Independent restaurants with fewer than three locations make up more than half of the restaurants in the U.S. Many restaurateurs dream of growing into multiple locations, but it takes a lot of capital investment to get there. At my restaurant development and investment firm Full Course, we work with emerging brands to develop leadership, optimize business practices and ultimately provide financial investment for expansion. The following top 10 tips are just some of the ways we help restaurateurs start their fundraising journey.
- Define the purpose and mission and invite investors to join in support of the cause: If asking investors to put dollars behind a business, restaurateurs should be crystal clear on both the purpose and the mission. Investors can bring more than just capital to the table, they can show support for the mission in other ways including volunteering their time, leveraging their network for referrals and showing public support.
- Clearly state the problem to be solved and be the unique solution: A strong problem statement will attract potential investors to the business because it shows industry knowledge and how the business is uniquely positioned to be the solution.
- Address the market opportunity, including challenges, and position the restaurant in relation to the competition: Owners can use the data collected about strengths, weaknesses, opportunities and threats to paint a complete picture of their restaurant. Including challenges with strengths builds trust and transparency with investors. Knowing the competition helps to clearly define what sets the brand apart. Positioning is the story of how the business is solving the customer’s problem differently than others.
- Identify ideal investors and the number needed: Restaurant owners should look at the people in the fundraising fold and evaluate what they have in common. Owners can use this information to develop an investor profile and put it to work identifying new leads in their networks. They also should set a fixed number of investors to create a sense of scarcity and to keep the power balance in their favor. Business owners can fill the pipeline with people who match the businesses’ ideal investor profile on LinkedIn.
- Map out the amount of money needed and options for investing: Owners can use incentives to reward early investors for their support and close deals faster to have the checks in hand to grow the restaurant. And it doesn't always have to be a check: owners can appoint an IRA custodian and set up funds to receive investment via Roth IRAs or similar investment accounts. A person’s time and reputation also can add value. Supporters might be able to volunteer their time, provide coaching or give referrals for potential investors.
- Make booking calls easy and track conversations: Business owners should use an automated scheduling tool like Calendly and keep the calendar as open as possible for investors. After all, time is money! Before ending the call, owners should be sure to schedule a follow-up conversation. When fundraising, business owners should talk to a lot of people and keep track of them by logging each conversation’s talking points into a CRM, a database or even a simple Excel spreadsheet.
- Set up non-disclosure agreements but keep it simple: With automated processes like DocuSign, NDAs don't have to get in the way of the fundraising journey. With just three clicks, DocuSign can establish a mutual NDA that is sent to all parties once executed.
- Stay on top of industry news: Owners can set up Google alerts on topics that are relevant to the business. Knowledge of current events and trends will help to strike up conversations.
- Take every introduction and every opportunity to speak publicly about the business: Out of everyone restaurateurs talk to, about one out of 10 will sign. That is why it is so important to talk to many people and to meet the goal for weekly calls. You never know who might be willing to invest. Investors can be vendors, clients and friends of clients who might not necessarily match the profile. Owners also should position themselves as an expert in their field and engage on social media so potential investors know the human behind the business.
- Do not stop asking until there is a “no” or 12 touches are made, whichever comes first: Asking is free, and the sales funnel is not a straight line from point A to point B. It can take many exposures to a brand to drive people to action, and timing is everything. Business owners need to find allies who connect them to the right people. And if turned down by a potential investor, it could have nothing to do with the quality of the business or the offer. Their risk profile does not equate with their approval of the business owner as a person.
With these tips, restaurateurs will be ready to flex their connections and secure the funding needed to take the restaurant world by storm.
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