Starting a restaurant business is a time of excitement and anxiety. You not only have to figure out how to put together and operate the food and service part of the business, you also have to consider the financial aspects of entrepreneurship. Investor funding is one way to get capital for your restaurant.
>> Shared Risks
Any new business start-up has risks of failure, but this is especially true of restaurants. The competition is often heavy and you typically have to generate a lot of business to get a return on investment. Sharing these risks of business failure with investors can help reduce the chances of personal financial ruin. You and your investors would share the financial losses of the company if it goes under.
Some business ventures need investors with more expertise in the business than you may have. If you are a chef looking to center a business around your culinary passion, you might want investors familiar with the business side of a restaurant. Usually, when investors put their money into your restaurant, they want to get involved in whatever way they can to ensure the business succeeds. Combining your talents and those of investors can lead to better synergy in the business operation.
One of the disadvantages of getting investor funding in your business is the potential for loss of control over the enterprise. If you have a vision of how you want your restaurant to operate, you may find you lose some control over the operation when you take on large investors. Generally, the higher the share of ownership an investor buys, the more right he has to assert control in the decision-making process. If your restaurant dream is very specific, you might prefer to avoid significant investor funding or take on several, smaller investors.
Another disadvantage of investor funding for your restaurant is the distractions involved in finding investors and communicating with them. Some investors have concerns about investing in smaller restaurants with limited return potential. You may spend a lot of time finding investors, which takes away from planning for your restaurant. The more investor funding you take on, the more time and energy you dedicate to keeping them updated and involved. Again, this takes away from focusing on your employees, restaurant patrons and your bottom line.
>> About the Author
Neil Kokemuller has been an active writer and content media website developer since 2007. He wrote regular feature articles for LiveCharts for three years and has been a college marketing professor since 2004. He has four years of additional professional experience in marketing, retail and small business, and he holds a Master of Business Administration from Iowa State University.
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