Anyone a partner in a restaurant?

[carnutzzz]

I've been invited to become a minority partner in a restaurant that is being sold and bought by some friends of mine. I have total faith in the guys buying this restaurant and I've wtinessed them successfully manage restaurants for others for years. They are great operators, managers, chefs, and are well connected. They live this stuff.

I've always told them to let me know when they go out on their own- the time is now.

We're not talking a ton of money from my end- but it is real money and enough to be interesting.

They are sending me the 4 year plan and everything I need to perform due diligance on my end. I would not have any stake in operations- nor do I want it.

What kinds of things should I look for while analyzing this type of deal?

[Dottore]

I have been a financial partner in three restaurants. I lost a moderate amount of money the first time, a significant amount of money the second time, and made a little bit the third time.

Each time I went into these deals it was "because I had total faith in the guys etc etc"., and because I thought it would be fun.

You can look at all the business plans and projections on earth—but these will guarantee nothing. Concept, quality, location, buzz...all that is critical for success, but ultimately the restaurant business is a people business and people are unpredictable. By people I mean not only your staff—but your guests. People change. People mess up. Peoples tastes change. People leave and compete with you. There's no end to what people will do to mess up your fine 4-year projections.

That said, I had an enormous amount of fun with each one, and even knowing what I know now would probably make the same investments again. The buzz of being involved in "the" new place in town is infectuous. In fact this buzz is what keeps people going in the industry, and losing money time and time again.

If you make money in this venture you'll be one of a very small minority of restaurant investors that does. But you could well break even — or something close to it. There's a small chance. It's a very tough and unpredictable business. I would never do it for a living. But if you can afford to lose your investment, it can be a very fun way to lose some money.

[Rick Lee]

I can't help but to think of this. NSFW. I hope your grand opening goes as well as Larry's when he hired a chef with Tourettes.

http://www.youtube.com/watch?v=LTmHS-T5dLA

[LeeH]

My brother-in-law was an area and regional restaurant manager for years. My nephew managed restaurants for years. Together they lost most of my sister and BIL's retirement savings when they opened a restaurant of their own. Now in her mid 60s, my sister works in her local church office to pay the bills.

Did you see this news today?

"The move by S&A underscores how economic weakness and rising costs in the United States are squeezing mid-tier restaurants. Many of those restaurant chains have grappled with higher food and labor costs while U.S. consumers are trying to cope with higher grocery and gas bills."

[carnutzzz]

Encouraging! ;-)

The concept is great, the quality is outstanding (very highly rated by many with some great press), the location is decent, and I'm pretty sure they can generate some new buzz.

Good feedback though- thanks!

[carnutzzz]

Originally Posted by LeeH

My brother-in-law was an area and regional restaurant manager for years. My nephew managed restaurants for years. Together they lost most of my sister and BIL's retirement savings when they opened a restaurant of their own. Now in her mid 60s, my sister works in her local church office to pay the bills.

Did you see this news today?

"The move by S&A underscores how economic weakness and rising costs in the United States are squeezing mid-tier restaurants. Many of those restaurant chains have grappled with higher food and labor costs while U.S. consumers are trying to cope with higher grocery and gas bills."

Yeah- I haven't eaten at one of those restaurants in years so I could see that.

How are the upper end restaurants doing? I would think they would be feeling it too...

[MikeSid]

Originally Posted by Dottore

If you make money in this venture you'll be one of a very small minority of restaurant investors that does.... But if you can afford to lose your investment, it can be a very fun way to lose some money.

+1. Exactly.

[peppy]

I am a partner with my sister in a QSR. I have opened one new location about ten years ago and it failed.

I would look long and hard at the failure rates of restaurants. Your money may serve you well in a money market or a CD.

I have been in the restaurant since I was about 5, and working since 15. I am now 40.

[Porsche_monkey]

Rent Goodfella's this weekend.

Post your final decision Monday.

[Gogar]

Bennigan's: Chapter 7

After opening 9 concepts and 16 years of experience, I would suggest putting your money somewhere else. I always tell people that when they want to invest in the business.

As stated above, if you aren't concerned about the loss you can have a great time. Working in N.Y. and L.A. it was easy to attract investors due to the fact that it was used as bragging rights. If its an ego based decision then do it. If not lets put something together and send me a check.

I would look carefully at the proforma and see if it makes sense. I have looked at so many restaurant business plans that by a glance I could see that they were full of $hit.

BTW, my credentials are that I have been a "Corporate Chef" since 1999 and still consult on concepts.

[greglepore]

Own one myself. Echo all of the above, with the caveat that partners make it worse as once the losses start, the guys w/ little captial will get nervous fast.

Start up costs are huge, and they wipe out the inital money you make from being the new game in town. Gotta look at 3-4 yrs out to maybe eek a little profit. But the "worker" investors will want a salary, probably, another source of friction.

Economy right now has been good for my bistro style joint-seems people are taking in big pleasures less, but spending a little more close to home.

[cashflyer]

If it's not money that you would happily flush down the toilet, you'll end up with a rift between you and your friends.