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Assessments: Ready to Raise Capital for Your Restaurants?

Jan 22, 2020

Almost everyone knows the cost of entry into the restaurant business is comparatively low. Which helps explain why there are so many foodservice businesses in the U.S. (The National Restaurant Association estimates puts the number at more than a million.)

And yet the chance to hit a home run with an up-to-date concept is surely a motivating factor for some entrepreneurs. And, to take things a step further, a (relatively low-cost) home run that attracts institutional investors who may put a handsome multiple of EBITDA or sales on your company for the chance to help grow it into a thriving brand.

So let’s say you believe you’ve got the goods to achieve that. After all, the five restaurants you own are profitable and on-trend. Best of all, you believe you know where the concept’s strengths and weaknesses are.

We asked RTS Partner Jessica Kates, a financial specialist and a restaurant investor herself, to provide advice for owners who now want to engage professional investors (sometimes called private equity) in a serious discussion about funding. She offers these six tips to help owners assess their concepts before any meeting takes place.

Have answers. How is your brand differentiated? Why does it work? Who is your core customer? What’s the competitive set in each of your locations?

Be prototype ready. Have a replicable prototype model that with tweaks from an institutional investor is at a point where it can be dropped into new markets as your growth strategy launches. Also: Put together a real estate pipeline with locations for the next, say, five stores.

Identify weaknesses. Show where there’s room for improvement and areas of opportunity. Be ready to explain the type of strategic help you need from a financial partner capable of providing it.

Identify your investor. Think long and hard about who the ideal financial partner is. For example, is it a financial investor who remains passive when it comes to operations? Or is it more of a a strategic partner capable of helping you make decisions about managing the business?

Your share, their share. How much equity are you willing to sell (i.e., what percentage of the company do you want to retain vs. the percentage you’re willing to part with)?

How much capital? Your business plan should already have an operating model that accounts for capital needs (new store openings, maintenance capex, additional hires, G&A, etc.). Now make sure that whatever the amount of capital you’re seeking, it provides at least three years of runway with a cushion.

If you need help raising capital for your project, Results Thru Strategy can help. Please email RTS CEO Fred LeFranc: or call 888–812–2150.


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