# The business side of being a chef...



## bonnj (Apr 30, 2017)

I've joined here and have been lurking for quite a long time, and I don't see a lot about the business side of being a chef. I've seen very good chefs in my career, who can do excellent things in the kitchen, however, I've often thought about the other side -- the business side of being a chef. Now, if you are strictly an employee, then the other side might not be relevant to you, at least not to a great extent. You'll deal with it, but not fully as if you were a "partner" or "owner" so to speak.

That said, I wanted to hear other member's thoughts on the business side. First, if you had a financial "backer" or someone who wanted to go partners with you -- would you put up money or strictly be the "sweat equity" partner? I always thought if the chef put up money, it can have more potential benefits for all those involved. Second, if the chef did put up money, what about their salary -- should the chef get "full" salary or "market rate" salary, or should he/she get less? Third, does the chef get to "buy in" at a lower price, a discount, etc.? For example, if the deal is $25,000 a point, does the chef get to buy his points at a lower price?

Fourth, I've often looked at some of these celebrity chefs, and have wondered how did their deals get structured. Jerry or Laurence Kretchmer comes along and wants to go partners with a young, talented, far less known than today, Bobby Flay. How does a deal like that get structured? I am sure very different than it does today, LOL.

Thank you very much in advance for your comments and insight.


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## chefonfire (May 8, 2010)

I am chef owner. I own my property and business. I used the real estate as bargaining tool. I have a private investor that holds the mortgage on real estate. Second much smaller mortgage on the business. 
I make monthly payments and that's it. No input from partners etc. It makes decision making very quick and easy, no committee to hash things out with. 
Not sure how partnering deals like you mentioned get done. I just know that I don't want to answer to anyone.
At the same time I am alone in pushing the business forward. I don't have strength in numbers which would be nice sometimes, until I remember my previous partner (that I bought out). 
I know this doesn't answer your questions but I didn't want to see this thread pushed to the bottom of the page as I am interested in the conversation.


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## bonnj (Apr 30, 2017)

Chefonfire said:


> I am chef owner. I own my property and business. I used the real estate as bargaining tool. I have a private investor that holds the mortgage on real estate. Second much smaller mortgage on the business.
> I make monthly payments and that's it. No input from partners etc. It makes decision making very quick and easy, no committee to hash things out with.
> Not sure how partnering deals like you mentioned get done. I just know that I don't want to answer to anyone.
> At the same time I am alone in pushing the business forward. I don't have strength in numbers which would be nice sometimes, until I remember my previous partner (that I bought out).
> I know this doesn't answer your questions but I didn't want to see this thread pushed to the bottom of the page as I am interested in the conversation.


Thank you. I appreciate the reply. I see both sides, and each person is different. Some people want it, some don't. Like I've often said -- some people like chocolate, some vanilla, and some don't like ice cream. LOL.

From the chef perspective -- aside from the real estate aspect -- again, I see both sides, motivations, etc. Thanks.


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## bonnj (Apr 30, 2017)

Let me throw out a specific question...if a premier, top chef salary in my area is, let's say, $150,000 annually...if the chef is putting up money, and going in as a partner...would you see the chef now taking a lower salary? Let's say he buys in at a discount. Having the chef be vested on the "back end" so to speak is a good thing. Lower salary? Buying in at a discount? Any thoughts? Thank you in advance.


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## cheflayne (Aug 21, 2004)

Is the chef doing any less work, as a partner, to warrant a reduction in salary? Would the non-chef partner be willing to take a reduction in his/her share of the profits because doing so would be in the best interest of the business?


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## cheflayne (Aug 21, 2004)

I can't quite wrap my head around the idea of buying in at a discounted rate. Seems to me that would just lead to possible arguments and or hard feelings down the road.

Instead of a discounted rate, I would structure it as a loan with payments being made out of salary.


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## bonnj (Apr 30, 2017)

cheflayne said:


> Is the chef doing any less work, as a partner, to warrant a reduction in salary? Would the non-chef partner be willing to take a reduction in his/her share of the profits because doing so would be in the best interest of the business?


I don't think it is as much "best interest of the business" as much as giving the chef/partner incentive, vesting, etc., in the "back end" of the deal. In the deals I've seen that are done with something like this -- while the chef/partner is not doing any less, and is certainly entitled to a salary -- the idea is that they have to have skin in the game as far as equity. Now, if they buy in, sure, they have skin in the game. If they buy in at a discount, same. I can understand wanting the chef/partner to be vested in the business, the equity, etc. If the business is hurting, partners are hurting. If the business is thriving, the partners are as well, and so on. I see your point though. Thanks.


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## bonnj (Apr 30, 2017)

cheflayne said:


> I can't quite wrap my head around the idea of buying in at a discounted rate. Seems to me that would just lead to possible arguments and or hard feelings down the road.
> 
> Instead of a discounted rate, I would structure it as a loan with payments being made out of salary.


