no money

How to Start a Restaurant with No Money

Want to start a restaurant with no money? This article goes through ways to get started, explains how to secure capital, and even helps make actual financial projections.

What if you don't have any money to invest in starting up a new venture? Or maybe you're just not sure how much it will cost to open a restaurant? If so, then we've got some good news: You can still start a successful restaurant without having millions of dollars sitting around waiting to be invested! It doesn’t matter if you have zero dollars and don’t know how to cook – there is always someone who will help you out. You may even find that it’s easier than you think! 

Find a space that's basically turnkey.

Finding a location that could serve as an actual restaurant isn't hard. There are plenty of places like this across America, where someone has already put in the hard work to outfit a location and then quickly outgrown it. This will ultimately save a good chunk of money in remodeling costs. In addition, some buildings will even come with all equipment, chairs, tables, POS systems in more. While hard to come by, this is definitely a great opportunity to jump on. But even if it doesn't come with all the necessary equipment, you should still have a few things that you'll need to get started. And if you're missing a POS system, for example, be sure to do your research using blog posts like the “Best Restaurant POS Systems” by POS USA to ensure you make the right decision.

Consider getting a food truck.

If you've got some extra time on your hands but no capital to invest, consider operating a food truck instead. A food truck allows you to test market your product without having to spend thousands of dollars upfront. Once you work out the kinks and discover your audience, you can sell off your equipment and move onto another location.

Start with a catering business.

If you've got some extra time on your hands, consider catering instead of opening a full service restaurant. A catering company doesn't necessarily mean that you'll only serve one meal at a time. Many caterers do contract work where they prepare meals for large events such as weddings, corporate meetings, and holiday parties. They may even cater multiple events per day. Caterer companies typically charge anywhere from $1,500-$10,000+ per event depending upon how many people attend. It can be a great way to get your name out there before jumping into a more permanent role while still maintaining a job elsewhere.

Try out a ghost kitchen concept.

Ghost kitchens are the new wave of food establishments that seek low barriers to entry. By eliminating customer-facing space, ghost kitchens require very little startup capital. You could even consider renting commercial kitchen space in order to lower costs even more. If you don't know what a ghost kitchen is, they basically function as delivery-only food establishments operating on a number of delivery platforms. With these delivery platforms, you can also choose the hours and days you work, expanding as your business grows. It's important to note that this isn't always possible because some states require licensing for certain types of businesses like restaurants but do your own research to see if this could be an option.

Operate a pop-up.

Pop-up restaurants are a great way to generate buzz around your concept while also bringing in potential capital for growth. Pop-ups, to clarify, are temporary businesses set up at various locations in an area. They usually last anywhere between two weeks and six months depending on how successful they are. This type of venture allows you to test market your product without having to commit to anything long term. It also gives you the chance to see what kind of demand exists for your particular offering before committing to a full-time location.

The downside? Pop-ups require a great deal of work and still some investment to make them successful and worthwhile.

Crunch the numbers.

Knowing a ballpark amount of how much it will cost to open the location of your (realistic) dreams will help you get there faster. Luckily, we built this spreadsheet to do just that. Input your own numbers and discover a ballpark amount of capital you'll need to get started. 

Seek funding that benefits your customers. 

While bank loans will require a large amount of collateral (that you may not have) and donation crowdfunding relies on the good of people to give their money to you free of charge, investment crowdfunding allows you to get a loan from your potential customers. 

Investment crowdfunding can take a variety of forms. Some restaurants use equity crowdfunding, in which they share a percentage of the business in exchange for investment capital from investors. Other restaurants may crowdfund loans or use other forms of crowdsourced debt. Mainvest is a RegCF portal registered with FINRA and the SEC, and we work with restaurants who raise capital using an innovative new investment vehicle called the revenue sharing note. A revenue sharing note (RSN) is a debt-based investment vehicle, in which a company borrows money from investors and agrees to pay back a certain Revenue Share Percent of any revenue it may generate every quarter until all principal and interest is repaid.

Find a loan that's right for you.

Financial institutions offer a variety of loans that can get your small business up and running. Restaurants, in particular, typically rely heavily on external debt sources (like bank financing) during the first year. A business loan can be helpful because you can work with reputable lenders and access a large sum of money upfront with minimal effort. However, depending on your financial situation, it can be extremely difficult to qualify for a small business loan.

SBA Loans

SBA loan guarantee programs are another source of capital. The programs include 7(a) loans and CDC/504 loans. 7(a) loans provide small businesses with financing guarantees for a variety of general business purposes through participating lending institutions. CDC/504 loans are made available through certified development companies, or “CDCs,” typically structured with the SBA providing 40%, a lender covering up to 50%, and the borrower contributing 10% of the total project costs.

Bank Loans

When approaching a bank for a loan, here are a few tips:

1. Create solid, thoughtful, and detailed projections.

Financial projections are the best estimate of how much money your business will make and spend over the next three to five years. A good set of projections can show lenders that you have done your homework and that you will manage their investment wisely.

2. Build an attractive and intelligent business plan.

Lenders want to know what they’re getting into, and the more professional and polished your business plan, the more seriously a lender will take you. This goes for the overall layout, but also for the content itself. Make sure that you’ve covered all of your bases: explain your marketing and sales strategy, justify your projections, provide details on your proposed location, and share details about your operations. This tool may help!

3. Consider multiple lenders.

Different lenders may offer different perks, products, and rates. It’s very important to have a good relationship with whichever bank you go with, because if you ever need to go back for an additional line of credit, look to open additional accounts, or have issues, it’s much easier to resolve obstacles when you trust and work well with your bank.

Get educated. 

Want to do it right? Check out our complete guide on How to Start a Restaurant, that dives into everything from branding and selecting a name to the licensing processes in every single U.S. state and more. 

Written by Lauren Murdock

Lauren is Mainvest's Content Marketing Manager. She is an expert in marketing strategy and leads content generation for Mainvest.

posted August 3, 2021
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