If you weighed your start up funding options and decided to approach private investors, you’ll need to do some prep work before pitching them.
You’ve probably watched an episode or two of Shark Tank, Dragon’s Den, or Restaurant Startup to gain a sense of what it might be like to pitch your restaurant to investors. While the shows are dramatized for television, some elements remain true to life:
- You and your idea need to make a big impression on investors to be considered
- Investors will try to catch you off guard with questions you may not have anticipated
- You need to know your financials inside and out before you pitch your restaurant to investors
The right investor will be someone who’s passionate about the restaurant industry – which means they’ll know exactly which questions to ask about your business. Investor expectations are high, and you need to be prepared for every possible inquiry about your business.
Remember: the time you spend preparing your pitch to investors is worth the potential gain in startup capital. This section will tell you how to prepare for your pitch meeting, where to find the right investors for your business, and how to execute an expert pitch.
How to Prepare for a Pitch
Preparing your pitch to investors takes a lot of time and consideration. While your actual pitch deck can be adapted from certain sections of your business plan, you’ll need to run through your financials with a fine-toothed comb to prepare for the questions you’ll face during your pitch meeting(s).
pro tip: prepare for your pitch as you write your business plan. if you know early that you’re going to be approaching investors, you should be writing your business plan with investors in mind.
Defining investor benefits
Before you begin to craft your pitch deck, you want to clearly define how investors will benefit from investing in your restaurant. Your list of benefits will guide the content of your pitch and help you achieve your ultimate goal: convince investors your business is worth their contribution.
First, decide what you’re comfortable offering investors. Answer the following questions:
- What total percentage of my ownership am I willing to give investors?
- How much is my business worth right now?
- How much control over my business am I willing to give to investors?
- What kinds of discounts and perks am I ready to offer investors?
- What are my long-term goals? How do I see myself working with investors to scale my business?
The answers to these questions will determine the benefits of investing in your restaurant startup and will provide a way on how to prepare for a pitch. Here’s how you can frame these benefits for investors during your pitch:
Rate of return
A rate of return is the gain or loss on an investment over a specified time period, expressed as a percentage of the investment’s cost. Equity investors will be particularly interested in their “return on equity”, which is the amount of income they’ll earn as a percentage of their equity contributed to your business.
An investor ultimately wants to know how much money he or she will make from investing in your business. First, think about how much ownership of your restaurant is worth. You can estimate this number by dividing the amount of the investment by the potential value of your restaurant. For example, a $50,000 investment buys 50% of a restaurant that’s worth $100,000.
You should know approximately what these numbers look like for your restaurant so you know going into your pitch meeting how much of your business you’re willing to offer in exchange for how much capital.
List all the ways you want to scale your business after it’s open. If you’re opening a quick service restaurant, you may want to expand your business to include a fleet of food trucks that focus on serving specialty items. Investors will want to know about all long-term plans for growth, as they indicate larger potential returns on their investment.
If you’re looking for active investors whom you can draw on for industry expertise, make sure to sell investors on wanting to work with you. List some of the ways investors can have a positive influence on your business so they know you’re open to more of a partnership with them. Once a deal has been signed and sealed, investors want to see your business succeed as much as you do, so they can see a return. They’ll want to know whether they can jump in and provide direction to make your business more profitable.
Discounts and perks
Most restaurant owners offer discounts on meals and other promotional perks to their investors as incentives. List all the discount types and perks you’d like to offer investors to sweeten the investment deal, and keep these in your back pocket during your pitch meeting.
Payback terms and structure
Before your pitch to investors, you should know which payback structure makes the most sense for your business. Your payback structure will influence your ask of investors; you should know ahead of time whether you’ll be seeking an equity, loan, or convertible debt investment. You can determine which investment type is appropriate for your business based on its phase in the startup process, your time frame, how much money you need, and your short-term and long-term goals.
Equity investments are the most well-known types of investments in startups. With an equity investment, investors get partial ownership of your business in exchange for startup capital.
When to seek equity investments:
- It’s going to take you a long time to make a profit
- You have no collateral
- You can’t fund the business with your own money
- Your restaurant has massive potential for growth
When investors get paid:
Investors receive a return on investment when they sell their shares of the business.
Investors receive payment in the form of dividend payments on a monthly, quarterly, or yearly basis. Your business would pay a cash dividend to investors from your accumulated profits.
