Entrepreneurship & Small Business

Start Up Restaurant Business Loan/Financing

  • Last Updated:
  • May 17th, 2019 3:38 pm
Newbie
Oct 19, 2018
5 posts
1 upvote

Start Up Restaurant Business Loan/Financing

Hi, I am in the middle of opening a restaurant. My contractor bailed with money and I found out the property has some HVAC and wall issues which are amounting more and more than I though (around 100k).
I am worried because all this is happening and not sure how I can pay for everything. I’m looking into business loans but they want me to be in business for 1-2 years.
Is there any advice on my predicament?
(I have the money for the HVAC and walls but then 8 don’t have the money for Reno’s it equipment )
30 replies
Deal Addict
May 23, 2017
4196 posts
3204 upvotes
toronto
do yourself a favor and get out of the restaurant business.
Got that FIDO account!
Newbie
Oct 19, 2018
5 posts
1 upvote
riseagainstthemachine wrote: do yourself a favor and get out of the restaurant business.
“Running away from your problems is a race you’ll never win”
Deal Addict
May 23, 2017
4196 posts
3204 upvotes
toronto
Znx100 wrote: “Running away from your problems is a race you’ll never win”
you will realize what I am getting at when your restaurant is closed in a year and you are $500k - $1 million in debt. Think twice before opening a restaurant. I was in the food industry for years, went to chef school, red seal, the whole nine. Thought about opening a restaurant and after a few friends tried and failed I switched jobs and now out of the industry. First you will have a passion for it, then as money becomes a problem food cost/quality will go down. the the bad yelp reviews ect. I wish you the best but please be very very careful.
Got that FIDO account!
Deal Addict
User avatar
Jan 22, 2009
2280 posts
1421 upvotes
Montreal
riseagainstthemachine wrote: you will realize what I am getting at when your restaurant is closed in a year and you are $500k - $1 million in debt. Think twice before opening a restaurant. I was in the food industry for years, went to chef school, red seal, the whole nine. Thought about opening a restaurant and after a few friends tried and failed I switched jobs and now out of the industry. First you will have a passion for it, then as money becomes a problem food cost/quality will go down. the the bad yelp reviews ect. I wish you the best but please be very very careful.
Thinking and doing are two different things.

To OP, keep the drive alive, ignore all the naysayers. Good luck!!!
Deal Addict
May 23, 2017
4196 posts
3204 upvotes
toronto
williamsauga wrote: Thinking and doing are two different things.

To OP, keep the drive alive, ignore all the naysayers. Good luck!!!
This is very true. I dont mean to discourage the OP.
Got that FIDO account!
Deal Expert
User avatar
Aug 2, 2010
15196 posts
5016 upvotes
Here 'n There
Best way to achieve a net worth of $1M:

Have a net worth of $2M and then open a restaurant.
Jr. Member
Oct 27, 2018
126 posts
56 upvotes
Sometimes ok to lose a battle than a war.
Banned
Apr 5, 2013
5810 posts
3019 upvotes
keenland
the dirty truth about the restaurant business...

...margins are very thin, hours are long.
...the real reason people got wealthy from restaurants years ago was the "skim". Owning a restaurant was a great way to make tax free money. (or launder money..but thats a whole different subject). It used to be a cash business, as with most business's ..but with small cheque average, and 500% markup from wholesale food to end product..the opportunity to make tax free dollars was there. No franchise fees, no watchdogs, the only person privy to total sales and hands on the money was the owner. A paycheck in cash could be made through unreported sales..as long as 10-15% expenses of food costs were not reported..a skim of 10-15% could be had...it was common up until the advent of plastic. The same applied with liquor sales. ..Having said this, do the math..if you had a place that did $1500 a day..the owner could easily skim $150-200 a day..that easily is $50k a year...cash , no tax!

Gone are the days of cash sales...the skim has disappeared..everyone pays with plastic, and its all tracked.

While I don't condone tax evasion..this is the honest truth about it....think about it.in today's world...a restaurant does $1 mil in sales a year..decent profit on that is about $80-100k..after tax , that is about $60k. take home...really? for an $200k+ investment , risk, and 100 hours a week??...oh and if you have a franchise...you better hope you are in the $2 mil plus range because another 4-8% will be going to them....so , in this day and age...is the risk really worth it?...something you really have to do the math with.
Banned
Jan 26, 2019
60 posts
33 upvotes
cardguy wrote: the dirty truth about the restaurant business...

...margins are very thin, hours are long.
...the real reason people got wealthy from restaurants years ago was the "skim". Owning a restaurant was a great way to make tax free money. (or launder money..but thats a whole different subject). It used to be a cash business, as with most business's ..but with small cheque average, and 500% markup from wholesale food to end product..the opportunity to make tax free dollars was there. No franchise fees, no watchdogs, the only person privy to total sales and hands on the money was the owner. A paycheck in cash could be made through unreported sales..as long as 10-15% expenses of food costs were not reported..a skim of 10-15% could be had...it was common up until the advent of plastic. The same applied with liquor sales. ..Having said this, do the math..if you had a place that did $1500 a day..the owner could easily skim $150-200 a day..that easily is $50k a year...cash , no tax!

Gone are the days of cash sales...the skim has disappeared..everyone pays with plastic, and its all tracked.

While I don't condone tax evasion..this is the honest truth about it....think about it.in today's world...a restaurant does $1 mil in sales a year..decent profit on that is about $80-100k..after tax , that is about $60k. take home...really? for an $200k+ investment , risk, and 100 hours a week??...oh and if you have a franchise...you better hope you are in the $2 mil plus range because another 4-8% will be going to them....so , in this day and age...is the risk really worth it?...something you really have to do the math with.
yep.
buying yourself a job more or less.
Deal Expert
User avatar
Aug 2, 2010
15196 posts
5016 upvotes
Here 'n There
cardguy wrote: the dirty truth about the restaurant business...

