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    13 Replies Latest reply on Aug 23, 2013 9:25 AM by Moderator Melinda

    restaurant startup

    Mamie2010 Wayfarer

      I am trying to open a small restaurant. I have found the location that I want, but haven't been able to secure the lease yet because of the lack of funding. I am receiving a small inheritance that I can use to purchase/lease kitchen equipment and purchase furniture, but I'm afraid I won't have enough working capital. My niece and her fiance, a chef, have a chef that has worked in 4 star restaurants that is willing to work with me if I give him the run of the kitchen - this will work out fine for dinner as there will be a different menu for lunch.

      I am the bookkeeper for a local restaurant and the owner had an offer from a friend/customer to open another restaurant location - she would put up the money to purchase/build but he doesn't want a partner and neither do I, but I need funding. Is it necessary for financial backers to be partners?

      thanks
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          • Re: restaurant startup
            Mamie2010 Wayfarer

            is it possible to get a line of credit for a startup and how long will it take?

            thanks
              • Re: restaurant startup
                loan guy Wayfarer

                It can take 2-4 weeks for funding on a start up for a business line of credit. Will you need equipment financing as well?
                  • Re: restaurant startup
                    Mamie2010 Wayfarer
                    thanks ... 2-4 weeks wouldn't be bad if I could in fact get financing - the only problem with time that I have is the location not being available.

                    My plan is to build a kitchen with gas and electric cooktops, 2 double/1 single electric convection ovens, proofer cabinet, built in warmer drawers and 2 microwaves -- 1 for the kitchen and 1 for the waitress station -- these and all cooking equipment I plan to purchase. Instead of deep fryers that require 5 gallons of grease I would like to use countertop flash fryers for french fries, etc. and cast iron skillets for fried chicken, fish, etc. -- did I mention I'm from the deep south? (: Instead of an expensive charbroiler, I have found an 'addon' to use with the gas cooktop, one side is a grill and the other is a charbroiler and if this won't work I have found an inexpensive countertop charbroiler. Ice maker, refrigerator, freezer and dishwasher I would like to lease these, and right now I'm unsure about the steam table. I was told last week that some companies provide dishwashers if you purchase their chemicals, that would be great if that's the case. S/S tables/prep stations/dish tables and s/s sinks I would try to buy used, those would be easy to replace later with new if they need be. My biggest concern/expense is the hood ventilation/fire system, they're not cheap. The dining room won't be a problem at all, I will make the drapes, purchase the chairs and build/stain tables to match - my sister has an entire workshop, the only thing I have to figure out is how large to cut the table tops.

                    If I can get the location that I want there will be construction costs - installing a grease trap, running water and gas lines, and hood stystem and iadding another ADA approved bathroom - the bathroom won't be a problem, one of the potential landlords has a construction company and his foreman told me that would be easy to do. There are some walls that need to be moved and we can reuse the studs, but I'm not sure if we can reuse the recessesd lighting.

                    That's my business plan - there will be small equipment financing/leasing and I will need the funds to purchase food and meet payroll. Currently there is not a nice restaurant in the area that serves lunch, only fast food places. If I can seat 50 people and turn over the tables at least twice at a minimum of $8.50 (lunch special) and incur no further expenses (excluding insurance, taxes, etc), I should be able to get things up and going full speed within a couple of months.

                    what do you think?

                     


              • Re: restaurant startup
                JDickinson Newbie
                Your question is well stated "Is it necessary for financial backers to be partners?" Regardless of whether your financial backer is a lending institution or an individual, you usually have to give up something to the financial backer. With a lending insitution, you typically would have to give them priority in liquidation over your personal investment. With an individual as a financial backer/partner, you could put them as an equal to you in liquidation.

                It's never nice to talk about liquidation but that's what the lenders are trying to protect themselves from.

                With the current financial crisis, you may have difficulty getting a bank loan. Try the smaller local banks. During my years in the restaurant industry, the local banks had a better appetite for this type of loan.

