Gotham Gal: Question of the week #17

The restaurant world is a very different type of an investment than the start-up world. First and foremost it is much riskier, at least I think so and the returns will rarely be as large. We invest in restaurants for a few reasons. We want to support the community as much as we want to support smart entrepreneurs. It is also a bonus being part of a restaurant if it is a place that you can personally frequent and enjoy the success. So this is why I chose this question for the week.

You mentioned some restaurant you were an investor. Could you share some info about the typical funding structure of restaurants (preferred/debt etc ) ?

All restaurants are structured a little differently. Many accelerate payment back to investors first and then begin to pay themselves afterward. You tend to give up a little upside that way but it makes investors feel safer. There are 3 factors (none are surprising); amount of seats, amount raised and rent. Obviously those numbers change based on location and city but those are the 3 things that I look at in regards to being a worthwhile investment. There are investments that I have passed on just because of the huge number they were raising because I did not believe they would be able to pay us back based on the number of seats that they were covering every night. I could end up being totally wrong and I hope so for them but that is how I look at it.

I expect the restaurant owner to take 50% of the investment off the bat unless it isn't their first place. The investors cover the other 50%. The amount you put in of the 50% is your piece of the place. For instance, if they raise $400k then $400K is 50% of the business. If you put up $50K then you own 8%. You will get paid back 8% of the profits. Sometimes, as I said earlier, the deal is that the owner will pay out an accelerated amount to the investors until they get their original money out and perhaps a 10% overage and then will return to paying out the investors annually based on their investment.

Each deal is different but the ones that I have seen basically follow this thread.

companies I have invested in

more investments →

books of the moment

Peggy Riley: Amity & Sorrow: A Novel
A mother drives for days with her daughters and ends up in a random Oklahoma town after crashing the car. They come from a polygamous community where there were 50 wives. The mother had grown up knowing life outside that community. Over time, after leaving, she almost becomes deprogrammed. The realization of what she did to her daughters who no nothing outside the world they came from including how to read. Then there is the family that brought them in. It is a fascinating story. Well written. Worthy read.
Charles Graeber: The Good Nurse: A True Story of Medicine, Madness, and Murder
An amazing true story of a male nurse who was arrested in 2002. I actually remember the story as I followed it in the papers. This nurse was a serial killer who had probably murdered over 400 patients that were under his care. A seriously well researched book. Great read.
Meg Wolitzer: The Interestings: A Novel
Wolitzer writes about a group of camp friends who all come from different walks of life (some on scholarship) as their friendships continue through their mid-50s. At the beginning the story seems trite but as you continue to read there is a lot of be said. The story is sticking with me. She makes the case that everything that happens to you from your childhood makes an impact on who you become or don't become. Worthy read.
Elizabeth Strout: The Burgess Boys: A Novel
Strouts last book won a Pulitzer. She focuses on family issues. I enjoyed this book much more than Olive Ketteredge which I found utterly depressing. This book follows two brothers and a sister who live in the shadow of their fathers accidental death. Like most siblings, all have turned out very different yet they are connected. I did not love any of the characters, like her last book, yet as The Burgess Boys moves forward and memories are revealed, it is an interesting perspective on human character.
Tamara Shopsin: Mumbai New York Scranton: A Memoir
Great book. A witty spare inventive personal diary of Tamara journey from Indian to New York to Scranton. Really really enjoyed the book.
Michael Lavigne: The Wanting: A Novel
An incredible book that tells the human side of the many layered issues in the Middle East. From immigrating to Israel from Moscow, to being a victim of a suicide bomber yet surviving, to being pulled into an Israeli radical group. Each character is connected. Very layered well written book. Powerful
Alessandro Piol: Tech and the City: The Making of New York's Startup Community
A history of the Internet that I lived through. Great job of recording what happened.
Amity Gaige: Schroder: A Novel
Not sure how much I loved this book. A father loses his child in divorce and decides to kidnap his own daughter. He is not a stable person but he obviously loves his daughter. His own childhood has made him a disconnected human being. An interesting journey but not sure I'd recommend.
Ernest Hemingway: The Old Man and the Sea
Classic.
Janice Steinberg: The Tin Horse: A Novel
a good novel that not only tells the tale of another dysfunctional jewish family in the early 30's but interweaves pieces of los angeles history throughout the book.