I think the discounted rate is fairly common. Some of the major financial partners in the industry do this, and everyone knows and gets it up front. I think the theory is that the chef, while being paid a salary, is bringing something to the table aside from money and has skills to warrant incentive being provided. Are there a lot of great money partners out there? Maybe. Are there a lot of great chef/partners out there? I don't think so, LOL.

The loan regime is common also. Sometimes the money partners don't want to be the bank also, LOL.

Good points -- thanks.


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## cheflayne (Aug 21, 2004)

cheflayne said:


> Is the chef doing any less work, as a partner, to warrant a reduction in salary? Would the non-chef partner be willing to take a reduction in his/her share of the profits because doing so would be in the best interest of the business?


The chef put up money (in your specific question). He has skin in the game as far as equity, So how is getting a lower salary incentive?


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## cheflayne (Aug 21, 2004)

BoNNJ said:


> I think the discounted rate is fairly common. Some of the major financial partners in the industry do this, and everyone knows and gets it up front. I think the theory is that the chef, while being paid a salary, is bringing something to the table aside from money and has skills to warrant incentive being provided.


Let's say total investment is $500,000 divided between 100 shares. Each share is $5,000. I am the chef and I buy 50 shares at a discounted rate of 30% so each share costs me $3500. My total investment is $175,000. Partner has the other 50 shares of the business. We are 50/50 partners._H__ow great is that!_....I paid $175,000 for my 50%. He paid $325,000 for his 50%. I don't know, but


cheflayne said:


> Seems to me that would just lead to possible arguments and or hard feelings down the road.


I could be wrong, but I am just a hard headed chef... Also that scenario kinda mirrors my own experience...I bought my partner out after a year because of arguments and hard feelings. On paper we were 50/50, in his mind we weren't. _Didn't go well._


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## bonnj (Apr 30, 2017)

cheflayne said:


> The chef put up money (in your specific question). He has skin in the game as far as equity, So how is getting a lower salary incentive?


Yes, in that example/question the chef did put up money -- and let's say he bought in at a discount -- I think the lower salary, coupled with buying in at a discount, gives the chef a stronger vested interest in seeing to it that the business as an entity, an ongoing concern, is successful. The buying in at a discount compensates for the lower salary, and the lower salary is part of the chef's "sweat equity" as well.

I can see a chef putting up money, but not at the same buy in price as the financial partner(s).

I've heard of both elements -- a lower salary and a discounted buy in -- as being 


cheflayne said:


> Let's say total investment is $500,000 divided between 100 shares. Each share is $5,000. I am the chef and I buy 50 shares at a discounted rate of 30% so each share costs me $3500. My total investment is $175,000. Partner has the other 50 shares of the business. We are 50/50 partners._H__ow great is that!_....I paid $175,000 for my 50%. He paid $325,000 for his 50%. I don't know, but
> 
> I could be wrong, but I am just a hard headed chef... Also that scenario kinda mirrors my own experience...I bought my partner out after a year because of arguments and hard feelings. On paper we were 50/50, in his mind we weren't. _Didn't go well._





cheflayne said:


> Let's say total investment is $500,000 divided between 100 shares. Each share is $5,000. I am the chef and I buy 50 shares at a discounted rate of 30% so each share costs me $3500. My total investment is $175,000. Partner has the other 50 shares of the business. We are 50/50 partners._H__ow great is that!_....I paid $175,000 for my 50%. He paid $325,000 for his 50%. I don't know, but
> 
> I could be wrong, but I am just a hard headed chef... Also that scenario kinda mirrors my own experience...I bought my partner out after a year because of arguments and hard feelings. On paper we were 50/50, in his mind we weren't. _Didn't go well._





cheflayne said:


> Let's say total investment is $500,000 divided between 100 shares. Each share is $5,000. I am the chef and I buy 50 shares at a discounted rate of 30% so each share costs me $3500. My total investment is $175,000. Partner has the other 50 shares of the business. We are 50/50 partners._H__ow great is that!_....I paid $175,000 for my 50%. He paid $325,000 for his 50%. I don't know, but
> 
> I could be wrong, but I am just a hard headed chef... Also that scenario kinda mirrors my own experience...I bought my partner out after a year because of arguments and hard feelings. On paper we were 50/50, in his mind we weren't. _Didn't go well._


I hear you. Any partnership can go either way -- good or bad -- and the terms and conditions from day one will certainly have an impact on that. Start off on the wrong foot and facing the wrong direction, and everything after that doesn't matter, LOL.

For me, I can see both sides of the coin. While the Flay/Kretchmer partnership may not be very common, I am certain there are certain "models" that work strictly as a model. Whether or not the restaurant is successful is another story. Thank you for your comments and thoughts.


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