Saturday, November 21, 2015

Restaurant Investing 101's Sustainable SF Bay Area Flavor

A dear friend recently asked me if I would ever invest in a restaurant. The restaurant sector isn't for me, and I don't personally know anyone who invests there, but it's a fascinating area nonetheless. I scoured the Web for some basic coverage of restaurant investing and the investors who make it work. Check out this 101 primer.

The National Restaurant Association should be the first stop for first-time eatery investors. The industry's clearinghouse reveals the inside scoop on managing a store. The search box turned up tons of articles on topics like "investment" and "sustainability," including the NRA's Conserve Program that's worth a look for potential owners.

I tried to find a link to the NRA's annual Restaurant Finance Summit. Instead I found Restaurant Finance Monitor, which runs its own finance and development conferences. Capital sources populate the Monitor's finance and real estate directory. I don't have time to read through their white papers but the ones on sale-leaseback financing and restaurant valuation look especially useful for investors.

Not every source is as authoritative as the restaurant industry's official organs. The Wiley "For Dummies" imprint has a bunch of articles on food trucks, but of course the dining sector is much larger than what rolls on streets. Searching the Dummies brand for "restaurant" turned up tips on menu selection and social media marketing, plus many irrelevant topics. I sought wisdom at and found mostly anecdotal articles touting "industry insights" rather than the hard research and checklist an owner-operator needs. Gourmet Marketing's learning center has some decent tips on investor due diligence and critical management numbers, but I would prefer to see those suggestions populated with industry data.

Owner-operators have a wealth of prospecting sources thanks to the digital economy. AngelList has thousands of self-identified restaurant angel investors. It is difficult to tell at first glance which ones are still active or have successful investments. Some AngelList people don't mind being prospected because that's how they vet new ideas. EquityEats is a crowdfunding platform specifically for restaurateurs raising seed capital for their first storefront. The good news for all startups, including eateries, is that the SEC is liberalizing rules on crowdfunding right now. Non-accredited investors will soon have many more crowdfunding options available, and entrepreneurs will have more channels to raise capital if they have good legal counsel to keep them compliant with the SEC's JOBS Act rules.

Non-profits like to help with restaurant incubation, at least here in the SF Bay Area. La Cocina focuses on assistance for restaurant owners in disadvantaged demographics, but their resources page includes planning and financing sources invaluable to any restaurateur. Forage runs another Bay Area kitchen incubator and promotes sustainable dining through its supper club.

Speaking of sustainability, it now matters in retail dining. My San Francisco blog coverage must include the local scene's sustainable dining culture. The Center for Urban Education about Sustainable Agriculture (CUESA) covers everything from farm to table. Entire dining supply chains can now be sustainable. The trend towards sustainability also gets national notice. Full Service Restaurants has detailed coverage of sustainability developments. The Center for Food Integrity and its CFI ENGAGE Resource Center offer a national perspective on food supply chain quality. Entrepreneurs launching a sustainable dining space need the seal of approval that comes from participating in these programs. Earning a B-Corporation designation probably helps show a restaurant's commitment to a sustainable philosophy.

There's a lot here for a restaurant owner to digest, no pun intended. San Francisco investors like to see sustainability when they perform due diligence on potential investments in any category, based on what I've gleaned from attending the Bay Area Impact Investing Initiative's (BAIII) events. The federal government is getting into the act with the SBA's sustainable business practices for small firms. It's all food for thought . . . again, no pun intended.