# Restaurant Start-up Funding



## Tamboli's Pasta & Pizza (Aug 22, 2018)

First time restaurant opener here exploring funding options. I'm trying to find creative ways to get started without giving away all my equity, and I'm open to any ideas or experience anyone's willing to share.

One option I'm considering is starting a* "founders' club."* Low level investors ($1,000-$5,000) can pre-purchase meals at a discount, redeemable in monthly increments using a gift card that I'll replenish at the start of each month. Anyone done anything like this and care to share insights?

Has anyone used *crowdfunding*?

Another option I'm considering is *partnering with local non-profits*, so their supporters can purchase set-term equity shares for their preferred organizations. Say a funder invests $5,000 for one share. Over the five year term, the non-profit stands to receive about $6,500, and the funder has a vested interest in my restaurant's success. Funders who donate at a higher level also receive "founders' club" benefits. Anyone have thoughts/insighs/advice on something like this?

Many thanks in advance,

Miles Tamboli
Tamboli Pasta & Produce


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## halb (May 25, 2015)

So you want to do this with no risk of your own. What happens to your "investors" if you go out of business in six months? You send them a thank you card from the Caribbean?


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## Tamboli's Pasta & Pizza (Aug 22, 2018)

halb said:


> So you want to do this with no risk of your own. What happens to your "investors" if you go out of business in six months? You send them a thank you card from the Caribbean?


Thanks, that's really helpful.


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## jcakes (Feb 18, 2007)

How much experience do you have in the restaurant business? That alone is going to be an impact if you do crowd funding and you're only going to get a crowd if you already have a following (from an existing restaurant or food truck, for example - or perhaps social media). It depends on how much funding you're looking for, too. A hundred thousand dollars isn't likely but a few thousand might be a reasonable goal for crowdfunding. Do you have a location already? Is it an existing restaurant or food business? A business plan?


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## halb (May 25, 2015)

Tamboli Produce Co. said:


> Thanks, that's really helpful.


Ok. What restaurant experience do you have?


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## sudhanshu arora (Apr 29, 2019)

You are right.but if you have an issue then why not you cooked food from home and deliver to the people. if people like your food they ordered more and more and then u can take the loan and start your own restaurant.


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## patblue (Feb 19, 2019)

Not sure what to think of this...
Honestly speaking - anyone opening a restaurant and not putting a cent of their own money in - I don't know - would make me think twice, honestly speaking.

Aside from the experience angle - successfully opening, running and keeping a restaurant a float is no easy task - and yes, I know, so is nothing in life - but I've just seen too many people opening restaurants, getting staff in (a lot of times from other places), setting up accounts with vendors, etc...only for the whole show to go up in flames (hopefully not literally) and a lot of good people sitting on the street looking for new jobs. But aside from that....

Crowdfunding a restaurant - never heard of it - might be an interesting angle though.
Question here is though - what is the motivation for people to crowdfund a restaurant? 
I could imagine only people living in the vicinity (short distance / short drive) would benefit from that. Then the question is, how many people would that be (location) - and then, how much are you anticipating they would be investing?

Founders Club? Have seen a few operations that started on this concept, although, most of them were bars / wine bars where the "founders" could then also have their own collection of wine/spirits stored (of course against a small premium) but did not have to pay corkage or anything like that.
Works - but you need to be careful with your founders - they might start taking advantage real soon....

Have you considered teaming up with some of the vendors you'd be looking at working with?
Reason I ask, is, that I have seen a few restaurants that, while giving a vendor exclusive rights (i.e. one vendor is specialized in seafood, so the restaurant will purchase all seafood from them (limited to their selection)) got the vendors to invest into the business. Not sure if that might be a way to go.

As you mentioned above - the reason you are looking for alternatives is to avoid giving up all your equity.
While I can understand that point, honestly speaking, it really depends on what you are offering to investors.
I had one restaurant (sold it two years ago to a small dining group that wanted to get a foothold in the market in Vietnam) which was co-owned by me to 60% (controlling stake) and 20% each by my two investors.
So as you can see, you don't need to give up all your "equity" in your restaurant - just, as mentioned above, depends what you are offering to the investors and how much they believe in you...or your concept for that matter...


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## kuan (Jun 11, 2001)

1) You have to have money in the game. That way people will take you seriously.

2) Crowdfunding works only if you have a large following.

3) I would start with a small restaurant, feel your way around, and then use that experience to decide whether or not you want to continue.


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## Tamboli's Pasta & Pizza (Aug 22, 2018)

Everybody just calm down now...

I have a successful pasta business and a large following. 15 years' restaurant experience. Great location that's currently a restaurant and is owned by my family. Buying out the current restaurant for a hell of a good deal. Putting in 10% of the total equity myself. I've been running successful monthly pop-ups at the location since December. I have a very solid business plan and a great team of advisors. The place is small - 2,000 square feet, 60 seats. 

Please y'all; if you have experience you're willing to share, I'd love some helpful advice. Save your criticism if you don't know what you're talking about.


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## cheflayne (Aug 21, 2004)

> 1) You have to have money in the game. That way people will take you seriously.


Agree with this. The restaurant industry is known for a high failure rate with a low ROI for those that do succeed. Of course not all investors are savvy though, so who knows.

If you do get investors and open, what happens if you have to close? "Pre-purchase meals at a discount" are not much of a liquidity asset.


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## Tamboli's Pasta & Pizza (Aug 22, 2018)

cheflayne said:


> Agree with this. The restaurant industry is known for a high failure rate with a low ROI for those that do succeed. Of course not all investors are savvy though, so who knows.
> 
> If you do get investors and open, what happens if you have to close? "Pre-purchase meals at a discount" are not much of a liquidity asset.


