Restaurant Financing: How to Get Funding for a Restaurant
Opening a restaurant, whether a franchise or an independent operation, requires preparation, dedication, and most of all, the proper funding. If you are serious about the industry but don’t know how to get funding for a restaurant, Teriyaki Madness has put together an essential guide to restaurant financing for you.
Financing Options for Your Restaurant
Traditional bank loans: A lender or bank financing is the most common way to get funding for a restaurant. This type of loan usually involves a lengthy application process and requires you to put up collateral to back the loan.
Small Business Administration loans: Many banks offer loans to small businesses supported by a guarantee from the Small Business Administration (SBA) to assist with the loan. SBA-backed loans average a 30% cash injection.
Personal assets: A home equity line of credit or second mortgage can give you access to funds, while assets like stocks, bonds, and mutual funds can also be used to secure loans. If you have a 401k or IRA, you should consider a Rollover as Business Start-Up (ROBS). This option allows you to invest those funds into your new business venture free of taxes or early withdrawal penalties.
Private investors: Outside investors are looking to fund promising new businesses, hoping to make a profit as the business takes off. You can structure agreements so that they’ll own a part of your restaurant until you pay them back, helping them attain a return on their investment, at which point you’ll have full control over your business.
Business partners: Consider a business partnership with other entrepreneurs to help with funding, operations, and growth as part of your restaurant financing plan.
‘Love’ money: Friends and family can be easy asks when it comes to needing funds or meeting minimum liquidity qualifications if the funds are gifted. However, borrowing money from loved ones can be tricky if a lender is also involved because borrowed equity is usually prohibited.
Crowdfunding: Set up a campaign on a crowdfunding platform where like-minded individuals who wish to financially support your venture donate money. The downside to this funding choice is the time and effort it takes, and the fact that the individual donations tend to be low in comparison to other financing routes.
Franchisor financing: Certain franchises offer financing arrangements to franchisees. Teriyaki Madness offers a comprehensive suite of 3rd party funding options depending on your fundability.
Financial Differences: Franchise vs. Independent Restaurants
There are several advantages to owning a franchise restaurant over an independent restaurant. The initial startup costs are typically lower to open a franchise restaurant than an independent eatery. Securing franchise financing is generally easier since lenders are often more open to supporting franchise businesses because of their proven success rate. Franchisee owners also enjoy the buying power to purchase food and other supplies in bulk at a cheaper price.
The Teriyaki Madness Difference
The cost of opening a new restaurant can run upwards of a million dollars. However, a fast casual concept like TMAD presents a more affordable and potentially lucrative investment opportunity.
Teriyaki Madness’ location size typically ranges from 1,200 to 1,600 square feet, which requires less real estate overhead and lower startup costs – like buildout – than many other fast casual competitors. Teriyaki Madness considers potential franchisees with at least $150,000 in liquid capital and the initial investment ranges between $346,400 and $768,760*.
Teriyaki Madness has more than 125 shops open across the U.S., plus two in Mexico and two in Canada! With strong support, numbers and scalability, TMAD is a fantastic multi-unit option to add to your franchise portfolio or a great choice for your entry into the restaurant industry.
If you want to learn more about owning multiple Teriyaki Madness franchises and the financing options available, click here to download our franchise report.
*Refer to the Franchise Disclosure Document