Sometimes, in order to reach our dreams, we need a little help. Starting (or growing) a scalable and sustainable restaurant or hospitality business is not cheap. Many aspiring restaurateurs need a business partner or investment group to help reach their financial targets.
Here’s what we know: The average start-up restaurant, (in US dollars) can range from $295,000 to $660,000+ depending on a variety of factors, including of course the size of establishment, whether it’s a ‘from-scratch’ project, and the choice of overall concept.
No matter how you look at it, that’s a lot of money.
So how can you get financial help? You can’t just walk up to someone and ask for $100,000 for example. You need to get out in both the financial and hospitality community and network to build up both solid and referable business relationships. You then need to prepare yourself and your concept for investors.
But how do you do that successfully for your hospitality business? Here's how:
Let’s hope you’ve completed a feasibility study, concept development plan, and business plan (hint: if you haven’t – get started, you won’t get far without these plans). Once those plans are finalized and tweaked, you want to begin preparing yourself for investors by ‘working backwards’ from your completed business plan.
Investors receive numerous proposals per month or year. They may not have the time to read through all of your plans, initially. You want to narrow it down to 10-12 impactful slides followed by 1-2 pages of your ‘executive summary’, and then a 60 second elevator-type pitch.
When crafting a proposal to investors, the return on their investment will always be their first and most critical concern, so keep that in mind.
Perfect your pitch decks
Combining your three plans (feasibility + concept + business), what are the most important and impactful pieces of information that an investor would look for?
This is a great opportunity, within 10-12 slides, to include:
- Your overall market size
- Gaps in the market
- Competitive advantages
- Start-up costs
- Architectural notes
- Menu development
- Key performance indicators
- Other financial highlights
Refine your executive summary
Now, take your pitch decks and narrow that key information down to 1-2 pages of the most important and impactful information. If you can’t capture their interest in your executive summary, you need to keep re-drafting it until it screams ‘WOW’.
Often times, this is the first document they will want to read, before getting into pitch decks or even your business plan.
Know your elevator pitch
Sixty seconds. How can you grab the attention of an investor in one minute or less? Show your passion through the pitch while answering the three most critical questions the investor will want to hear, even before they ask you.
This is where you want to hit them with:
- How they will make their money back
- What problem or market gap you are filling
- What your overall business concept is
Investors want to know where their money is going, how it is going to be used, and how they’re going to get it back. Being strategic also means to expect the unexpected, and be prepared for it. You also want to identify your strengths, opportunities, and challenges.
If you’ve completed your plans correctly, you should know your numbers. Be prepared to answer key financial questions (for example KPI’s) – which should all be backed
up with both facts and strategic (SMART) objectives.
Show them your benchmarks for:
- Revenue per customer throughout different times of the day
- Break-even strategies
- Detailed labor reports, inc. revenue per labor hour
- Detailed food and beverage costs
- Marketing and advertising budgets
- Revenue per square foot
- Revenue per available seat
Know your limits
Don't be surprised that investors will have an interest in your business, (after all it is their money and reputation that's on the line) so be prepared to answer some challenging questions:
- Are you willing to negotiate any control of the restaurant to investors?
- When will the restaurant begin to turn a profit? What are the monthly cash-flow projections?
- What are the projected profits of the restaurant over the next 1-3 years; and is it realistic?
- What is your role in the project and who will be surrounding you for support?
- What are the chances the restaurant concept will fail? What is the exit strategy
Before you pitch your heart out, have a long, hard, think about these and know where you stand. It's better that you know your boundaries rather than step into a deal that you're not happy with.
Leave an impression
Lastly, be confident and memorable – show your passion, your level of experience, as well as your true understanding of your business concept. Utilize additional resources such as photos, drawings, videos, market research, testimonials, and even food or beverage samples to help enhance your presentation.
If you’re turned away by an investor (or bank), don’t let it get you down. Learn from the experience, make any adjustments from their feedback, and try again.
Asking for money isn’t easy – but being prepared, strategic, and memorable – will help you get closer to winning that next investor pitch. Good luck!
Start your online hospitality training with Typsy and watch our course now on Improving hospitality business operations with Eden Sunshine.
|As the Founder & President of KRG Hospitality Inc. in addition to being the author of the book ‘Bar Hacks’, Doug Radkey’s impressive career spans more than two decades and includes all aspects of food, beverage, and hospitality development. This storied brand has proven success since 2009, throughout a variety of markets found within Canada, The United States, and abroad by being a creative agency with a focus on planning, development, and support for independent restaurants, bars, hotels, and other hospitality related properties.|
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