the existing location's real numbers and the new site's real quotes, that shows how long the next location takes to pay back what it cost to open.

It is not a forecast pulled from a broker's pitch or a franchise brochure. It is built from four things: the sales a full month does, what a dollar of those sales keeps after variable costs, the fixed costs of the new site, and a ramp that shows how slowly a new location climbs before it does a full month of sales. None of those four numbers should come from anyone else's restaurant.

Once the doors open, the pro forma stops being a projection and becomes the plan the real months get compared against. It is a projection, not a promise, to an owner, a partner, or a lender.

Where do the starting numbers come from?

Each number in the pro forma has one correct source: sales and what a dollar keeps come from the location already running, fixed costs come from the new site's own lease and schedule, and the ramp comes from the first location's own first year.

Sales in a full month come from the operating P&L of the location already running. What a dollar keeps after variable costs comes from that same location's unit economics. Fixed costs for the new site come from its own letter of intent for rent and a real schedule for the crew floor, never copied from the existing location. The ramp comes from the first location's first year, from its old P&Ls or the POS.

In a worked example, a location doing $1,500,000 a year does $125,000 of sales a month. At 40 cents kept per dollar, that is $50,000 kept. Fixed costs of $450,000 a year work out to $37,500 a month. $50,000 less $37,500 leaves $12,500 of profit a month, once the location is running at a full month of sales.

Three things change at a new address: the rent, which follows the new lease and may not resemble the existing one, the sales, which start without a single regular customer, and the team, which is new and slower until it is trained. Systems get copied to a new location. People and their regulars do not.

What does it actually cost to open a new location?

The cost to open is everything that happens before the first paying guest: build-out and equipment, deposits and permits, rent and payroll during the months before opening, and the opening stock and soft open nights.

That figure comes from contractor and supplier quotes for the new site, not from whatever the first location happened to cost. Prices move, and the only person who should be collecting those quotes is a controller, not the owner.

In the worked example, the first location cost $600,000 to open, and the quotes for the next one come back at the same $600,000. A real pro forma uses whatever the actual quotes say, even if that number looks nothing like what the first location cost.

Results are not typical and will vary with your business, your market, your team and how much of the work you actually do. Client figures on this site come from recorded interviews and are dated. Nothing here is a guarantee of revenue, profit or growth.

Why does a ramp change the payback so much?

A pro forma that assumes a full month of sales from day one gives a shorter payback than reality, because a new location with no regulars and an untrained team climbs to a full month over roughly its first year, not on opening night.

The simplest version of a pro forma divides the cost to open by the profit of a full month. In the worked example, $600,000 divided by $12,500 gives 48 months, the same payback as the existing location. That assumes the new site sells a full month's worth from its first day, which is the best case, not the base case.

Add a ramp built from the first location's own first year and the picture changes. Profit by quarter in the worked example runs a loss in the first quarter, a smaller loss in the second, a profit in the third, and a larger profit in the fourth, for quarterly totals of minus $22,500, minus $7,500, plus $7,500, and plus $22,500. Add those four quarters together and they sum to $0. A full year of work, and the location has only paid its own way, nothing more. The $600,000 is still outstanding. From month thirteen it earns $12,500 a month, so it takes 48 more months to pay that back, for a total of 60 months.

Same location, same quotes, two very different answers. The ramp also costs cash along the way. The low point in the worked example comes at month six, where the first two quarters' losses add up to minus $30,000. After that the location starts climbing back. The project does not need $600,000. It needs $600,000 plus whatever that low point turns out to be, and that is the number a later step of the plan has to find money for.

Where should the ramp assumption come from?

The ramp should come from the first location's own first twelve months, and any ramp that looks faster than that needs a stated reason, like a busier street or a team that has opened before.

If an owner cannot find that first year's numbers, the fix is not to guess quietly. It is to write the assumed ramp down, label it as an assumption, and have it checked on a regular basis rather than left to sit unexamined inside a spreadsheet.

What does the bad case tell you, and why build one at all?

The bad case applies a slower ramp and a lower ceiling to the same numbers, and it is the version that decides how much cash the project actually needs to survive.

The bad case in the worked example stretches each stage of the ramp and assumes the location tops out below where the first one landed, while fixed costs stay the same because rent does not move just because a month went softer than hoped. Losses run to $30,000 over the first stretch, then another $10,000 over the next, taking the low point to $40,000. The location earns $10,000 back over the stretch after that, then settles into a profit of $7,500 a month.

On the bad case, $600,000 plus the $30,000 needed to cover the low point, divided by $7,500 a month, comes to 84 more months of payback. Add the first 12 months and the total runs to 96 months. The bad case is not meant to be the expected outcome. It is the version an owner funds against, because it sets the amount of cash that has to be available if the slower, smaller version is the one that actually happens.

How does the pro forma fit with the rest of an expansion plan?

The pro forma answers whether the next location is worth going to and how much money it really needs, which is a different question from whether the current location can run without its owner.

A separate check on the current location establishes whether it can run without the owner in the room day to day. The pro forma picks up after that and works out whether opening a second location is worth the cash and time it takes, using the real numbers of the location already open rather than borrowed ones. For owners who want a structured way to work through that test and the pro forma side by side, the Founders Board gives access to the same system and weekly review used to build this lesson, and case studies show how other owners carried their own numbers through it.