When the economy goes south and the press begins to throw the word “recession” around as though it were complimentary desserts for a group of regular customers, many owners begin to explore ways to bring in revenue without having to bring in customers. Enter the potential investor.
Owners look for investors for numerous reasons- to help them develop new concepts or expand on old ones that have new life in them. They look to the investor to buy old dilapidated eateries that have shuttered their windows and locked their doors because of a previous owner’s failure to find success in Penne Pasta with Sautéed Shrimp. Fried Calamari or appetizers that were to tantalize the palate but instead left the soul empty.
Yes, now is the time many of us will look to friends, family and fools to ante up anywhere from a few grand to a wheel barrel full of currency in order to grow an empire. And, there are many business people in the world, a few steps ahead of the “R” word, who are intrigued with the business and think, or possibly hope that a small investment in a culinary concept could have the rocket ship effect on a community and a bank account.
Seldom is the case. Even in the world of quickly expanding chains and bottom lines that continually muster attention from the financial mavens and vultures of Wall Street, the initial capitalization of even the most reasonably priced concept is close to a million dollars, if not more. And that isn’t for multi locations that are for one.
Of course there are those shoe string concepts that can be opened with less than six zero figures, but the chances of those evolving into a multi unit, million dollar company are slim.
But, if an owner has an idea and wants to expand on it, investors may be the way to do that. However, there are some very serious steps to consider if the investor route is the road you chose to take to expansion.
First, do not even insinuate that any of your investors will ever get their money back. The risks that they take are something needing explanation before any mention of profit or bottom line is ever discussed.
I was in a conversation last month with a business man who owns an art gallery in
Naturally, I told him that he should be careful and consider the money a gift rather than ever expecting any money back.
I approached a good friend, who was also a customer of one of my restaurants, to invest in a new location with a different concept. Unbeknownst to me he owned a bar in
The potential investor sat me down, explained why he would not invest in my restaurant and why nobody should invest in my concept or anyone else. He then hands me a check for $5,000.00 and asked me to fill out fifty $100.00 gift certificates. He claimed he would be using some, and giving others out for presents.
A great way to invest.