In the restaurant and hospitality industry, one of the most important things keeping business afloat is a steady stream of restaurant capital. This is true whether you’re an industry leader—like Starbucks or McDonald’s—as well as a startup food business or concept kitchen.
Either way, you will need a solid restaurant business plan for raising your restaurant capital. Then, you’ll need to know where to marshal your resources to make the most of your cash. Without capital, there’s little to be done to invest and support your restaurant.
Learn how to raise restaurant capital below, how much you might need, and finally the best ways to get the money. Explore the world of resources in the restaurant industry here. Soon, you’ll be set to expand and thrive as a business and brand.
Key Takeaway: Restaurant capital allows food brands and hospitality businesses to run smoothly and profitably through responsible use of resources and investing.
What is Restaurant Capital?
Very simply, restaurant capital is that money invested in running the business. For example, this includes whatever initial investment there may have been in the start-up costs of the restaurant. But, it would also include any ongoing additions needed to keep the business on the sea of commerce.
Your restaurant’s size and scope will clearly define the amount of capital the business will need to operate profitably. For instance, a pop-up restaurant may only need a few thousand dollars to start its climb toward success. On the other hand, a large chain or franchise could easily cost hundreds of thousands or millions of dollars when all’s said and done.
This is also just the beginning. When you look at the full lifecycle of the business, a restaurant will require regular reinvestment, especially to stay competitive. That’s why it’s important to almost every business owner to have the flexibility that capital affords. In fact, the ability that resources and investments bestow are critical to the brand.
That’s why it’s vital to keep a close eye on the restaurant expenditures (and especially hidden costs) within your business operations. These restaurant operating expenses lead to a slow but steady loss of revenue, resources, and capital if left unmonitored or unchecked by your systems.
If you want to start a restaurant, understand what your strategy for investment capital and working capital will be. Once you’ve ironed out the details with the help below, you’ll make smarter decisions about the next steps for your restaurant’s natural evolution.
How to Raise Restaurant Capital: 11 Ways
When you take on the task of raising restaurant capital, you may immediately be met with concern that you’re not quite sure what your options are. But, there are many places that you can turn to first to secure the capital you need to get your restaurant running:
1. Build up management.
If you assemble the right team of skilled professionals with the right experience, you won’t struggle in managing capital. Instead, with a strong restaurant management team, you’ll have the confidence of investors in your ability to achieve business objectives.
By having solid operational and event management, you will create more chances for securing and building your capital resources as a restaurant.
2. Choose the experienced.
Showcasing your team members' skills, accomplishments, and achievements is a good way to reassure your investors that business is booming.
Backed by the most capable hands, they’ll feel assured that you're attracting the talent to meet their investing objectives through the restaurant venture.
3. Explore financing types.
Despite your team and talent, you’ll need to search and search again for different financial options. Once you consider loans, equity, and crowdfunding, you can make other considerations to limit financial strain.
Whatever you do, ensure that you can sustain this kind of capital acquisition—and that the costs don’t outweigh the risks.
4. Initiate fundraising early.
You should start seeking capital at the earliest opportunity. This gives you more time to slowly and successful engage your investors.
It’s critical to have time when the process of investment is also one of patience. By hitting the initiations early, practicing patience, and taking a steady, stable approach, you’ll stack capital quickly.
5. Exchange equity for funding.
There are times when it stands to reason to offer the restaurant itself as part of the investor bargain. Offering some of your business in exchange for immediate funding is a common and conventional practice.
As you enter equity negotiation, however, make certain that all parties have a favorable agreement. Equity translates to a long-term commitment for everyone.
6. Interact with investors.
Say it with us: professionalism is paramount. If you maintain a respectful relationship with investors defined by mutual benefit and professionalism, they’re more likely to stick around. They care about prime costs, and they also care about being treated well.
Sometimes rapport and positivity can go a long way to build trust and secure a stable future for your business as it rides the waves of early uncertainty.
7. Maintain realistic flexibility.
Stay adaptable. Change with circumstances. Demonstrate overall that you’re taking a responsible and practical approach to funding and feeding your restaurant.
Through smart, grounded financial planning and good business practices like inventory management, your business can remain financially solid, sustaining itself for investors to renew their interest and commitment.
8. Have a backup.
Challenges will come your way. Anticipate the potential for issues to come up during your raising, maintaining, and reliance on capital. Put that contingency plan in place so that you’re prepared with more balanced foresight.
If you can protect your business’ financial health in a way that shows investors they have nothing to worry about, you’re more likely to be able to count on them when you really need an infusion of stability.
9. Express your gratitude.
Show your investors they matter. When you acknowledge and express gratitude, this reinforces the commitment and relationships that people have made to support your business. It’s also a great way to keep people engaged and, of course, continuing to support your operations.
10. Provide regular updates.
There are many ways to keep people (customers, staff, and investors) informed about the operations and successes of your restaurant business. In part, this is the function of your marketing and promotional efforts online—especially in a world where everything is seen.
For each publication or announcement, remember your investors are listening! You're doing more than working on customer experience with every post.
11. Listen to feedback.
Transparency about your business processes and progress will get the attention of new and loyal investors. Your willingness to listen will also help to foster the confidence that money-backers need to feel good about their donation to your cause.
A healthy investor relationship can count on new influxes of capital, but not without a say in the sport.
Frequently Asked Questions About Restaurant Capital
Do you want to secure more capital from the right sources? Do you know how to determine your start up costs and capital needs as a restaurant? We mean food costs, labor costs, and the cost of doing business altogether.
Perhaps you should read our FAQ on maintaining your working capital. These answers will help you elevate your restaurant’s view of its resources as you strive for future financial stability.
What are funding sources for restaurant capital?
If you are starting or supporting a restaurant, securing capital can come from many sources, but some of the most popular include crowdfunding, angel investors, venture capitalists, and self-financing.
Beyond this, there are contacts in your personal network that could be helpful as well as the option to take out a variety of loans. For example, you can target bank loans, institutional loans, and even private equity funds.
How much money is needed to start a restaurant?
If you’re starting a restaurant, know your capital needs will vary by concept. Surveys of the industry show that most restaurants fit, initially, somewhere within the $175,000 to $750,000 start-up capital range.
For those in quick service, the costs that add up most quickly are rent, equipment, and other overhead like cost of goods and labor costs. Consider the restaurant you intend to run, and then work back from there to determine your capital needs.
How much working capital to have for restaurants?
There is no certain ratio perfect for the well-oiled restaurant operation—however, you should maintain at least 150 to 200 percent of your revenue on hand as working capital. This will cushion you from unexpected costs and periods of unfortunately low sales volume.
In the end, you’ll need to consider your restaurant as an establishment. What are your ingredient costs? Who’s your customer? And, how can we better track expenses, cash flow, and online orders to improve our working capital? These are all important questions for the restaurant owner or management team.