That's a good point. I'm from a farming background and most of my customers are familiar with the CSA model, which is trust-based. I think they'll be open to it since we've already been doing it with CSA subscriptions for years.


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## chefwriter (Oct 31, 2012)

My first thought is to check with the IRS, the SEC and a very good accountant and a lawyer. They know the landscape and can point out potential problems, issues, liabilities, etc. They might even have some ideas on how to arrange the financing in ways we wouldn't think of.


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## halb (May 25, 2015)

Since it's owned by your family ever consider leasing with option to buy? Pay them an amount every month that goes towards the purchase. If all goes well after maybe two years you have the option to buy at a predetermined price. If it goes belly up you walk away, your family still owns it and they made money all along.

This is something an accountant and business attorney can advise you on.


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## Tamboli's Pasta & Pizza (Aug 22, 2018)

halb said:


> Since it's owned by your family ever consider leasing with option to buy? Pay them an amount every month that goes towards the purchase. If all goes well after maybe two years you have the option to buy at a predetermined price. If it goes belly up you walk away, your family still owns it and they made money all along.
> 
> This is something an accountant and business attorney can advise you on.


At the risk of sounding heartless, it's willed to me so anything I put into it will come back to me eventually.

If I wanted advice about real estate, business planning, or whatever else you're trying to enlighten me on I would've asked for it. I'm really just interested whether anyone here has experience with non-traditional fundraising.


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## cheflayne (Aug 21, 2004)

link to excellent article written by a restaurateur with a background in finance

https://money.usnews.com/investing/...acts-to-know-before-investing-in-a-restaurant

small excerpt " "I think restaurants are one of the riskiest investments you can make unless there's an opportunity to scale and sell the brand"


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## halb (May 25, 2015)

Tamboli Produce Co. said:


> If I wanted advice about real estate, business planning, or whatever else you're trying to enlighten me on I would've asked for it.


That's the attitude I sensed in your first post and the reason I said what I did. I can't see anybody giving you more advice after that remark!


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## cheflayne (Aug 21, 2004)

> I'm really just interested whether anyone here has experience with non-traditional fundraising.


 I don't. Can't be of any help in that area.


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## jcakes (Feb 18, 2007)

A local candy maker raised a little over $12K in a go-fund-me to seed her down payment on buying a commercial condo (it's her kitchen/storefront). When she successfully completed that fundraiser, she then wanted to buy an enrober and raised another $5K. Most of her donations were less than $100 and they were tied to incentives (a dozen marshmallows for X donation, three month membership in marshmallow club, a candy bar named after the donor) Each incentive was limited in quantity (only one candy bar for example). She had about a thousand followers on social media; and had been sharing kitchen space with a local coffee shop that sold her marshmallows. Your mileage will vary based on how much you want to raise this way and what you are willing to offer as incentives (a private pop up dinner for 12 = $2,500)


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## Tamboli's Pasta & Pizza (Aug 22, 2018)

halb said:


> That's the attitude I sensed in your first post and the reason I said what I did. I can't see anybody giving you more advice after that remark!


Bye : )


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## Tamboli's Pasta & Pizza (Aug 22, 2018)

jcakes said:


> A local candy maker raised a little over $12K in a go-fund-me to seed her down payment on buying a commercial condo (it's her kitchen/storefront). When she successfully completed that fundraiser, she then wanted to buy an enrober and raised another $5K. Most of her donations were less than $100 and they were tied to incentives (a dozen marshmallows for X donation, three month membership in marshmallow club, a candy bar named after the donor) Each incentive was limited in quantity (only one candy bar for example). She had about a thousand followers on social media; and had been sharing kitchen space with a local coffee shop that sold her marshmallows. Your mileage will vary based on how much you want to raise this way and what you are willing to offer as incentives (a private pop up dinner for 12 = $2,500)


Thanks. It's good to know somebody's done it. Any chance you know the name of the shop? I'd love to look up her campaign and see how she did it


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## someday (Aug 15, 2003)

halb said:


> That's the attitude I sensed in your first post and the reason I said what I did. I can't see anybody giving you more advice after that remark!


I don't understand...you started by answering a question the OP didn't ask, then offer advice that isn't anything near what the OP asked, and you are now offended at the OP's "attitude?" I don't understand what it is you think the OP did, but IMO you are the one in the wrong here.


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## sgmchef (Sep 30, 2006)

Hi Tamboli,

The only question you have that I can answer is:

Exp: is where a person indicates their experience level. 

This information can be very helpful to the people trying to help you. 

Good luck!


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## halb (May 25, 2015)

someday said:


> I don't understand...you started by answering a question the OP didn't ask, then offer advice that isn't anything near what the OP asked, and you are now offended at the OP's "attitude?" I don't understand what it is you think the OP did, but IMO you are the one in the wrong here.


Sorry, but it just looks like the OP is looking for people to give him money and that's offensive to me.


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## foodpump (Oct 10, 2005)

No, no experience with crowd funding. However I raised my own capitol for my catering biz, when I sold that 10 yrs later I used some of the money to start a chocolate and pastry business. And when I sold that business 11 years later, I paid off the mortgage on the house.


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## Tamboli's Pasta & Pizza (Aug 22, 2018)

sgmchef said:


> Hi Tamboli,
> 
> The only question you have that I can answer is:
> 
> ...


Thanks for that. I neglected to fill out my profile. That should be better.


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## Tamboli's Pasta & Pizza (Aug 22, 2018)

halb said:


> Sorry, but it just looks like the OP is looking for people to give him money and that's offensive to me.


I've got a great investment opportunity if you're interested halb


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## jcakes (Feb 18, 2007)

Tamboli Produce Co. said:


> Thanks. It's good to know somebody's done it. Any chance you know the name of the shop? I'd love to look up her campaign and see how she did it


sent you a private message


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