Loan investments are just that: loans. When fundraising for loan investments, you’re asking to borrow a certain amount of money and pay it back with an established rate of interest.
When to seek loan investments:
- You need less than $50,000
- You need fast cash
- You need capital to accomplish a specific goal
- You don’t want to offer equity
- You have collateral to offer
When investors get paid:
You can set repayment schedules on loan investments in several ways. You and your investor may agree on one lump sum repayment plus interest, to be paid by a certain date. You can also agree on a monthly, quarterly, or yearly repayment schedule.
pro tip: work with your local small business development center (sbdc) to document the terms of your loan investment.
Convertible debt investments
Convertible debt is a mix of debt and equity: investors lend you money that will either be repaid or turned into a share in the company later on.
When to seek convertible debt investments:
- It’s too early to determine how much your restaurant is worth
- You’re betting your restaurant will be worth much more at a later date
When investors get paid:
- On a repayment schedule that is either a lump sum by a certain date or on a monthly, quarterly, or yearly schedule
- In equity after your business has been valuated
Your Restaurant Pitch Deck
Your pitch deck should tell a compelling and memorable story about your restaurant. You’ll want to accomplish two goals with your pitch deck: impress investors with the originality of your concept and demonstrate the viability of that concept as a profitable business. Your pitch deck should deliver on these goals using visuals, concise language, and an impactful narrative.
Remember that you can take from your business plan to create your pitch deck. Here are the core slides of your pitch deck and how they each communicate an important part of your business.
Choose 4-6 key facts about your restaurant: what would you want investors to know above all else? Focus on the market demand, your neighborhood, your team members who are helping you start your restaurant, and what you’ve put into your business so far.
This is your elevator pitch: you have 15-seconds to sum up the vision of your restaurant. Hint: you should be able to use your mission statement for this slide.
If you’ve hired some key team members already, include pictures and bios for each and tell investors how they’ll help you grow your business. Don’t forget to include restaurant consultants, who can help increase your credibility and show investors you’re serious about strategy and scaling your business.
Here you’ll want to define your market as a whole and demonstrate its size. The goal with this slide is to show market demand: why your business has the opportunity to succeed (answer: because there is a sizable demand for it).
Now is your opportunity to demonstrate passion: tell investors why your business is special, and talk about the kind of experience you’ll be providing customers. Use visuals here, and don’t be afraid to establish an emotional connection to your concept.
List statistics you’ve gathered about your market and any other relevant information about your potential customers. Show investors you’ve done your research and know which customer segments within your target demographic have certain needs over others.
Your investors will always want to know as much as they can about your competitors. Make sure you demonstrate a solid understanding of your competitors and, more importantly, the advantages and differentiators you have over them. Be prepared to answer questions about your competitors here, as this is key to showing investors that you know your market inside out.
The Marketing Plan
Provide investors with an overview of your marketing plan to show them you have a strategy to make your restaurant profitable. Communicate which marketing channels you plan to use (paid search, social media, TV, radio, email marketing, etc.). If you’ve garnered some early buzz for your restaurant, show the outcomes here.
You won’t want to include slides of your complete financial spreadsheets here, but you’ll want to condense the following key documents:
- Revenue: forecasted sales for the next year to three years – and the assumptions you’re using in your projections
- Controllable costs: food, beverage, and labor costs
- Expenses: marketing, rent, supplies, utilities, etc.
See our section on “Preparing for financial questions” for more information on how to prepare for this part of your pitch.
This is your big moment: when you ask investors for the capital you need to start your restaurant. Be specific about how much money you need in exchange for what amount of equity, and what you’ll be able to accomplish with the money. You may also want to list other investors who have already contributed, if you have any.
Preparing for financial questions
One of the most common mistakes new business owners make when meeting with investors is the inability to answer questions about their finances. You’ll want to keep your presentation brief, but over-prepare for questions about the current status of your business and how your restaurant will become profitable.
Common questions from investors about financials are:
- When will your restaurant become profitable?
- What do your sales projections look like for the next year? What about three years from now?
- What assumptions about your business are you using to forecast revenue?
- How much of your own equity and debt have you put into the restaurant?
- How much capital do you still need to raise for your restaurant to open? What about operating costs after opening?
- What obstacles would prevent your restaurant from becoming profitable within your designated timeframe?
