How to find business partners to put up funds to buy a bar?

May 18, 2006 12:21 PM

What are good resources, books, etc. on how to find investors/business partners for buying a bar?

A friend of mine who's worked in bars/restaurants for 15+ years (as a waiter, bartender, etc.) would love to own his own place... trouble is, he's got no money to put up, and very little collateral for a bank loan. So he needs business partners who can put up the funds so that he can go about doing the work (he's got subcontracting experience, too, so he could also work on rehabbing). Neither of us have much of an idea how one goes about finding partners/investors; the complete extent of my knowledge is to say "I guess you'll need a business plan." What other resources can I point him towards?

posted by scody to Work & Money (4 answers total)

Three F's, Friends, Family and Fools. Small business financing usually involves draining whatever you can out of people you know and maxing out all your credit card. It's incredibly risky, but that is the nature of small business.

Bars aren't paticularly profitble ventures, especially in LA where the profitable bars probably have very short lifespans. Any serious bank or investor would want to demand a return greater than the market and I doubt you can do that with a bar.

If your friend comes off as competent you should be able to get quite a bit out of older relatives and friends, you'd be surprised. Figure out all the costs initially and operating costs for the first 5 years. If you can show an ability to pay back a bank at 10-15% you should be able to use the three Fs as collateral and get some clever financing done.
posted by geoff. at 1:28 PM on May 18, 2006

Seconding geoff - financing a bar can be a hugely risky business. The bar owners I know have all used private cash / remortgages to get set up. Banks are very risk averse to these sort of things and the returns involved aren't enough to interest VCs. A private business angel might be able to help, but they can be very hard to find.

Alternatively, try tapping up a few of his regulars. This is NY, right? All he needs is a group of bankers willing to put their bonuses towards the project and take a back seat as silent partners.
posted by blag at 2:50 PM on May 18, 2006

Response by poster: This is NY, right?

Nope, it's L.A., and unfortunately the regulars at his current gig aren't exactly investment bankers. heh.

Thanks for the info, though, blag and geoff -- it's definitely handy to start getting an understanding of the lay of the land for this kind of business. (Any further input from anyone else appreciated too.)
posted by scody at 3:13 PM on May 18, 2006

have you read jwz's story of buying a bar at http://www.dnalounge.com/? It reinforces the 3F rule in excruciating detail.
posted by boo_radley at 1:06 PM on June 7, 2006