[SSpiro]

I'd like to start a management company in form of an LLC.

This company would own and manage a few select franchise restaurants, possibly a hotel or two, some commercial real estate, and whatever else might make sense that follows along the business plan and company mission.

The company may also offer management services for existing companies as an outsourced service that oversees management, operations, legal, fiscal, and other aspects of an existing company that sees the need to outsource.

Obviously the company needs to start somehow.. most franchises require a certain amount of net worth, liquid assets, percentage of cash down, etc to get started. If a company is a NEW LLC, how will it have liquid assets and net worth, and what can a startup do to create this to get started?

It's like a catch 22.. Need liquid assets and net worth to start first franchise.. need first franchise to generate asset and net worth.

The idea of creating this management company and being an LLC is keeping personal finances, taxes, liability out of the hands of the partners/owners.

Anyone chime in and let me know your thoughts! Is this going to require personal funds or can this get started without personal funds?

[jasaunders]

You won't be able to have a franchise with a new LLC. Franchises look for people with a high net worth and liquid assets along with previous success in the industry for a reason. They don't want to take a chance with a brand new company. So your only option is to your your own liquidity if you have it. You definately need personal funds.

[SSpiro]

Originally Posted by jasaunders

You won't be able to have a franchise with a new LLC. Franchises look for people with a high net worth and liquid assets along with previous success in the industry for a reason. They don't want to take a chance with a brand new company. So your only option is to your your own liquidity if you have it. You definately need personal funds.

So I'd have to Start a franchise based on personal net worth/liquid and then start the LLC, and perhaps sell to the LLC? Then go from there?

The experience I have.. I've ran 3 restaurants in the past. Just haven't owned any. Tired of working for someone else when I can do it on my own.. Know what I mean?

Just financial resources are limited.. so I was hoping the LLC would help me get over the need for personal net worth and liquid.

[rogercbryan]

It's like everything else in business- its a slow step by step process. You seem to have a great deal of ambition so all you need to do now is lay the foundation for your company. If during year 1-3 you get your first franchise going then year 4-5 you do your second.. then in year 6 your third... year 7 & 8 you add two hotels... then you would be on to something...

The key is always your first successful venture. If you can get one franchise up an running in a profitable manner then you'll be well on your way to accomplishing everything you want.

[SSpiro]

Originally Posted by rogercbryan

It's like everything else in business- its a slow step by step process. You seem to have a great deal of ambition so all you need to do now is lay the foundation for your company. If during year 1-3 you get your first franchise going then year 4-5 you do your second.. then in year 6 your third... year 7 & 8 you add two hotels... then you would be on to something...

The key is always your first successful venture. If you can get one franchise up an running in a profitable manner then you'll be well on your way to accomplishing everything you want.

You're absolutely right.. Thank you for the reply.

The key will be funding the first venture. This is and has been my first hurtle, unfortunately.

[rogercbryan]

Originally Posted by SSpiro

You're absolutely right.. Thank you for the reply.

The key will be funding the first venture. This is and has been my first hurtle, unfortunately.

I'm going to throw out a guesstimate here... I would say 95% of people have the same problem 'getting funding for their first venture'. I used the BBS method to start my first company (beg... borrow.. steal). I started my company 2 1/2 years ago... second in April of this year... and my third is set to launch in June... so once you get the ball rolling its hard for anything to stop you.

[SSpiro]

Originally Posted by rogercbryan

I'm going to throw out a guesstimate here... I would say 95% of people have the same problem 'getting funding for their first venture'. I used the BBS method to start my first company (beg... borrow.. steal). I started my company 2 1/2 years ago... second in April of this year... and my third is set to launch in June... so once you get the ball rolling its hard for anything to stop you.

I think 95% may be too low of a guesstimate.

BBS Method will have to be my first avenue as well.

Let me also add that I have a few unique restaurant ideas that would not be franchise-purchased. I'm in the process of introducing a few select individuals to these ideas and concepts, but so far, not so good. I have some very tight friends and family.

[SSpiro]

I'm pondering...

I wonder if perhaps a first venture may be better obtained by buying an existing restaurant or business; perhaps via LBO..? What do you think?

[rogercbryan]

Originally Posted by SSpiro

I'm pondering...

I wonder if perhaps a first venture may be better obtained by buying an existing restaurant or business; perhaps via LOB..? What do you think?

