When it comes to opening a restaurant, there’s only one thing that’s certain: It can’t be done without money. In New York City, where opening costs often run upward of half a million dollars, access to that kind of cash — or the lack thereof — is a powerful determinant of who can shape the present and future of dining, and who can’t.
Established chefs can go to their trusted investor network or well-heeled fans, who are more primed to invest; the more success a chef has, the more that people who historically invest in restaurants, like people in the finance industry, try to become a part of that success. Some even have their hands in several pots, like one billionaire who has funded Eleven Madison Park, Loring Place, Charlie Bird, and Shuko.
But for those trying to open their first restaurant, finding the finances to get off the ground is trickier. “It’s really, really hard to get money, so once you have that person — like Jean-Georges has that one person; Andrew Carmellini has [his team] — a lot of them don’t give up their contact, and it becomes power,” acclaimed chef and Eater Young Gun JJ Johnson says. “So you have to figure out how to get the power. The money is the power.”
As Johnson can attest, though, it’s not impossible to get started without a pre-existing network of investors. The chef recently opened his first solo restaurant, Harlem rice bowl shop FieldTrip, after raising $650,000 from six different investors. He’s not the only first-time restaurateur to find alternative routes to opening: When Eater Young gun Amelie Kang wanted to open the first location of her Chinese dry-pot restaurant MáLà Project, she put together a shoestring budget and found $320,000, while Jen Pelka raised $1.5 million for her luxe West Village Champagne bar the Riddler. Roni Mazumdar, owner of several acclaimed Indian restaurants, was able to raise $2 million for Rahi and $400,000 for Adda.
These are numbers that restaurateurs typically don’t share, but the only way for money to be spread around and for “more people to open more successful restaurants,” as Pelka puts it, “is if we all share this information.”
Many of these restaurateurs received funding from people who had never invested in a restaurant before. It’s not easy, they say. Raising money feels “like you’re walking on a bridge as you’re constructing it,” says Mazumdar.
Here’s how five newer NYC restaurateurs got it done.
Hit up friends and family first
Kang had the idea for MáLà Project in 2015, but she’d never worked in restaurants before. So she did what most first-time restaurateurs do: She turned to family and friends. Kang had figured that she and her partners only needed $320,000, which is an unusually low budget, so she was able to eschew outside investors. “It was my first project, and my partners didn’t have any history in business either, so we just knew it would be easier to get money from ourselves,” she says.
The tight budget had unexpected benefits: Kang went outside of the architects and graphic designers that many restaurants use because she couldn’t afford them, resulting in a unique aesthetic. She does warn, though, that because they kept the budget so low, they had to do nearly everything themselves — like construction projects and marketing the restaurant.
“Our time could have been better spent than painting the walls ourselves,” she says, but she still recommends trying to self-fund a restaurant as a first course of action for keeping more control of the end result.
Look outside already-existing
It may seem as though money is controlled by a small cabal of deep-pocketed people, but anyone with money can be a potential investor.
Both FieldTrip’s Johnson and the Riddler’s Pelka mainly sourced money from first-time investors, Johnson from people of color and Pelka from women. “What I started to realize is you have to speak to people who are consistently around money,” Johnson says. “Talk to your dentist, doctor, accountant. Speak to people who know people who have money. I actually raised money at a wedding and in a pool drinking pina coladas.”
Pelka asked anyone whom she thought had $5,000 or more to spare because “truly anyone could do it,” she says. The end result was having more investors than some restaurants have — more than 30, compared to Mazumdar’s four — but it’s also a good way to diversify ideas and create a bigger network, she says.
Though many small businesses turn to banks for loans, restaurants historically have not had that option. Hospitality consultant Steven Kamali says that’s because the restaurant industry is traditionally opaque, with finances not often a part of public data. Plus, most restaurateurs do not have significant personal net worth, and they lease their spaces and equipment, both of which are considered liabilities, Kamali says, making it difficult to secure a longer-term loan.
If you’re not serving burgers or pasta, already-existing networks will be even harder
American, Italian, and burger concepts tend to be easier to pitch to local investors, Juan Correa of acclaimed Nikkei restaurant Llama San says, meaning that, paradoxically, any restaurant serving a cuisine that’s not already ubiquitous in New York may have a hard time finding money here.
