Nearly 20 years after
Nieporent’s debut, financing the launch of a restaurant is far more
complex. Michael Whiteman, a Brooklyn-based consultant who is involved in
restaurants, luxury inns, spas and other developments around the country, points
out that starting a small restaurant in a suburb can run $650,000 to $700,000
and up, and in a major city the start-up costs are easily double
that.
 | | MICHAEL JORDAN'S Steak House |
Despite the outlay required, the possibility of quickly reaping a
generous return, perhaps 40 percent at a top-flight restaurant, as some suggest,
looms large for many potential investors. Before an investor can rub elbows with
a hot crowd drawn to a “scene,” however, there are other considerations: silent
partners, real estate haggling, celebrity egos and sophisticated tax
deliberations. “Don’t do it,” warns Zagat, “unless you’re very smart and very experienced.” He notes that the restaurant business has the highest failure rate
of any, with more than half of all new ventures failing in less than two years.
The investor, he adds, should “be a good real estate person, know what’s a good
lease at the right price and understand capital needs.” He has to be a savvy
buyer because food is perishable. “If you buy poorly,” Zagat says, “you need a
genius in the kitchen to overcome bad ingredients.” The restaurateur must also
be a good PR person, a good advertiser and be good at dealing with the
public.
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