Restaurant Investor Return possibilities...

**K305** · 01-26-2010 01:33 PM

Hi all,

I was hoping to get some feedback on what an investor might like to see as a return on investment for a restaurant concept.

10% of the startup capital in in place and the remaining 90% is being sought from 3 investors each contributing 30%.

Any experiences/opinions on what an investor would seek as a return? A loan repayment schedule? Equity in the company in place of loan payback? Some hybrid of both?

Thanks!

**akula** · 01-26-2010 04:33 PM

hii..yes i have experience pricing debt and equity for retail ventures
restaurants are ventures with higher than average rates of infant mortality, so the debt or equity will be more expensive than average
debt will be 10-12% over prime, equity discount rate will be 40-70%*.

*prime means cash rate, discount rate is the rate used in valuing the business, when deciding on a pre money valuation, in the event that the investors want to buy shares in the business.

**Gator** · 01-27-2010 06:45 PM

any luck yet?

**K305** · 02-10-2010 03:48 PM

Well there are two options it seems right now. The cleanest in terms of preserving ownership for the principals is to seek a private loan, with an annual interest payback structured over 5 years.

But with most individual investors, they are going to want to see equity in the company to make it worth their risk.

The issue is finding a balance of what % of the company the owners can retain even though the ratio of start up capital they can contribute is lower. However they will be working full time on location.