How to Craft an Annual Operating Plan

As a visionary restaurant leader, you’re likely no stranger to strategic planning. However, a strategic plan alone won’t suffice for sustained success in the dynamic restaurant industry. This is where the Annual Operating Plan takes center stage. The Annual Operating Plan serves as a guide for your organization’s journey over the fiscal year. In this post, we’ll dive into creating an Annual Operation Plan. We’ll explore what an Annual Operating Plan entails, underscore its importance, offer insights into crafting an impactful plan, and share best practices to embark on this critical expedition.

How to Craft an Annual Operating Plan

Appreciating the Importance of an Annual Operating Plan for Restaurants

An Annual Operating Plan is your road map for the upcoming year, translating your larger visions into actionable plans and budgets. Without one, your team may lack the clarity and alignment needed to make progress on the priorities and metrics that matter most to having a successful coming year. I often see companies set budgets for the coming year without engaging the stakeholders who have to deliver on those budgets or drafting an operating plan that supports the accomplishments of the planned financial journey. It’s important that your annual plan address several key components: growth, people, operations and finances. Planning for the year ahead ensures everyone in your organization works on the same goals in the same sequence, increasing efficiency, streamlining operations, and improving your business’s performance.

When to Draft Your Annual Operating Plan

The best time to draft your annual operating plan depends on your fiscal year and the seasonality of your business. September or October is generally the right time to start yearly planning, depending on the intensity of your planning process and the seasonality of your business. Generally, companies plan on a calendar year cycle (January to December). December is typically one of our busiest sales periods in the restaurant business. Even though January is typically a slower month, planning in January means you’ll be planning while your team is already executing. The goal is to complete the plan by about Thanksgiving so everyone can focus on operations from the day after Thanksgiving forward.

Defining an Annual Operating Plan

An Annual Operating Plan is a detailed action plan for achieving your business goals over the coming year. It typically includes key performance metrics, budgets, priorities, timelines and plans for each business function. This plan should be based on your broader strategic plan and be aligned with your company’s vision, mission and values.

Let’s say your organization’s vision is to be the leading brand for serving high-quality tapas meals worldwide. Your annual operating plan for the next fiscal year might include specific action steps, such as laying the foundation for a franchise program or writing a more thorough operations manual to license the business beyond company-owned restaurants. The annual plan would align organizational leaders to key deliverables and establish SMART goals to measure achievement.

Benefits of a Well-Crafted Annual Operating Plan

Crafting a well-structured Annual Operating Plan can provide several benefits for your organization, including:

  1. Better line-of-sight into your organization’s operations and finances. With a detailed plan in place, you and your team will better understand where you are, where you’re going, and how you’ll get there together to deliver better results.
  2. Clarity around how you’ll achieve results in the coming year. By breaking down your longer-term goals and vision into smaller, actionable steps, your plan can help you focus on the priorities that matter the most.
  3. Increased accountability among your team. When everyone knows the priorities they are responsible for and how they contribute to the larger goals, they are more likely to take ownership of their work and deliver results to support organizational success.
  4. More accurate operational and financial forecasts. By creating a detailed budget as part of your annual operating plan, you can better anticipate economic changes for the coming year, which can help you make more accurate financial projections.
  5. Improve communication and coordination between departments and functions. With everyone clear and aligned around one plan, the organization will be on the same page about how you win in the coming fiscal year. Alignment between teams helps improve communication and head issues before they happen.

Benefits of a Well-Crafted Annual Operating Plan 1. Better line-of-sight into your organization's operations and finances. 2. Clarity around how you'll achieve results in the coming year. 3. Increased accountability among your team. 4. More accurate operational and financial forecasts. 5. Improved communication and coordination between departments and functions.

Components of an Annual Operating Plan

Now that we’ve covered what an Annual Operating Plan is and why it’s important to your business let’s review the key components that go into creating one.

Set Clear Goals

The first step in creating an effective annual plan is to identify your key objectives and goals for the year. These should be specific, measurable, achievable, relevant, and time-bound (S.M.A.R.T.). By setting clear goals upfront, you can more effectively measure and manage your progress as the year progresses.

Here are a couple of big items to consider in setting your objectives and goals:

  • How do you plan to grow and evolve your existing footprint of stores?
  • How, where and when will you grow into new locations?
  • What’s in next year’s plan that can’t be avoided (a lease or credit facility ends, must-do compliance projects, etc.)