This isn't my industry (restaurants) so I want to be careful what type of advice I give. In my opinion I would think that your first venture would have a greater chance of success if you were to buy a preexisting business. This would mean lower start-up capital requirements as well as it would give you current income streams.

Many of my friends here in DC are bar/restaurant owners/managers/chefs so I've listened to them talk about their businesses. Its damn hard work and super long hours. This often leads to burnout. You may be able to take advantage of that to work your way into a partnership or a LBO (not sure if you meant LBO- Leveraged Buyout or if LOB stands for something else) if you can find the right person at the right time.

Its sounds like you already have management experience so you are now looking for ownership experience. Even if you can only work your way into a 20% stake in a place you'll be moving in the right direction. I would look for owners who have been doing this for 10+ years and that are over 40 years old. They seem to be ideal candidates for partnerships because of burnout.

Again.. not my indsutry... just giving my opinion... now if you want to start and auto auction... then I'm game to help.

[SSpiro]

Originally Posted by rogercbryan

This isn't my industry (restaurants) so I want to be careful what type of advice I give. In my opinion I would think that your first venture would have a greater chance of success if you were to buy a preexisting business. This would mean lower start-up capital requirements as well as it would give you current income streams.

Many of my friends here in DC are bar/restaurant owners/managers/chefs so I've listened to them talk about their businesses. Its damn hard work and super long hours. This often leads to burnout. You may be able to take advantage of that to work your way into a partnership or a LBO (not sure if you meant LBO- Leveraged Buyout or if LOB stands for something else) if you can find the right person at the right time.

Its sounds like you already have management experience so you are now looking for ownership experience. Even if you can only work your way into a 20% stake in a place you'll be moving in the right direction. I would look for owners who have been doing this for 10+ years and that are over 40 years old. They seem to be ideal candidates for partnerships because of burnout.

Again.. not my indsutry... just giving my opinion... now if you want to start and auto auction... then I'm game to help.

My type-o, sorry about that..LBO is what I meant.

Any of your DC friends interested in investing or partnering up in Fla? Wife and I love the DC area, maybe we'll just go there!

I still have a lot of learning and reading to do, but its looking like this is a better option for first venture. Purchase/LBO/Partnership of existing business. Would help generate revenue and worth to start second venture.

Restaurants are definitely taxing and require so much time and hands on. The goal would be, long term, to own the ventures and no longer manage the day-to-day tasks, but oversee via macromanagement.

New question is.. With a LBO of existing restaurant/business, would the LLC become the new director or myself personally?

[rogercbryan]

Originally Posted by SSpiro

New question is.. With a LBO of existing restaurant/business, would the LLC become the new director or myself personally?

This Q is above me... I'll have to let someone else answer this...

[SSpiro]

In for more input!

[jasaunders]

I suspect it would be somewhat difficult to finance a restaurant for an LBO from traditional routes (banks). Banks do not like to invest heavily in restaurants as they are very risky, unless you have significant collateral and are putting in a lot of your own money. This is based off of conversations I've had with my loan officer at Chase. They get a ton of loan requests for restaurants and rarely approve them, especially if someone doesn't have ownership experience.

That being the case, you will have to find a private investor(s) to fund the LBO, which may also be difficult.

I also suggest though that it would be much easier to buy an existing business. A large number of owners would be willing to sell if you approach them, even if their business isn't currently 'for sale'. If you go this route though, I would suggest getting help from someone in the industry who has bought a restaurant before, otherwise there is a strong chance you'll get screwed.

[SSpiro]

Originally Posted by jasaunders

I suspect it would be somewhat difficult to finance a restaurant for an LBO from traditional routes (banks). Banks do not like to invest heavily in restaurants as they are very risky, unless you have significant collateral and are putting in a lot of your own money. This is based off of conversations I've had with my loan officer at Chase. They get a ton of loan requests for restaurants and rarely approve them, especially if someone doesn't have ownership experience.

That being the case, you will have to find a private investor(s) to fund the LBO, which may also be difficult.

I also suggest though that it would be much easier to buy an existing business. A large number of owners would be willing to sell if you approach them, even if their business isn't currently 'for sale'. If you go this route though, I would suggest getting help from someone in the industry who has bought a restaurant before, otherwise there is a strong chance you'll get screwed.

Couldn't the prospective buyer use the company being bought as collateral to fund the LBO?

[jasaunders]

The assets of the company are probably going to be worth much less than the financing needed to purchase the company.