How to Find Investors for Your Restaurant
So, you have an amazing idea for a restaurant. You’ve cut your teeth in the restaurant industry for years, and you have the burn marks from hot plates and knife scars to prove it (ouch). Now, you’re ready to do something for yourself. Or perhaps you’re already an established restaurateur, and you’re looking for room to grow—maybe a second location?
Either way, you’re going to need some investors, unless you have a spare $375,000 laying around, which is the average cost to start a restaurant. So, where do you find them? And when you find investors, what do you tell them to get them to take a chance on you?
Below, we’re going to walk through the basics of what you need to talk to start funding your restaurant:
What you need to have ready before approaching investors,
How to find investors,
What to look for in a good investor, and finally
How crowd-investing can fund your restaurant
A. What do I need to have ready to talk to investors?
1. Business Plan
Your business plan is essentially the who/what/where/when/how of your business. It’s where you show you’ve done the market analysis, have a plan of how the restaurant will be organized, and how you’ll promote the business.
Many investors will ask for your business plan before you meet with them to pitch, so this is often their first impression of you, so make it count! You also should bring a business plan to any pitch meetings if investors don’t ask for them right off the bat.
2. Pitch deck
This is your opportunity to introduce your idea to investors and get them excited about it! Usually, a pitch deck takes the form of a PowerPoint presentation, and typically it’s where you get to have a bit more fun than with your business plan. You can add sample menus, mood boards, and different design elements to really show what makes this restaurant unique.
Essentially, the pitch deck is where you not only drive home the fact that you’re confident and able to make this business successful but also make the investor fall in love with your future restaurant.
The other important thing to consider for a pitch deck is to be cognizant of your investor’s time, and also make sure you hit all the things you need to talk about. Your business plan is a great resource to structure your pitch. All you need to do is refine it into a concise but powerful message.
3. Plan out your use of funds
Another element that investors look for is that you have a clear purpose for the funds. You must take the time to map out a cost analysis of what restaurant basics you’ll need - small wares, ovens, equipment, hiring, and oh, rent.
Your business plan and pitch need to include these numbers, as well as other current investors, and how much you’re asking for.
Investors often want to see that you’ve got some skin in the game as well, so map out your contribution, whether that’s in funds or in your time and energy.
Other things that investors will often look for are your plans for the future. What are your future revenue projections?? When do you plan to launch? How do you plan to grow?
4. A great team
Having a great team to back you up is another way you can inspire confidence in your investors. As part of your business plan and pitch deck, talk about the key players in your restaurant. Where else has your general manager worked? Is your head waiter also a master sommelier? If these are relevant to your restaurant’s functions, they’ll be relevant to your investors.
B. Where do I find investors?
1. Family and Friends
A solid place to start looking for your first round of investors is actually pretty close to home. Plenty of start-ups, restaurants included, look to their friends and family to help at least start the funding process.
Some good rules of thumb when talking to family and friends about investing in your restaurant is to have a really clear set of terms and guidelines about the investment agreement. That way, there will less likely be bad blood due to miscommunication. Also, don’t go just cold-calling childhood friends or distant cousins asking for money - look to see if this is in their interests as well and if they stand to benefit from the relationship as well.
Also, make sure that the friends who are investing in you are in a good position to take some risk on an investment. Even if you’re the world’s greatest restaurateur, as the past year has shown us, restaurants are risky!
2. Facebook Groups and other Social Media Forums
Social media can be great for more than just complaining and sharing pictures of cats!
Are you part of any industry groups? You can either outright see if anyone is looking to invest in a new business, or maybe just seek advice from others who might have once been in your shoes. Even if they might not be wanting to invest at the moment, they can maybe point you toward investors who have invested in them and might also be interested in you.
3. Industry connections
On a similar note, your industry connections are also another viable option to look for future investors. Whether it’s a former boss, an instructor at culinary school, or someone you worked the line with who has become successful, these people know where you’ve been and should have an idea whether you’ve got what it takes to build a successful restaurant.
4. Banks and small business loans
You could also go the route that many small businesses do, and seek financing through a bank or Small Business Administration. Banks will be looking for similar things to other investors such as a strong business plan, relevant experience, and a clear purpose for the funds.
However, banks are often hesitant to fund certain types of businesses, such as restaurants. They require your business to be in operation for 2 years, so they won’t fund new restaurants, plus their application process can be quite lengthy!
C. How do I know it’s a good fit?
An investment is, above all, a relationship. You want your investor to bring value to your business, beyond the actual monetary value that they’re investing. Whether this is their knowledge, their network, or simply their patronage, there are many ways you can ensure that your investors are a good fit for your business.
1. The investor has their priorities in the right place
The best kind of investor knows that this is a relationship and not purely an investment for themselves. The investor should believe in your restaurant, sure, but they should also believe that it’s something that’ll bring something genuinely unique and beneficial to the community. Restaurants especially are so important in making a neighborhood or a city feel like somewhere you want to visit and spend time in, and they’re important to local economies as well.
2. Make sure the investor has a good history
Especially if this investor is going to be taking equity or having a leadership role in your restaurant, you want to make sure that they’re someone you want to deal with, both financially and personally. This goes along with our previous point about making sure they have the right priorities, but also make sure they have a solid history in making good investment decisions.
Have they backed out of a deal before? Not able to pay up what they promised? Will they want to make a bunch of decisions about the restaurant that you’re not okay with? Not all money is good money, so it really does pay to be choosy when it comes to certain investors.
3. Appeal to other investors, and to you!
On the other hand, maybe having this investor on board will be really beneficial to your business, beyond just their dollars.
D. What about crowdfunding?
One of the cool things about Honeycomb’s crowd-investing platform is that you can take all of this advice and raise the funds you need all in one convenient place, without losing ownership of your restaurant!
For many successful Honeycomb campaigns, the first group of investors is usually the people the business owner knows personally or are in their network. The opportunities expand as the campaign reaches investors from all over the country who are interested in earning a return while helping small businesses from all over.
Our investors know how important small restaurants, bars, cafes, bakeries, and more are to a community and that investing in one of them is also investing in someone else’s dreams and livelihoods. That’s how we know their priorities are in the right place.
Also, due to the unique crowdfunding structure, these investors aren’t taking any equity or ownership over your company but still have the potential to become long-lasting patrons. Investing in a small business doesn’t just mean getting a return on investment, but it also strengthens the investors’ relationship with your business to a much deeper level.
Ready to expand your network and find some investors?
You can look near and far to find investors for your restaurant, or you could start a Honeycomb campaign and transform your personal network and local community members into your restaurant’s first patrons.
Find out more about Honeycomb Credit’s campaigns for small businesses at www.honeycombcredit.com/grow