Identify Key Performance Indicators (KPIs)

Once you set your SMART Goals and objectives, the next step is identifying the KPIs to help you measure progress toward your goals. KPIs should be tied to specific purposes and based on available data. Typically, we focus on Same Restaurant Sales, Traffic, Speed of Service (if in quick service or fast casual), Customer Satisfaction, Team Member Engagement, and Financial Performance Metrics.

Choosing relevant KPIs that can be easily tracked and measured is essential. An issue I often see is choosing KPIs to measure success that the business doesn’t currently have the capability of measuring. Another is that the KPI dashboard is so big that it’s rarely updated or used. Ensure you’re realistic in your KPI approach – focusing usually leads to higher-quality outcomes.

Setting a Realistic Budget

No Annual Operating Plan is complete without a well-thought-out budget. Your budget should consider all expenses associated with achieving your plans, including needed salaries, capital expenditures, and project investments. It’s important to be realistic when setting your budget, as overestimating revenue or underestimating expenses can lead to inaccurate forecasting, missed targets, and serious cash issues.

When creating your budget, it’s important to consider any potential risks or uncertainties that could impair your revenue or expenses. The restaurant industry is rife with unpredictable risks: economic, supply chain, regulatory, labor, and competition, to name a few.  While you can’t predict every uncertainty, you can plan for things like coming roadway construction or new competitors in your current trade areas.

Defining Roles and Responsibilities

To ensure that everyone in your organization is working toward the same goals, it’s important to be clear about the roles and responsibilities of each department and function. This might mean identifying who oversees specific projects or initiatives and outlining each team member’s key tasks and deliverables. By clearly defining roles, you can ensure everyone knows their contributions to the larger objectives.

Creating a Timeline for Execution

With objectives, KPIs, growth, budgets and roles defined, the next step is to create a timeline for executing your Annual Operating Plan. Your timeline should include specific & realistic milestones and deadlines for each department or function and contingency plans for unexpected roadblocks or delays.

This is a good time and place to build a detailed annual calendar for your business mapping out key events, milestones, accounting cycles, meeting cadences, activities and initiatives throughout the year. The calendar is a visual roadmap that helps you stay organized and committed to your plans.

Developing Your Annual Operating Plan

Now that we’ve covered the components of an Annual Operating Plan let’s review steps you can take to develop an effective plan for your restaurant business.

Conduct a Thorough Business Review

The first step in your annual planning process is thoroughly reviewing your business. This should include reviewing sales, operational, people, marketing and financial results. It also means looking for bright spots and areas for improvement based on recent activity in the business.

The thorough business review is a great place to deploy a SWOT and/or PEST analysis:

  • In the SWOT analysis, the planning team brainstorms internal strengths, internal weaknesses, external opportunities, and external threats of the business in four quadrants. The team then looks for connections between the quadrants.
  • In the PEST/PESTLE analysis, the planning team weighs the socioeconomic factors into planning. PEST includes political, economic, socio-cultural, and technological). PESTLE adds legal and environmental factors.

SWOT Diagram

By taking a comprehensive review of your restaurant business and the environment in which you operate, you can craft an Annual Operating Plan that identifies opportunities and sets realistic goals for the year ahead.

Engage Stakeholders in the Process

Once you have conducted your thorough business review, it’s time to engage stakeholders in the planning process. This likely includes your entire management team, key team members from operations, and even an outside facilitator. If you’d like a facilitator to guide you through this process, I’d be happy to help. Just contact me about your needs.

Fostering open and honest communication and encouraging feedback is very important during the annual planning process. By creating a collaborative environment, you can ensure that your Annual Operating Plan reflects the needs and priorities of your entire restaurant business. You want to avoid environments where there are “meetings outside of meetings” or where key stakeholders choose not to share their input.

Set Priorities and Allocate Resources

Based on your business review and stakeholder input, the next step is to set priorities and allocate resources for the year ahead. This should involve deciding which projects or initiatives to prioritize, what headcount to add in what order, and how much money you and your team will need to invest to achieve your objectives and goals.

When setting priorities and timelines, it’s critical to consider the entire year rather than hyper-focus on the first one or two quarters of the plan year. While it may be easy to focus on immediate needs, it’s important to consider your plan for the broader year and strategic vision. Make sure you balance your plan to deliver results in the near and long term.