- What milestones are you setting for your business to measure whether you’re going to meet your forecast numbers?
- How do you plan to use the capital from investors?
- What milestones do you anticipate being able to reach with this round of startup capital?
remember: don’t feel the need to address every one of these questions in your presentation. you’re preparing answers to these questions so you can confidently answer them should they be asked after your pitch.
How to Get a Meeting with Investors
So the rumors are true: “who you know” in the industry increases your likelihood of scoring a meeting with an investor.
If you know someone who knows someone whose aunt has invested in several restaurants over the years, ask for an introduction. Take stock of your personal network and ask people you know in the industry if they know anyone who might be interested in investing in your business. How to get a meeting with investors can first start with a personal connection, where you’re more likely to get a meeting because your connection can vouch for your character and credibility as a business owner.
If you don’t have personal connections, here’s where you’ll want to start looking for an investor.
Active restaurant investors
While AngelList focuses on connecting people to companies and investors in the tech industry, they do have a list of investors who have invested in restaurants.
Located in Atlanta, GA, BIP Capital invests in many quick serve restaurants in the United States.
Located in New York, Los Angeles, and Boca Raton, Sun Capital is considered one of the most active restaurant private equity investors in the United States.
Roark Capital Group is an Atlanta-based private equity firm that focuses on multi-unit business models in the retail, restaurant, and consumer services sectors.
Brentwood Associates focuses on building category-defining consumer and consumer-related businesses through sustained, accelerated growth.
How to ask for a meeting
Once you know whom you want to contact for a meeting, you want to make sure you’re making a great first impression with your meeting request. Here are some rules to follow when requesting a meeting with an investor.
- BCC your introducer.
If someone initialized correspondence with an introduction, make sure to blind copy them on your follow up email to the investor. This is a courtesy to the person who introduced you, so they know how you followed up with their contact.
- Be brief.
Let the investor know who you are, the nature of your business, and why you want to meet with them – but be brief in your correspondence. Only give the investor the essentials to pique their interest, and assume they don’t have time to read a long email.
- Propose times to meet.
Don’t just ask for a meeting: let the investor know when you would like to meet. Propose two or three time slots that work for you, and let the investor know you’re open to meeting when it’s convenient for them.
- Include a PDF copy of your pitch deck.
Send a copy of your pitch deck for reference. Always attach it as a PDF file to your email; don’t require a Dropbox download, as this will present an obstacle the investor does not have time to deal with.
Tips on Pitching to Investors
So you’ve prepared your deck, reviewed your financials, and scored your meeting with an investor – now how do you pull off the best pitch of your life? Here are some tips to keep in mind when pitching to investors.
- Practice your pitch.
Practice makes perfect. After you’ve prepared your pitch deck, practice by yourself and tweak any sections that feel like they could be stronger. Then recruit friends, preferably ones who have business experience, to listen to your pitch again. Ask for feedback on how to make the pitch more compelling and convincing.
- Back up your claims.
Run through your pitch and make note of every declaration of facts: do you have all the information you need to back up your claim? Once you’ve run through your pitch and matched every claim with a source, practice articulating why your claims are credible and factual.
- Identify a problem, your solution, and your unique selling proposition.
Your investors want to know what your business is all about in a neat package: the market opportunity, how you’ll capitalize on the opportunity, and why your business is different from the competition. Make sure you can articulate this “package” in 15 seconds or less.
- Demonstrate you know your market.
Knowing your market is essential to the perfect investor pitch. Your credibility depends on your knowledge of the market you’re selling into, and investors will be able to see right away if you have any gaps here. Spend more time than you think you might need on this portion of your pitch.
- Tell a story and make an emotional connection.
While investors will definitely be viewing your business through a pragmatic, analytical lens, remember that they’re investing as much in you as they are in your business. If you started your restaurant because you’re passionate about something, don’t be afraid to express it. Storytelling is how people connect to ideas, and your investors will be more likely to remember you if your business is rooted in something emotional.
- Articulate the benefits of being an investor.
Make sure to clearly articulate why investing in your restaurant is a smart choice for investors. Articulate these points as concisely as possible during your presentation, but over-prepare for questions about your finances that will ultimately determine whether or not investors make the final decision to deliver on capital.
You should now know everything you need to know to start pitching your restaurant startup to investors. Good luck with your pitch!