Need Angel Investor Advice

[beans]

In many cases a restaurant is built around a chef, so if you indicate that you want to start your own business, they may rather invest in a new place with you as opposed to just losing you outright.

Certainly not where I work! The restaurant has been around 15+ years with exceptionally high six figure earnings on only a Friday night. And we are not serving a la Trotter or the run of the mill TGIF stuff either.

We do a fantastic business, which is exactly why I returned to work there. We are built around a solid concept of good food (CIA grads with experience running the kitchen), good service, decent wine list, excellent barstaff (something established *long* before I was employed there), outstanding bar selection(s) and it is casual.

bcnchef: I wish you luck and much success, too.

edit: bleh, typos.

Edited January 13, 2004 by beans (log)

[Bond Girl]

A couple of additional thoughts:

- It's important to distinguish between the role of chef and the role of restaurateur. A person can be both, of course, but savvy investors will recognize that the two skills are different. As a result, to many investors it doesn't matter how well you cook -- they're not going to invest in a chef's project; they're only going to invest in a restaurateur's project. In most cases, with multimillion-dollar openings, there is a Phil Suarez or a Jeffrey Chodorow paired with a Jean-Georges Vongerichten or Alain Ducasse. As I mentioned above, were I a talented chef looking to do a big opening, I'd be looking for someone like that to partner with -- getting investors would be no trouble after that. Otherwise, I'd look at a smaller opening -- a 71 Clinton Fresh Food as a prelude to a WD-50 as a prelude to something even bigger.

- Current employment, and the relationship with the employer, should be kept in mind. Word travels fast; if you're out there promoting your investment online and to dozens of people in the flesh, it's not going to be a secret for long. Thus it's important to be up front with one's employers -- they shouldn't find out through word-of-mouth that their employee is looking to strike out on his own. I don't know this particular situation well enough to comment on it -- maybe this has all been done -- but it's always worth keeping in mind. The same goes for follow-up and updates.

I'm not sure if many restaurant groups are quite so generous to invest in their own employees, because you are looking at diluting the market share. Logically, it really doesn't make sense and that's the unfortunate aspect of it. If I were a restaurant group principal, I would want to invest in my employees if any one of the chefs or managers wants to go out on his own because in that you foster a mutually beneficial relationship. But, most people don't see it that way.

This is the reason why there is always a lawyer involved somewheres between investors and entrepreneurs. When I worked in Private Equity, no one gets to talk about anything because of the confidentiality agreements. I'm certain that words to get around, but the possibility of law suits always kept people tight lipped on confirmation.

[bcnchef]

Welcome to the NY Forum bcnchef! Your insights are really appreciated. Have you ever worked in NY?

Thanks for the welcom.

Haven't worked in New York, and my experience on the ground here in Barcelona is obviously different than the situation in NYC. Not just from the numbers perspective, but also legally, as Jackal has pointed out very well.

I just thought I'd share my experiences since I'm smack in the middle of things.

Hope to close second round next Wednesday.. Wish me luck!

J.

[JosephB]

Best of luck to you bcnchef! We welcome your continued input here.

[NYCCHEF]

Thank you everyone for some great advice.

[herbacidal]

Asking people to invest in your project "making investment advertisments" in the legal terminology has very specific rules and regulations, with severe punishments for transgression. You can, in principle, go to jail.

The rules go back to financial scandals like the south sea bubble, or in more modern times Ponzi and pyramid get-rich-quick schemes and are designed to protect the weak and vulnerable. You need professional advice. Distributing your plan to more than a few tens of people, or putting it on a web site count as investment advertisements. Investment advertisemens must be authorised by "members of self-regulating organisations" such as brokers, bankers or lawyers or accountants, who can check for accuracy of your statements, and have professional indemnity insurance so that they can be sued if incorrect. Expensive.

The get out is that you can solicit an few people who have certified that they are high net worth and sophisticated.

Hmm. That's interesting. I imagine that's the reason all the tombstone ads in WSJ and NYT have the disclaimer about not being an offer to sell, etc.

Never really thought about it, but it does make sense.

Thanks for the background.

I'm not sure if many restaurant groups are quite so generous to invest in their own employees, because you are looking at diluting the market share. Logically, it really doesn't make sense and that's the unfortunate aspect of it. If I were a restaurant group principal, I would want to invest in my employees if any one of the chefs or managers wants to go out on his own because in that you foster a mutually beneficial relationship. But, most people don't see it that way.

True. You have to remember that restaurant operators and owners are in large part NOT the professional operations that Danny Meyer, LEYE, Stephen Starr, etc. have developed. For the most part, people that actually open restaurants have been drawn to it b/c:

it's a cash business, making it easier to hide things from the IRS.

it's something that can be done with a lesser educational background and not-so-

perfect command of the English language

(i'm sure these 2 reasons are an even bigger motivation behind owners of the club business). The overly romanticized notion of people opening restaurants for various more "above board" reasons are fewer and less common.

For the most part, people with these kinds of viewpoints don't have such broad and long-term views.

[JosephB]

You have to remember that restaurant operators and owners are in large part NOT the professional operations that Danny Meyer, LEYE, Stephen Starr, etc. have developed. For the most part, people that actually open restaurants have been drawn to it b/c:

it's a cash business, making it easier to hide things from the IRS.

it's something that can be done with a lesser educational background and not-so-

perfect command of the English language

(i'm sure these 2 reasons are an even bigger motivation behind owners of the club business). The overly romanticized notion of people opening restaurants for various more "above board" reasons are fewer and less common.

For the most part, people with these kinds of viewpoints don't have such broad and long-term views.

I think your suggestion that most restauranteurs (if you're even willing to apply that term to operators other than Danny Meyer and the like) are either crooks or uneducated is unfounded and offensive to people in the restaurant industry, including people like Danny Meyer.

[NYCCHEF]

One more question about sq. footage. If I am looking to open an 80 seat establishment, what is a general estimate of square footage needed?

[jackal10]

One more question about sq. footage. If I am looking to open an 80 seat establishment, what is a general estimate of square footage needed?

How long is a piece of string?

It depends on the quality of ambience you want.

Basic is about 10sq ft per cover for chair and table; Double that for circulation and loos etc; Double that to allow for kitchen and service space, and you are looking at about 50 sq ft per cover, since you can never fit them in ideally, not forgettting wheelchair access etc. That is really crowding them in, canteen style. For an upmarket space you could easily double or triple that again.

Then there is the bar or lounge, parking, garbage, dry storage etc etc...

Gross is the overall measurement, which the real-estate company sells you. Net is the actual usable space after partitions, corridors, fire exits etc. Maybe half gross, especially of its an awkward space.

Edited February 2, 2004 by jackal10 (log)

[Bond Girl]

Here is a reference point for you. I was at Hearth (approx. 80 seats) the other night, and was told that the place is no bigger than 2500 square foot. I don't think it's a particularly tight restaurant, but that's downtown and people like things cozy in that neighborhood. There was also a place that closed down in Union Square which was over 4000 square feet and seated 120, though I though they weren't usinf the space optimally. I think for something upscale you might want a bigger place.