Risk-averse investors looking for a few good chefs

Restaurant Investment Group has plenty of money to invest in new chef-driven restaurants, and its blue-chip lineup of experts is ready to help the chosen few navigate the obstacles that can cause start-ups to fail. RIG is ready to deploy its capital, but is only doing deals in its hometown Boston area right now. Even so, restaurant operators elsewhere can learn plenty from this firm’s approach, which is designed to remove much of the risk from both the investor’s and chef/owner’s side of the restaurant investment equation. 

Here’s how the private equity firm, itself a new entity, describes its mission:

“We offer a novel concept for the industry, providing chefs/owners with capital, service providers, and experience; providing investors with diversification and transparency; and providing landlords and communities with the desired, interesting, and independent chef-operated restaurants.”

It’s an approach that enables aspiring chef/owners to focus their time and energy on the culinary aspect of their proposed restaurant, instead of digging around for would-be investors, haggling with landlords or wrangling permits from government officials. The RIG method smoothes the start-up process, although there are plenty of strings attached—not necessarily bad ones—when the firm makes an investment. 

“Chefs selected to be a part of a RIG fund will have to retain a suite of RIG-approved service providers for oversight of their business plan, design services, human resources, accounting, corporate governance, licensing and leasing issues, and selected chefs will have to come up with a minimum of $150,000 of capital as part of the deal to have ‘skin in the game,’” the company says.

Don’t worry. The chef owns the restaurant brand, and RIG promises that the “fund mechanism will be opaque to the dining community, so that the buzz around the new restaurant is focused on the chef.”

RIG’s founders include attorneys and consultants who have significant expertise in financing, real estate, permitting and other key areas of the restaurant business.Their primary job is to attract investors. RIG’s initial fund hopes to raise somewhere between $1.6 million and $3.1 million and then use it to make sizable investments in a handful of independent, chef-driven restaurants in Boston. The minimum investment is $100,000.

A second component is a board of advisors charged with finding on-the-rise chefs and keeping them on track once they’ve been funded. Members include a highly successful restaurant owner (Nancy Cushman of top-rated Boston restaurant O-Ya), an experienced restaurant business adviser, a commercial real estate developer and a beverage industry expert.

Given this level of oversight and guidance, it’s going to be hard to for a new RIG-funded restaurant to fail. The group’s approach doesn’t remove all the risks inherent to the restaurant start-up process. But it does address most of the big ones that cause fledgling chef/owners to stumble.  

So what’s the angle for operators not located in Boston? They can’t get any cash from RIG right now, but they can still benefit at least a little from the group’s collective expertise. 

Here’s how. As part of its application progress, RIG requires prospective borrowers to fill out a rigorous, 6-page “Chef Application and Business Plan Summary.” It’s designed to weed out the dreamers and wannabes, and it looks like it will do so in a hurry.

If you can give good answers to all these questions, it’s obvious you’ve got your act together. No guarantees, but most lenders will give your loan request serious consideration if you’ve thought through your concept as thoroughly as the RIG application requires you do. 

Contact Bob Krummert at [email protected].