Correa says he had that issue because the Peruvian-Japanese style isn’t known in New York. Local investors got “really anxious” about the restaurant’s risk, he says. “We were met sometimes with a glaze in their eyes,” he says. “They were like, ‘What is that? We didn’t even know that existed.’”
Instead, he used family connections to speak to people in Peru who were well-versed in the delights of Nikkei fare and ready to invest in spotlighting it in New York City. They already knew the cuisine, so they didn’t need to be convinced of its potential in a new city, Correa says. He ultimately raised $1.2 million exclusively from Peruvians to open Llama San.
International cuisines from newer immigrant populations also tend to encounter difficulty raising money because restaurateurs often have smaller networks in the United States, Mazumdar of Adda says.
Since he was the first in his family to come to the U.S., he didn’t have a history of relationships to build on, he says — no family businesses to prove viability and no credit history. “The amount of buying power a community has in many ways defines the caliber of restaurant that comes out of that cuisine,” he says.
Going to nontraditional investors, like the Indian surgeon who is Mazumdar’s main investor, was a way to overcome the lack of a built-in network. Mazumdar met his partner, Mukul Arya, through a mutual friend, and they immediately connected over the idea of wanting to up the level of Indian restaurants in the city — which is ultimately what convinced Arya to invest and Mazumdar to take his money, Mazumdar and Arya say.
Have a business plan ready to go, and don’t let “no” deter you
Before doing it, though, make sure to have a full business plan ready, Pelka says — with details ranging from design choices to first-year finances. “You have to know the answers to all the hard questions,” she says. “I think that’s the hardest part for first-time restaurateurs, to have all that stuff lined up.”
When approaching potential investors, usually through mutual connections, Johnson would start simply by introducing himself, his career accomplishments, and what his restaurant concept is. Instead of pitching all the details in person, he’d ask to send his pitch deck, or stylized business plan, and let that do the talking. Then, people could decide if they were interested before getting back to him, making a detailed conversation easier.
Pelka, though, takes a different tack. She asks to meet people she admires for drinks, without specifying that it’s to talk about being a potential investor. Instead, she starts a conversation by saying, “Tell me everything about you.” The person typically reciprocates, and if she thinks from their conversation so far that they could be a good fit, Pelka uses that as her opening to talk about her investor community, benefits, and capital raise. Only after that does she follow up with her business plan.
The two approaches are totally different, illustrating that varied styles can work, and that it’s best to find one that feels right.
It also becomes easier to get commitments with what Johnson calls an “anchor investor.” Once he had a main investor providing the bulk of the money, he was able to leverage that person’s name and show others that there was confidence in his idea. Still, at the end of the day, he got a lot of rejection. “Don’t be scared to hear ‘no,’” Johnson says. “You’re gonna hear one hundred nos before you hear a yes.”
But remember to stay discerning about who to sign a contract with
It’s important to maintain integrity when accepting money, especially in how the contract is laid out, these restaurateurs say. Investors can have inconvenient opinions, like expectations that certain dishes should be on a menu, so it’s essential to be on the same page or have boundaries written into a contract.
“I don’t pick the fastest money that comes to me. You need investors who not only believe in you on the good days, because everyone does, but the bad days as well,” Mazumdar says. “It’s inevitable that you’re going to have a bad day, and on those days, if you have a group of people who don’t support you, then you have the wrong group.”
Kang also advises not giving up too much ownership at the beginning by raising an excessive amount of money or taking from outside family and friends. Correa’s top word of warning is to avoid hedge funders, saying he’d “rather move to Tahiti” than deal with their egos and intense focus on quick returns.
At the end of the day, though, being selective is a luxury. Johnson points out that people of color are statistically less likely to raise funding as easily as others, as they tend to lack rolodexes and are more likely to be limited by families who may not have money to spare.
Still, Mazumdar recommends caution, saying that “people end up investing because they’re passionate,” but passion “should not supercede logic.” Since his success at Rahi and Adda, though, he’s had more and more people approaching him. “Ever since our rapid growth, there’s been numerous people saying, ‘Oh, I want to be a part of this.’ It happens all the time. They see a busy Saturday night and want a part of it,” he says. “But it cannot work like that. Until there’s a clear-cut conversation where both parties understand the dynamics of things, and you in your heart believe this person truly believes in you, we don’t bring that person onboard.”
Stefanie Tuder was a senior editor at Eater NY.