Advice On Rasing Capital For An In-line Mall Restaurant

[Dmi3]

I've been researched the costs, prepared my financial spreadsheet, and have contacted a handful of mall representatives to get an idea of what the rent would cost for a 3 month short term lease to test my idea on the market. After all this, I've finally come up with the amount I'd need to start up (under 50k) and now need to begin raising capital to get things rolling. Banks are out of the question because of my lack of credit history (despite 700+ credit scores) and unfortunately, despite everyone I've talked to loving the idea, my family is not part of that group and therefore won't even cosign a loan to help me get off the ground. I've seem to hit a roadblock on how to go about raising capital and any advice for this business newbie would be greatly appreciated. :wave:

 

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[Inphinity]

Have you approached the banks, or are you just assuming they won't want to provide the loan? What are your family's reasons for not wanting to help fund it? These are questions that would give me reservations about the solidity of your plan. If those options are genuinely out, you may need to look at some of the secondary lending institutions - there are plenty of places besides banks that give loans for all sorts of things.

What sort of places that loan funds have you already actually sat down and talked with about this deal, and what have the responses been?

 

[hedgehog757]

You can research online where you can get loans from or look for investors to help you. A lot of times people succeed despite no help from their families.

 

[Dmi3]

I've approached banks and have surprisingly received a positive response from them, saying that I have a high chance of receiving a loan. However, it appears that I'll be needing substantially more to secure a long term lease, since short term leases do not protect the tenant from being thrown out in the event that a more permanent tenant wants to step in. As for my family, my father is in the middle of securing a loan himself for his own business, and approaching the rest of my family would only be met with a lecture of why I should return to grad school, get my MBA, work for someone, stable career, blah blah blah. So unfortunately I'm on my own. As for the solidity of the plan, despite it being somewhat of a novel idea, 3 other restaurant businesses have begun doing what I've been planning on and have received an overwhelmingly positive reception (one is a restaurant while the other two are food trucks). Of the two food trucks, one has clearly stated that they intend on moving into malls to sell their product and when I inquired (anonymously of course :smxB, they told me that they were 8 months away from opening, that they too were in the middle of raising capital. So at this point, it's a foot race to see who can secure a position in the mall.

 

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[darkjediii]

Congrats!

Your experiences and the way you will get everything put together will be different, but I hope my post below will help you. I was in your same exact shoes just a few years ago...

Based on my own personal experience this is what I went through over the past few years to accomplish what you are hoping to do:

1) Partnered

I went through all the banks, got positive responses etc.. But in reality (my reality anyway, don't give up this route just because I'm saying this, you should def. try anyway.. This is just based on my experience) at the time - It was too much of a risk for any bank to undertake even through SBA lending. I had no experience, I had just an idea, and no assets to pledge as collateral. I tried about 5 or 6 banks. The way it works is this, unless it's a small community based bank, all the underwriters are in another state/building etc. and all those guys look at are the numbers. and if your current income and debt doesnt support the repayment of the loan, no assets to collateralize, plus it is your first venture, you are a super big risk to them.

In my experience, I found the phrase "banks only lend money to those that don't need it" true. Later on, I did get financing for my second venture, and I will explain how that came about later...

So anway, I was denied by banks, but kept my eyes open and kept moving forward like I was gonna build it, told everyone I could about my plans and intentions. And through a connection, stumbled upon a guy that was looking for a partner to build the concept that I had in mind. I had some money, opened "unsecured credit" personal loan (program was really meant to consolidate credit card debts, but I used it for financing the partnership biz.) Also I had a credit card that I bought equipment for. So I partnered.


2) Opened my own

While partnered and now I have a legit "proof of concept" up and running, within a couple of months, I went out and searched for investors to open my second store. I had multiple interested parties and learned from every investor meeting, I just constantly met with investors, but still could not find anyone legit. Through out all this, I was working a 9-5, saving money, and after getting off work, I would stay up until 4am to work on planning, researching, improving and running the back end of the business.

I was butting heads with my partner and decided that he was not running things the right way so I decided I would start my own brand. So now, armed with a 40 page business plan to show the banks and landlords, outlining my projected P&L, financial information, pictures of my existing concept, I actually had a shot. However, the bank could only lend me if it was secured by collateral, so I had money in the bank, basically borrowing from that. I also purchased a bunch of equipment and they used 70% of the total value as collateral, so I had to come up with 30%. (so if the equipment cost me $100k, I had to use $30k of my own money)

So all in all, through an SBA loan, I got about 1/3 of what I needed to start my own biz from the ground up (this one cost just under $200k to give you an idea).

So I really have no idea how I put that much money together, but from just selling stuff, savings, maxing out credit cards, overtime etc etc. I was able to put everything together, eventually.

3) Found Investors to open more

So at the point of this, having a few short years of experience under my belt, the goal is to franchise. I have to take all my process and replicate it to higher end locations and finance builds that cost way way more than what my first one cost (it was a barebones budget build for 200k).. So throughout all this, I kept talking to investors, learning, improving... And finally I was able to close partnership deals where I would take majority stake of the locations, but open multiple.. Somewhere along the line, I was also able to find licensees to use my brand and sell my products at their existing locations.

So now high-end indoor malls, town center locations, upscale and premium locations were now willing to talk to me because I was now a real business and my concepts were designed by an award-winning designer, they were featured in some design blogs recently also. So this opened up new location possibilites and with those, it's just a matter of putting the right investor in the right location.


So all this is not very easy and it takes dedication. Now, I am not claiming to have accomplished anything special or bragging about anything that I have "accomplished". In reality, I still face a ton of problems daily, if not more problems when I first started, but I feel like there is some progress, and they are "higher quality" problems...


So I guess what I am saying is that the process is different for everyone, but it's do-able if you stick with it. In reality, I'm really just a regular guy that started my journey with a 9-5 job, less than $100 in my bank account, about $12k in personal debt, but somehow, I was able to put together several retail outlets and grow from there.

So the process is not a fast one, you have to put in the time and sacrifice. You have to have a single goal in mind. Never give up no matter what happens, because you will have many failures along the way, small and big, that will make you want to QUIT!

Those small and big failures happened over and over many times - when I was in your shoes a few years ago. Just like it still happens to me today. learn from them.