...margins are very thin, hours are long.
...the real reason people got wealthy from restaurants years ago was the "skim". Owning a restaurant was a great way to make tax free money. (or launder money..but thats a whole different subject). It used to be a cash business, as with most business's ..but with small cheque average, and 500% markup from wholesale food to end product..the opportunity to make tax free dollars was there. No franchise fees, no watchdogs, the only person privy to total sales and hands on the money was the owner. A paycheck in cash could be made through unreported sales..as long as 10-15% expenses of food costs were not reported..a skim of 10-15% could be had...it was common up until the advent of plastic. The same applied with liquor sales. ..Having said this, do the math..if you had a place that did $1500 a day..the owner could easily skim $150-200 a day..that easily is $50k a year...cash , no tax!

Gone are the days of cash sales...the skim has disappeared..everyone pays with plastic, and its all tracked.

While I don't condone tax evasion..this is the honest truth about it....think about it.in today's world...a restaurant does $1 mil in sales a year..decent profit on that is about $80-100k..after tax , that is about $60k. take home...really? for an $200k+ investment , risk, and 100 hours a week??...oh and if you have a franchise...you better hope you are in the $2 mil plus range because another 4-8% will be going to them....so , in this day and age...is the risk really worth it?...something you really have to do the math with.
Right on. 99% of restaurants are really only a way to provide yourself a job and that's about it, along with a huge amount of risk and investment.
Deal Addict
Apr 20, 2018
1033 posts
187 upvotes
Oakville, ON
I thought of opening a pastry shop but now I don’t want to... even though I got the cash to do it

Startup cost is high, food costs getting higher, same for salary, long hours and holidays and all the work for simple average salary ... not worth it

I’m trying to get out of the food service industry unless I find a career in a food corporate type of business.. I’m looking at changing industry or open a non-food business which is tough to figure in today’s business market
Deal Addict
May 23, 2017
4196 posts
3204 upvotes
toronto
raptors87 wrote: I thought of opening a pastry shop but now I don’t want to... even though I got the cash to do it

Startup cost is high, food costs getting higher, same for salary, long hours and holidays and all the work for simple average salary ... not worth it

I’m trying to get out of the food service industry unless I find a career in a food corporate type of business.. I’m looking at changing industry or open a non-food business which is tough to figure in today’s business market
Like I said above, as soon as I saw what the industry was like, I got out. It is not worth losing your savings, time with loved ones, to make pennies. This is why i told the OP to get out while he can. He already has problems and is in debt, not worth going into more debt but I guess there is a point of no return where he needs to see it through. I wish OP the best but history shows that this is the worst kind of business to open and flourish.
Got that FIDO account!
Deal Addict
Apr 20, 2018
1033 posts
187 upvotes
Oakville, ON
riseagainstthemachine wrote: Like I said above, as soon as I saw what the industry was like, I got out. It is not worth losing your savings, time with loved ones, to make pennies. This is why i told the OP to get out while he can. He already has problems and is in debt, not worth going into more debt but I guess there is a point of no return where he needs to see it through. I wish OP the best but history shows that this is the worst kind of business to open and flourish.
Right ... I hope the OP can do it if he/she still pursuing it

What kind of businesses or industries that can people open that is thriving in todays market?
Deal Fanatic
May 22, 2003
9325 posts
6386 upvotes
Vancouver
I think the issue here is the OP doesn't even have the cash to get the business running. How will he/she survive the first year with negative cash flow (which is common in the first year of business)
Deal Addict
Apr 20, 2018
1033 posts
187 upvotes
Oakville, ON
notenoughsleep wrote: I think the issue here is the OP doesn't even have the cash to get the business running. How will he/she survive the first year with negative cash flow (which is common in the first year of business)
Right

Should have 6-12 months worth of cash on expenses when a business open to be able to control unforeseen costs or situations
Member
User avatar
May 17, 2009
234 posts
16 upvotes
If you don't have much of a history of operations you may need to go down-market to startup lenders/investors. Do you have any assets in the business to lend against? If no, do you have any revenue as part of the business or are you pre-revenue? corl.io or other revenue-based financiers might be an option for you if you do. No assets or revenue? Find a partner with capital as they'll want significant equity and control, or if others find you're too distressed to make a deal, you're out of luck.
Last edited by mtbmxrider on Apr 8th, 2019 12:18 am, edited 1 time in total.
Member
Feb 15, 2018
449 posts
558 upvotes
Edmonton
No self respecting bank will touch this venture with a 9 foot pole. If you own the building, then you might be able to get a mortgage on it and if the venture fails they will foreclose on your property. In this line of business, the odds of it failing are probably 98%. You might be the lucky 2% but from your lack capital ($100k) it doesn't seem like you fit into that 2% camp.

Cut your losses right now and rent out the building if you own it. If it is a leased space, you might be better off just breaking the lease. Also, if cash was that tight you shouldn't have hired a contractor but done your own renos (save for some regulated stuff like plumbing and electrical).

The only few restaurant business with a high likelihood of success are the really big franchise brands (Timmies, McDonalds, Ihop). However, those need big monies - at least half a million upfront and then you can finance the balance. Banks will work with such brands but not your independent business.

Lending Loop! There is a time I had considered investing in Lending Loop but after reading some reviews about their not so great underwriting - I definitely do not have an appetite for their business. If they approve OP's loan request, then it is the proverbial smoking gun I have been looking for.
Edmonton area Realtor

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