The Restaurateur and her Friends
A fictional story about a restaurant owner called Maria who raised $250,000 from her Amigos, because a mean bank manager called Richard Miserly thought Yelp was called Welp.
Once upon a time there was a restaurateur. Or rather, she was an aspiring restaurateur. She was actually running a food truck. A food truckeur. Or foockeur for short. But she really wanted to open a brick and mortar restaurant. Food trucks are kind of small when you’re in there cooking all day. And she lived in Fayetteville, Arkansas, which gets super hot in the summer. And her air conditioning unit kept on breaking. Which was Sub-Optimal.
And besides, you make more money running a brick and mortar restaurant than a food truck. And it’s more prestigious. It’s career progression. A restaurateur going from foockeur to brick and mortar is like an engineer going from Engineer to Senior Engineer. It’s the done thing.
Her name was Maria. And she made Mexican food. Everyone in town said it was the best Mexican food they had ever tasted. Because it was. And the people of Fayetteville are generally good, honest folk. They wouldn’t just make up stuff like that if it wasn’t true.
If she were able to open a restaurant, she was super confident she could fill it every night. And if she filled it every night, she’d make about three times as much money as she made running the food truck. Plus, she’d be creating jobs for Fayettevillians, and it would bring even more delight to the people in her community.
Doing the math, she figured out that she would need a minimum of $250,000 to open a restaurant – that was the cheapest she could do it.
But that was the problem. She didn’t have $250,000. She had $45,215.27. She’d been saving as best she could over the last three years running the food truck. But old and broken air conditioning units are annoyingly expensive. And her two daughters’ actual names were MoneyDrain and CashSink. (Not really. They were actually called Sara and Lucia. But you get the point).
Banks can be intimidating.
This is an actual picture of a leading bank in Fayetteville, Arkansas.
And furthermore, all except one of the banks in Fayetteville had, over the years, implemented increasingly austere Risk Management Protocols, which basically meant that they wouldn’t lend to startup businesses – or foockeurs looking to expand into a physical location.
But there was one bank that – at least in theory – might entertain her American Dream. It was called River Bank. (See what I did there?).
There are some really awesome bankers in the world. Good People. Just watch the documentary It’s a Wonderful Life for a real world example. But sadly, the manager of River Bank’s Fayetteville branch was not a Good Person. His name was Richard Miserly. But as he always liked to joke, “you can’t spell Miserly without Misery”.
This is a photo of Richard Miserly.
Maria had never met Mr. Miserly, but she was more determined to open her restaurant than she was intimidated by his stern reputation and moustache, and so she worked hard on a business plan for three months, and booked a meeting to pitch him on lending her the money she needed.
As she sat down in the enormous, amusingly squeaky, leather chair across from Mr. Miserly’s mahogany desk, Maria immediately knew it was going to be a tough meeting. Miserly eyed her suspiciously, and without so much as glancing at the business plan she had worked so hard on, began to bark questions at her.
“So you want to open a restaurant eh?”, he began.
“Yes”, replied Maria.
“Have you ever run a restaurant before?”
“No sir. But I do run a food truck right now. We’ve got a 4.5 star rating on Yelp”
“What’s Welp?”, asked Miserly, skeptically. “In fact, come to think of it, what’s a food truck?”
“It’s kind of like a rest—”, began Maria. But Miserly cut her off.
“Well it doesn’t really matter anyway. What collateral do you have? Do you own your house?”
“No”, said Maria.
“What’s your DTI ratio?”
“My what?”, asked Maria.
“And how’s your credit score? What, precisely, is your credit score, to three decimal places?”, growled Miserly. “And please give me the standard deviation of your weekly bank account balances going back to 2019. But I want you to recite the number in Latin”, he continued.
“Latin?”, Maria asked?
“Look Martha”
“…it’s actually Maria…”
“Whatever. Look, whatever your name is. This is just too risky OK. There’s no collateral, it’s a startup, you’ve never run a restaurant before. The answer is No. An emphatic No. Pinocchio, after telling the most extravagant fib in the history of mendacity? His Nose would have been less pronounced than my No’s.”
