Proposal for Joint-Venture with a Restaurant?

Discussion in 'Small Business' started by gnokybbob, 2nd Oct, 2015.

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  1. gnokybbob

    gnokybbob New Member

    6th Jul, 2015
    Melbourne, Vic
    Hi all savvy investors out there, I am just wondering whether any of you have had the experience with restaurant industry and what's the best investment proposal for asking a restaurant owner to use their brand and recipes to open another branch.

    One of the options that he proposes is for me to invest 100% of capital to open this branch, and we will split 50-50 of the profit. Is this a good option? If not, what's the best reasonable option do you think is best?

    Owner of the restaurant is pretty open to options and will consider my offerings.
  2. Ace in the Hole

    Ace in the Hole Well-Known Member Premium Member

    18th Jun, 2015
    If it were a McDonalds, it would be like printing money.
    But, if it's not widely known and just a one off outlet, there are many risks involved.
    You could be getting a good deal, or he could be getting a good deal, or by chance it could be balanced for both of you.
    There are so many things to consider before judging who benefits most out of this.
    However, the way it is, you're the one carrying all the risk.
    What if the guy changes his plans in a year and wants to move overseas to retire, or gets sick and unable to work, you'd lose your investment unless there was good systemisation in place for the biz to operate without the original owner.
    Many things to consider in such a deal.
  3. DaveM

    DaveM Adelaide Buyers Agent & KFC Strategist Business Member

    14th Jun, 2015
    Adelaide & Sydney
    So you carry all the risk and he takes 50% of the profit? LOL no.

    If he does not want to put any skin in the deal, license agreement for use of the name.
  4. chindonly

    chindonly Well-Known Member

    18th Jun, 2015
    Food a beverage is a very tough industry. Low margins and long hours. Unless you are an experienced owner operater and love the industry, I would stay away. We run two through work - over 15yrs now, and I wouldn't personally invest in this space.
  5. alicudi

    alicudi Well-Known Member

    18th Jun, 2015
    Melbourne, Australia

    I also invested in a restaurant by putting up the capital and used the experienced operator's idea/recipe/management skills etc the lot, I was comfortable in that I have known them for over 25 years and all 3 restaurants they still operate are running with huge profits. However I would not have invested 100% of the money just for a 50% profit share.

    I also wouldn't do it unless you have known this person for at least a decade and they are committed 110% to running the business properly with you and also take into other factors where they are at in life, ie: are they about to have kids, shift houses, go through a divorce etc etc.

    You need to find someone who is extremely stable and has a direction that matches yours. All points must be agreed in writing and checked over by solicitors. If you haven't run a restaurant before and want to own one yourself, go and work in one for 3 years and then decide if it is what you really want to do.


    sanj likes this.
  6. Terry_w

    Terry_w Structuring Lawyer and Finance Broker - all states Business Member

    18th Jun, 2015
  7. SonOfTrigger

    SonOfTrigger Well-Known Member

    19th Jun, 2015
    What exactly do you need that the existing operator has?

    Menu's or dishes aren't trademarked. You also need to understand if the existing "brand" has anything to do with success. I would suggest that the existing success would be due to some combination of location, food, pricing, ambience, popularity.

    Can you replicate any or all of those factors by using the "brand" in an unrelated location or can you do it without the brand?

    PS - chef's don't like cooking other people's recipes or menus. They are a different breed, half tortured artist, half primadonna. (I could be jaded from dealing with many of them!)
  8. The Y-man

    The Y-man Moderator Staff Member

    18th Jun, 2015
    You provide 100% of the capital for how much equity (and control of business)?
    Will the business be CF+ from day 1?
    Do you fork out more capital if not?
    What is the exit plan?
    What is your expected return?

    Too little info........

    The Y-man
  9. Truly Exotic

    Truly Exotic Well-Known Member

    21st Aug, 2015
    16.4944° S, 151.7364° W
    no good brother,
    a good chef/menu is only half the formula,

    if he thinks his food/menu is so good, then he should open himself

    if he cant , then he doesnt have the resources, then its a 50/50 JV or similar

    basically he has full control of the menu with your money,
    win win for him, you bare all the risk

    note: i Have done a restaurant JV before
    The Y-man likes this.