Are you like me, always dreamed of being a part owner in a chic restaurant? I love cooking at home and consider myself a good chef (my wife says so!). My good friend is very successful by owning a chain of steakhouses in our area. Every time I go for dinner, it is such fun and it looks like his work is so enjoyable I have been envious for years.
2018 marks the year that I decided to follow my dream after I returned from my Costa Rica trip and invested in the risky, yet lucrative restaurant industry. After carefully reviewing the possible return on investment, coupled with the cool factor of getting a great table any night I took the plunge -investing $50,000 in my buddies steakhouse.
Restaurants of all types, from coffee shops to high-end French restaurants take a lot of work and long hours. Some of the work is glamorous and fun but plenty of it is not such as handling drunks, negotiating food prices and getting and retaining top talents in chefs and managers.
In our financial meeting, my friend told me that the best restaurant loans for the working capital that he could find had APR – annual percentage interest rates of upwards of 80% in some cases. This is traditionally because of the high risk of business closures and reinvestment needs. Additionally, there is the danger that cash businesses face for theft and loss.
It is precisely because so many lenders shy away from restaurant loans that smart investors can make a killing. Perhaps you have read about the highly profitable firm Kabbage which makes loans to restaurants and other small businesses such as beauty salons, retailers, and online e-commerce sites.
Founded in 2009, headquartered in Atlanta, Georgia Kabbage loans have been named in the top percental of America’s fastest growing companies according to Inc magazine. Over the past three years, they have an awesome 979% growth rate. This is WHY I choose to make this restaurant loan to get a piece of this high growth and high-profit investment opportunity for myself.
The key to success in restaurant loans is to only invest with partners that you know, trust and have solid proven business skills running profitable companies over time.
Don’t be fooled by thinking great chefs are also great business people – very rarely is that the case.
To protect myself, and my investment I required constant accountability and detailed shareholder agreements which spell out everyone’s responsibility clearly. Also, we have weekly meetings (over a delicious steak and glass of red wine) to review all expenses and sales figures to spot and fix any issues right away before they grow into large unsurmountable problems.
People who lose money in restaurants often go into the industry to make lots of money fast, not work so hard and meet women. Good luck.