A step-by-step guide to fundraising
By Lauren Fernandez
Finding the funds to grow your business is a challenging but rewarding journey. The restaurant investment landscape is very different now than it was before COVID, but there are still opportunities out there to find investment capital. If you’re ready to expand your restaurant into a new location or a new market, you’ll need to brace yourself to play the long game and have a high tolerance for rejection.
Growth capital for scaling your business can come in many forms, from equity to debt, but don’t forget about gifts or grants. Approach your company needs for capital strategically and measure the risk vs. reward. And remember, giving up too much equity too early can be very detrimental in the long run. Having value-add from knowledgeable investors early can provide helpful support; the right partners can also share business advice and offer mentorship. Here are a few tips to prepare your restaurant for investment and growth.
Build a Solid Foundation. Before you can secure investors, your flagship location needs to be thriving with solid operating procedures and strong leadership. Make sure your books are balanced so you can demonstrate the viability of your brand when you’re ready to start pitching. Most prospective investors won’t want to take a risk on an unproven concept.
Create an Investor Persona. Think about what your ideal investor looks like. What kinds of brands do they support? What is their business philosophy and what is their professional background? Use this information to build a profile that you can use when evaluating potential investors. Once you’ve done this, you can use these as search criteria on LinkedIn.
Perfect Your Pitch. Create a concise and visually appealing pitch deck that shows why your restaurant is special but most importantly profitable. Include your strengths, weaknesses, opportunities and threats and compile the data to back them up. Your pitch is also an opportunity to show off your leadership team and their strengths. Don’t forget to emphasize your purpose and the unique qualities you bring to the table to convince investors to back you.
Put Yourself Out There. Begin searching for investors by utilizing your network. Family, friends and professional contacts are great places to start. Even if they don’t have the financial means to buy in, they can support you in other ways like referring you to their contacts and bragging on your restaurant when they get the chance. Crowdfunding has become a more popular option for some early-stage brands, leveraging your existing brand loyalty to partially fund your expansion.
Develop a Thick Skin. When you’re pitching your concept, you’re going to hear the word “no” more often than the parents of a stubborn toddler. That’s why it’s so important to get your pitch in front of as many people as you can. Rejection is not always personal: investment is a game of numbers and timing and not necessarily a reflection on your brand and concept. Pitching gets easier the more you practice, and getting your first “yes” after a barrage of “nos” is so gratifying.
Set the Terms for Investment. Once you’ve gotten a yes, then you need to be ready to figure out the terms of investment. This could take the form of dividends or a share of equity. If you choose to give equity to an investor, proceed with caution! Equity has so much value in the long run, and if you distribute too much you could lose control of what you’ve worked hard to build. By retaining the majority stake, you retain your legacy.
Use the Investment Wisely. Once you’ve found a group of investors willing to support you, create a budget to decide how you will use the funding. Some common uses for capital funding include purchasing real estate, equipment upgrades and restaurant renovations.
Never Stop Learning. While you’ve been focused on getting people to invest in you, you also need to invest in yourself. Keep up with the latest industry news and trends and think about how they can be applied in your restaurant. Although many fundamentals of the restaurant business are learned through firsthand experience with a side of trial and error, professional development and trainings provide education to help you continue to be a confident leader who is ready to weather any storm.
If you’re ready to take the first step toward becoming a powerhouse in the restaurant world, use these pointers to build a framework for success. Remember that it might take years to see the results of your efforts, so stay focused on your goals.