Develop Actions Plans and Assign Accountabilities

With your priorities and resources in place, the next step is to develop action plans for achieving your goals and objectives. This typically involves breaking down larger goals into smaller, more manageable tasks and assigning accountability for each task or initiative.

This is a good place to be clear on the differences between goals, projects and tasks, which can get tricky during planning. Here is a breakdown of the differences between these three concepts:

Goals, Projects, Tasks: What's the Difference?


A goal is a broad, high-level statement that defines a desired outcome or result. Goals provide an organization’s or individual’s overarching direction and help guide decision-making and resource allocation. They are typically aligned with the organization’s mission, vision, and long-term objectives. Goals are often qualitative and may not have a specific deadline. Examples of goals in strategic planning for a restaurant group might include

  • Become a recognized leader in sustainable dining within the next five years.
  • Increase revenue by 15% over the next fiscal year.


A project is a temporary and unique endeavor with a defined scope, objectives, and timeframe to achieve a specific goal. Projects are more specific and focused than goals. They involve coordinated activities, resources, and tasks to produce a deliverable or outcome. Projects are often broken down into phases or stages, requiring planning, execution, monitoring, and control. In the context of a restaurant group, a project might be:

  • Launch a franchising sales program within nine months.
  • Implement a customer loyalty program by the end of the year.


A task is a discrete and specific action or activity that must be completed to contribute to completing a project or goal. Tasks are smaller project components and are actionable steps that individuals or teams can perform. They are often time-bound and measurable. Tasks are the practical, day-to-day activities that move a project forward. In the restaurant industry, tasks might include:

  • Create a menu for the new farm-to-table concept.
  • Design promotional materials for the customer loyalty program.

When developing action plans, it’s essential to be specific and measurable. Each task or initiative should have a clear objective and a defined timeline for completion. Additionally, assigning accountability for each task is critical to ensure everyone knows their role and responsibilities.

Monitor Progress and Adjust as Needed


Your Plan vs Reality

Finally, regularly monitoring your progress toward your goals and KPI targets is important. Typically, checking in on KPIs monthly and have a more extended quarterly stepback meeting to review and assess your plans, budgets, and timelines. It’s essential to be objective and data-driven during monthly or quarterly reviews. Quarterly stepbacks are another great place to use an outside facilitator. Don’t rely on opinions or assumptions. Instead, use data and facts to assess your progress and make decisions about adjusting your operating plan. It is also essential to stay flexible and responsive to ensure your annual plan remains practical and relevant throughout the year.

Common Problems to Avoid

As the “Your Plan vs. Reality” graphic illustrates, things rarely go as planned. Here are a few common problems I see in the Annual Operating Plan process that you should try to avoid:

  1. Too few people involved: Building the Annual Operating Plan isn’t a CEO/CFO job. It’s a job that should meaningfully involve all stakeholders noted above. Excluding stakeholders from the process can result in incomplete or uninformed decisions.
  2. Especially not involving the Operator’s voice: Restaurant General Managers have a better pulse on trade areas, local hurdles, and potential momentum builders to help inform annual operating plans. Involving the Operator’s voice allows you to build a more accurate plan and get buy-in from the Operators when it comes time to execute.
  3. Overambitious goal and priority setting: Setting unrealistic or overly ambitious goals can lead to frustration, burnout, and failure to achieve the desired outcomes. Objectives should be challenging but attainable, and resources should be realistically allocated.
  4. Especially being too optimistic about New Restaurant Openings: Set realistic timelines, capex, and operating budgets for New Restaurant Openings. Rather than trying to perfectly time new restaurant openings, consider setting a new restaurant sales week goal accretive to the budget rather than trying to guess NRO schedules perfectly.
  5. Writing your plan and never looking at it again: If you spend the time and resources to build a plan, it’s crucial also to spend time and resources executing it. Failing to monitor, check and adjust as outlined above will make it difficult to track progress, stay focused, and determine the success of your plans.

In Conclusion

While creating an Annual Operating Plan may seem daunting, it’s critical to your business’s long-term success (especially if it’s rapidly growing). By defining your goals, KPIs, budget, and timelines upfront, you can ensure that everyone in your organization is working toward the same objectives, which can help increase efficiency, improve communication, and drive better business results.

Need Support?

If you’re scaling your business from a few locations to many, reviewing strategic alternatives, articulating a growth strategy, or anything else relating to strategically expanding your restaurant business, don’t hesitate to contact us at Consult to Grow®. We would love to be part of your restaurant journey! Ready to get started?

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