                Janet
                  • Re: restaurant startup
                    Mamie2010 Wayfarer
                    you're right about the banks not wanting to "lend" people money - right now the people are "giving" banks billions of dollars. I have not problem with a backer securing their investment and setting up a repayment plan, I just don't want to be obligated to somebody else for menu and food preparation. I first I was considering opening up a second location of an existing restaurant, but he said I would have to prepare all the foods the same as the restaurant and in my opinion it wasn't that good! Now however, he has a new cook and MawMaw cooks an awful lot like we do - since she's been there the food is much better, customers are always saying it reminds them of their mother, grandmother or aunt. I had tried to get the owner to put gumbo on the menu and he never would, but MawMaw has, along with fried oysters, fryed crabclaws and shrimp creole. And not only has the food improved, but business has picked up too.
                  • Re: restaurant startup
                    bmt2008 Adventurer
                    Try my site - it can be found in my profile. Lot's of sources for loans and lines of credit as well as equipment loans and leases. Think about leasing equipment and saving your money for working capital. You could also do a purchase - lease back option where you purchase the equipment, then a lender will buy it from you and lease it right back to you at lower payment rates.

                    Also have other sources of capital as you grow and want to expand. No obligation to you. Just the information you may be looking for.
                      • Re: restaurant startup
                        Mamie2010 Wayfarer
                        thanks, I actually went to your website last night and got as far as the companies to "serve your needs" with the option to apply at American Business Credit and BusinessFinance.com. American Business Credit offers unsecured business loans and LOC, but at this point I don't have a 'business' just a plan and a concept. If I can get financing I can file articles of incorporation, LLC and secure a business name and DBA commercial bank account, plus I would want a business LOC and not a personal one. One thing I have considered and don't know if it's possible, is if the landlord gets an assumable construction loan. That way he could do the renovations and assign the loan on the property location to me. I've never gotten a loan for anything other than a car and a house, so I'm not sure how this works. If I get a LOC can those be paid off early and used as revolving credit?
                        • Re: restaurant startup
                          madieve_tt Newbie
                          Hi bmt2008 My name is Madelyn, and I just went to your website and registered.
                          Please check my website at: www.ypoungnchic.com
                        • Re: restaurant startup
                          silvercell18 Wayfarer
                          It is definitely quite exciting to start a new business. But prior to jumping to throw any investments at the project, you have to make sure that you are financially secure and are able to sustain at least 3 months worth of expenses. The inheritance money that you are expecting may or may not be enough to help purchase the necessary equipment for your restaurant. Make sure that all of your costs are accounted for, so that there are no surprises. Building a solid business plan can not only help guide you through building out your dream restaurant, but it's also a good tool to present to potential investors that may want to invest in your business. Remember that careful planning goes a long way.
                            • Re: restaurant startup
                              Mamie2010 Wayfarer
                              you're right about being financially secure. One good thing is I don't have to rely upon the income from a business for my personal expenses - my sisters and I will be getting a small income from a rental property, this will pay my small mortgage and utilities - food won't be an issue because I would eat at the restaurant. And I really don't want to use all my cash on a business startup ... it would be preferable to secure a loan or LOC and lease equipment. In the beginning, if I could make enough to pay all the expenses for the restaurant, i.e., rent, utilities, equipment, food, salaries, I would be happy. I think it will take a while to get established in the community and make a profit. I want people to book private parties ... at least I can decorate cakes! In otherwords, I want people to enjoy not only the food, I want them to have a dining experience.
                            • Re: restaurant startup
                              LUCKIEST Guide
                              restaurant startup, Welcome

                              Go to Members page and tell us more. Who are you?? Where are you??

                              To raise money, you need a Business and Marketing plan.

                              Both SCORE and I can help, BUT NOT until you tell me more.

                              LUCKIEST
                                • Re: restaurant startup
                                  Mamie2010 Wayfarer
                                  I updated my profile as you suggested with my location. Can anybody say what the terms of these type of loans might be ... interest rates and length?
                                    • Re: restaurant startup
                                      Guide

                                      Hi Mamie2010,

                                       

                                      Welcome to the forum.

                                       

                                      You could have a silent partner agreement with the person that is willing to fund your restaurant. The funder is considered silent because of the lack of involvement in your business. All the funder cares about is the return that he will be getting for his money. The two of you have to come to an agreement of how much of a return and time frame for the return. You do the rest.

                                       

                                      Good luck!

                                       

                                      Melinda