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Investing in Restaurants - How to Spot a Good Deal

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  • Investing in Restaurants - How to Spot a Good Deal

    You know that investing in restaurants can be a risky venture, but it can also be quite a profitable one. The trick is to pinpoint the best investment opportunities and put your money there. These kinds of investments almost always take place during the start-up phases of a restaurant when it difficult to predict whether it will succeed or not. Private placements are usually the means by which these informal investments are accomplished. If you are serious about this category of investing, you should be prepared to put down at least $2,000, though most investors supply much more than this amount to a start-up restaurant.

    It is the common opinion of bankers and venture capitalists that 90% of people starting up restaurants will not succeed in finding any significant amount of financing from their bank. Likewise, many venture capitalists are only interested in investing in restaurants that are already established franchises. That is why so many start-up restaurants rely on family members and friends for the funding they need to get started. Whether you are a venture capitalist acting differently than the norm, or you have a friend or family member asking for funding, here is what you need to look for before you put a penny into the deal.

    First, see if you can get other investors behind you before investing in restaurants. Incentives you might offer to convince them include tax write-offs from the government, meal discounts, and a structured investment package. An example of this succeeding was with a man who had a dream of owning a restaurant and bringing financial discipline to an industry that could really use some. He was backed by 120 investors who helped him purchase or start up the six entities he owns today. Investments were limited to a reasonable $16,000 a piece, but with so many people backing him up, he had plenty of funding needed to succeed.

    Second, whether you can get investors to back you up or not, the only way to predictably tell if it is worth investing in restaurants is to take a look at the owner's business model. This should be sustainable, meaning that it can replicated and improved as needed based on the industry. The best advice you can utilize about investing in the restaurant industry is to not let the glitz of the food industry or your loyalty to your friend cloud your judgment.


    Article Source: http://EzineArticles.com/5922348
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