The whole meeting had taken 4 minutes. Maria left the room. Demoralized. Defeated.
She asked around everyone she knew, to see if anyone knew anyone who could help her. There were a few “Angel” Investors in town. But while they didn’t give her a hard no, they were also concerned about the risk of the investment. “I don’t write checks for less than $25K” said one man. “And I would want repayments of $25K per year, for 4 years”. “I would invest $25K”, said another. “But I would want 10% of the business”.
Everyone else she spoke with said similar things. But when she did the math again, she couldn’t make loan repayments that steep work. And she didn’t want to give up 10% of her business for 10% of the money she needed.
She researched as best she could to explore every possible option. She looked at crowdfunding sites like GoFundMe and Kickstarter, but the average new restaurant appeared to raise about $25K – nowhere near the amount she needed. Similarly, Kiva U.S. loans were beautifully cheap – 0% interest and no fees – but the maximum she could borrow was $15K.
But just as she was beginning to lose hope, someone told her about a woman named Kate Lynn, who had just started as the Arkansas Lead for a company called Wefunder. Maria looked Wefunder up online. She came across a restaurant called Cassava in San Francisco, which had raised $350K from its customers. And so she reached out to Kate to grab coffee.
Kate explained how Wefunder worked. “You actually raise money from your customers and community members”, she began. “The people who love your food truck, and your friends, family and neighbors, can now help you out, enable you to open a restaurant that they would love to exist, and earn a financial return. River Bank, and the “Angel” Investors you spoke with – making very large investments, and motivated to minimize their risk and maximize their returns – are either unwilling to lend you the money, or only able and willing to do so at pretty punitive terms. But check this out – because one of your customers is only investing $100, and is motivated by other things as well as making money on the investment – they might be willing to say Yes, on reasonable terms (e.g. you pay them back $150), when all you’ve been hearing over the last few months is No. Especially when you can offer them perks in exchange for investing.”
“Perks?”, asked Maria.
“Yeah perks. Like – let’s say that if someone invests $500, they get a free App every time they visit and spend $25. How much would you charge for a guac and chips?”
“$7”, said Maria.
“And how much would that cost you to make?”
“$3”.
“So you’re giving away $3. But you’re getting $25 in full price revenue. And the customer (investor) is stoked – because they’re getting $7 of free food every time they come in. And I’ve had your guac Maria. I’ve actually gotten lunch at the food truck a bunch of times. And it’s literally divine”.
“Thanks”, said Maria.
“Anyway. Back to Jonny’s Story”, said Kate.
“Jonny’s Story?”
“Whatever. I mean the (slightly contrived at this point) explanation of how Community Rounds work for restaurants on Wefunder”, said Kate. “So let’s say that investor comes in every week for a year, because they get free divine guac. And because they are an investor in the restaurant, which they’re proud about. And they’ve gotten to know and like you. In 50 weeks (they didn’t come in the week of Christmas, and one week when they took a trip to Senegal. And also I wanted to keep the math easy) they would get $350 of free divine guac. So they already made 70% of their investment back. Even before you started paying the loan back. Which it’s easier to do, because they also spent $1,250 at the restaurant.”
“I’m in”, said Maria.
And she was.
Kate helped Maria set the Wefunder page up, and the Fayetteville community rallied round to help Maria raise the $250,000 she needed. It was hard work. But she hustled, and pitched everyone she knew. And as people started to invest, they then told everyone they knew. The campaign spread so quickly that Maria’s photo was actually featured on the front page of the Northwest Arkansas Democrat-Gazette (business section) – which was also great for her getting the word out about the Grand Opening, which she invited her 978 Wefunder investors to.
Then she opened up the restaurant. She called it Los Amigos, in honor of the people that invested in her. It was packed every night.
She created 12 jobs. And the people of Fayetteville gorged themselves on exquisite Mexican food. Avocado farmers everywhere were delighted by their surge in sales.
She paid back her investors (financially) in two years. But she paid them back in divine guac many times over.
If you know a restaurateur (or a foockeur) looking to raise capital, community rounds are a great option: wefunder.com/revenueshare
Every time you hear a bell ring, it means that some angel's just got his wings.