Restaurant investors help potential owners realize their dreams of owning eateries of their own. You're up against a lot of competition - great chefs and owners - who also want to attract capital to fund their ventures.
Pop-up concepts and new desserts led the way in a new Yelp survey that found the following:
- 9,100 new Mexican restaurants
- 6,863 new bars
- 6,562 new sandwich concepts
- 5,939 breakfast and brunch eateries
If you have a new, special concept, you can attract investors for restaurants across the country. But there are also options for well-planned or specialty eateries that need funding to open their doors.
We'll explain what you can do to get the restaurant funding you need.
How to Attract Restaurant Investors
Your eatery's initial funding requirements will be different from someone else's requirements. A cute, old building in town that was once a restaurant may be a good choice to limit costs, but your culinary vision may still cost $175,000 to over $700,000 to make a reality.
Investors may not see your vision at first, so it's up to you to pitch them properly. Your pitch is the first thing we recommend you work on for your restaurant loan or equity deal.
Plan Your Pitch
Investors want to know one thing: what makes your idea unique? Imagine how many times someone with a traditional pizzeria pursues a loan or seeks investors, only to fail because there are already a dozen of the same concepts in town.
Your pitch is the reason an investor should invest in you and consists of:
- 10-15-slide slideshow
- Details of your restaurant's idea
- Answers to questions investors are likely to have
If you prepare your pitch the night before, it will show in your lack of detail and preparation. Your pitch will include a summary that is clear and concise so that anyone you present it to will be excited to invest.
Passion will show in your pitch, so use this time to showcase your experience, audience demands and any personal stories that relate to the eatery. Numbers win over investors, so be sure to include:
- Sales and growth forecasts
- Profit margins and operational costs
- Overhead and initial capital figures
End your pitch with an easy way to follow up on your idea, such as going out to dinner together to discuss your concept further.
Build Up Your Online Presence
Building an online presence is one of the best ways to showcase how serious you are about your restaurant. You'll undoubtedly research investors and learn more about them using Google, Instagram, LinkedIn, Facebook and the like.
Create a digital footprint that discusses your concept and even adds parts of your own:
- Executive summary
- Market analysis
- Overview of your restaurant
You must be discoverable online because you can be sure that savvy investors will search for you and want to know more about the person behind the restaurant (you).
Be Active in the Community
Having a strong relationship with the community can help your restaurant attract investors. Getting involved in community events is a great way to give back, increase brand exposure and open the door to potential investors.
Get involved in events like:
- Local culinary festivals and markets
- Non-profit food drives and similar events
- Community cooking classes
These are great places to meet like-minded people who may be interested in investing in your business.
Have a Strong Business Plan
Presenting your restaurant in a positive light is important, but when it comes down to it, investors want to know that you have a solid plan to succeed.
If your goal is to attract investors, make sure that you have a strong business plan that covers your:
- Mission and vision
- Strategic goals
- Marketing strategy
- Financial projections
Having a clear, thorough and well-thought-out plan will make all the difference when pitching to investors.
Working With Investors - What You Need to Know
Attracting investors is a process, and it won't happen overnight. You'll need to be patient and persistent, but in the meantime, you can prepare yourself for the road ahead.
Knowing what to expect can ensure you're ready to overcome potential challenges and move forward with confidence.
Here's what you need to know.
Understand the Types of Investors for Restaurant Funding
Various types of investors can help fund your restaurant. It's important to understand each one and their expectations.
- Restaurant angel investors. These are high-net-wealth individuals who invest in small businesses and startups. Along with capital, they also bring mentorship.
- Personal investors. These are individuals who use their own funds to invest in restaurants. Typically, they have a vested interest in the success of the business.
- Venture capitalists. These are companies that invest in businesses with high growth potential, and they seek a return on their investment within a few years. It's common for them to invest in things like a food business incubator to help businesses get going.
- P2P lending. Also known as peer-to-peer lending, P2P lending is a type of financing acquired from individuals, such as crowdfunding. Investors receive something in exchange for their funding, such as a product or benefits.
Depending on your goals for the business, you may wish to attract only certain types of investors. Having an understanding of what is expected in exchange for funding, whether it's a stake in the business or a return, can help you align your funding venture with your business goals.
Investors Bring More Than Just Funding
In most cases, investors can offer more than just a restaurant business loan. Investors who have industry experience or are former owners of restaurants can also offer mentorship, along with:
- Valuable connections
- Industry knowledge
- Advice and guidance
Many will also bring their passion and love for the restaurant industry to the table.
Iron Out the Details and Expectations
Before entering into any kind of investment agreement, make sure that you iron out the details first so that everyone is on the same page. Discuss what types of perks investors can expect, such as priority reservations, meal credits or any other agreed-upon benefit.
Take the time to do your research and understand the impacts of these benefits. For example, some benefits may be taxable and come with additional costs.
Working with investors gives you an opportunity to make your vision a reality, but it's important to choose your partners wisely.