09 Apr Crowdfunding: Get Funding for Your New Restaurant
Today’s restaurant entrepreneur is turning to alternate funding solutions to power their companies. Equity crowdfunding site Funders Club and investor start-up connection hub Angel List, both tap into wealthy, accredited investors. With a solid quick serve pitch with statistic planning to back it, the average success story can raise up to $2 million over 15 months, including contributions from other investors.
Past investment trends do show that restaurants aren’t the venture capitalists’ sweet spot, and if there is a quick serve investment plan, most VCs will stick with funding restaurants that can evolve into a chain.
However, times are changing and new equity crowdfunding rules will allow investors to invest in their own local restaurants. Customers who are also investors have a vested interest in the business and make for great brand ambassadors.
Some crowdfunding platforms are even offering eatable incentives to investors. EquityEats, a restaurant crowdfunding platform based in Washington, D.C, helps restaurants turn to their passionate foodie customers for funding help. For example, a $1,000 investment reaps a $1,750 return in free food and beverages over five years. For $3,000, investors get $3,000 back and $3,000 in more free food. EquityEats is also very selective. The crowdfunding platform only ends up working with 5 percent of the restaurants that apply.
Crowdfunding platforms have been another money-raising venue. But only about 25 percent of food companies that start campaigns on Kickstarter meet their funding goals, according to Kickstarter data. Indiegogo doesn’t collect stats on restaurant or food crowdfunding campaigns. But some food and restaurant campaigns there have thrived.
Money raised by restaurants on Indiegogo ranges from $30,000 to $500,000 per campaign. The most successful campaigns offer investor perks, such as restaurant cookbooks, digital downloads of recipes or a special note from the chef.
The best way to view equity crowdfunding is as an extension of friends and family investments. Equity crowdfunding will have its challenges, too. Restaurants must decide how they’ll structure the investment and what return they’ll offer investors, and get a solid handle on estimating the cost to open, from hiring to stocking the kitchen to getting a lease.
Crowdfunding may not be the catchall solution for financial assistance, but it is an up-and-coming avenue to explore for the new restaurateur.
About The Company
OrderMatic Corporation develops solutions that enhance the customer transactional experience in new and innovative ways. OrderMatic designs and manufactures drive thru menu boards, branded next generation signage, pos and technology solutions, and drive in products and accessories for quick service restaurants, retail merchants, and sports and entertainment venues. For over 60 years, OrderMatic is the official drive thru and drive in partner everywhere.