Restaurants are now more profitable than ever — but those profits don’t happen overnight. When you’re opening or expanding a restaurant business, there comes the daunting question of how to finance leasing costs, professional -grade equipment, staffing, ingredients, and more. Where will you get the money, and from whom?
Whether you’re opening a traveling taco truck or a metropolitan French eatery, restaurants are expensive endeavors worldwide. American entrepreneurs spend a median $375,000 USD opening a restaurant — and Australians spend an average of $650,000. You might be in a position to bootstrap your startup capital, or secure a business loan. But more often than not, running a restaurant isn’t a solo venture — you need partners to help. For many current or aspiring restaurateurs, partnering with investors can be a great way to secure initial capital.
In this post, we’ll discuss why restaurant investors might be an option — and how to win them over.
First thing’s first: Why involve investors in your restaurant business?
Even if you’re lucky enough to have the startup capital to open your business, it still might be a good idea to take out a business loan (if you can get one). Either way, there’s a lot of personal risk involved. But when working alongside outside investors, you distribute the risk and leave yourself with plenty of operating reserves.
On top of offering financing, qualified restaurant investors have the operating and expansion experience, industry credibility,and business savvy to help you succeed. Especially when you are independent or have a small team, this additional guidance can help you optimize sales and streamline operations with less trial and error. If you’re part of a large restaurant group with business resources, an investor can also be a valuable partner as you navigate publicity, brand partnerships, and more. Here are 4 tips to help you successfully pitch investors and secure the funding you need.
1. Share who you are — and why you’re the person to bring this restaurant to life
Some of the best business stories start with personal anecdotes, and this can help establish grounds for respect and belief from potential investors. Maybe you’re starting a Polish eatery using your grandmother’s family recipes; maybe you were an athlete earlier in life and are committed to bringing customers healthy, nutritious food. Give potential investors an idea of who you are, what credentials you have, and why you’re committed to making this business a reality. Your personality and passion will help set up your presentation for success.
2. Provide a concise, big - picture elevator pitch
Right away, your investors will want to know what your restaurant is and how you’re executing it. Have a concise sales pitch you can deliver in one minute — the industry standard. More often than not, investor teams have a decision in mind before you begin speaking. To master the delivery, make sure to craft and pr actice this statement, including the who, what, when, where, why, and how of your restaurant:
- Who you serve
- What type of experience you’ll bring
- When key milestones fall on your opening timeline
- Where your presence will be
- Why your restaurant matters
- How you'll execute it
When you speak, project the confidence of an entrepreneur who’s ready to feed the masses, and outline how your restaurant will deliver a plentiful return on investment
3. Emphasize what makes your restaurant different
Investors hear hundreds of spiels from fledgling companies. Don’t just tell them what your business is — show them why they should care. Differentiating your restaurant is a key part of illustrating the need for it, and convincing investors their dollars will pay off. Maybe a competitor in your space doesn’t offer delivery — and you know the convenience of being able to dine in or order out will win their customers over. Now’s your time to share the smart, strategic decisions you and your team have made to make this venture stand out.
4. Demonstrate your understanding of the target market and key competitors
Investors want to know that you have a plan to reach new customers — and a strategy to cut through the noise of similar establishments. Who will be coming back to your restaurant for more — are you a favorite of the late - night college crowd, busy business professionals, or perhaps young families? What are you doing that the existing neighborhood spot isn’t? Maybe you’re the first to bring Asian fusion cuisine to your area. Show off how informed you are — and win investors on your side.
5. Get into the specifics
If you already have investors or supporters on board, do let the prospects in front of you know. If you have a business plan or sales projections handy, now is the time to share those — and back up how you’ll hit those numbers. Additionally, you’ll want to map out what you’ll use the investment for, whether it’s kitchen equipment or hiring a Michelin - starred recipe - developer. Giving potential investors a high - fidelity sense of where you’re at in your journey can go a long way to instill confidence.
Securing the investment
By t he end of your thoughtfully - crafted pitch, your investors should be on the edge of their seats, ready to back your restaurant financially. If you’ve never worked with an investor before, don’t just look at the dollar signs. You want to make sure the relationship allows you to operate successfully. Consider the following:
- Is the investor treating this as a partnership?
- Will I still have primary ownership of my restaurant business?
- Are there any contingencies attached to the offer?
- Does the structure of the deal match where you want to take your business?
- Do your personalities align?
The most important thing to ensure the partnership is knowing that investors identify with your restaurant mission and want to support you. With this backing, you’ll be positioned to accomplish any goal you set out to complete, whether it’s opening a second location, hiring a culinary director, buying new pizza ovens, or overhauling your menu.
To learn even more about funding, financing, and crafting a business plan, explore our latest merchant guide, “Financing Your Restaurant and Projecting Profits."
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