How can restaurant raise capital amid the pandemic

Short Description
At every stage you will have a separate outlook as to what it is it that the investors want from an overall risk v/s return factors.
  • Nusra Deputy Features Editor
Funding

Restaurant industry which in the pre-pandemic world required pre-fixing in the team but were so busy running a restaurant, food business that there was no time to look deep down into the business. Whether it is shorter menus, up scaling of people, outside dining for example; curbside pickup, delivery all got fixed during the pandemic which was hard to achieve during the normal days. And, there’s no denying that with if the industry bouncing back again, restaurants are now expanding at newer locations, geographies. But how do we look at growth, expand the restaurant to a new destination is an important question.

When are you seeking fund to grow?

From being investors’ first love to going through cash crunch; restaurants have seen it all in last 2 years. Though we have seen that food businesses do attracted investors over these periods but those were mostly brands present in the delivery space or someone doing a cloud kitchen/ dark kitchen concept. But as the industry is slowly gearing up to normalcy, restaurants are all look at new locations, growth and with this comes the investment.

“The last 18 month has affected our industry. A lot of investors were cautious in respect to investing in the restaurants based on the unknowns and how the hospitality took a brunt of the pandemic. But what I have been noticing and we are seeing with various IPOs that have happened that investor’s outlook toward the industry is coming back at globally and domestically,” shared Kabir Suri of Azure Hospitality that operate brands like Mamagoto, Sly Granny and Dhaba to name a few.

Funding and investment also depends on where one is on the journey of an entrepreneur, restaurateur. One has to make the decision whether he is looking for institutional money, can grow the business with internal accruals, are they looking to partner their business through joint ventures where they participate and share the burden of capital. So, it depends and one has to answer that by themselves.  “You can go the traditional way of raising debt capital, through joint venture where you can participate jointly and third is there is lots of HNI money that is looking for this space because either they are looking to provide alternative businesses other than family-owned businesses and also where you have the land partners where they provide you the asset and a capex that is indirectly a joint venture and last is you franchise the brand once you give birth to a brand and understand the DNA completely then you obviously facilitate the expansion on that,” he added by pointing that there has been a different ways of doing it but it’s been tough raising money in last 18 months

But we have seen that the time has turned and it’s visible with the amount of new restaurants opening. Unfortunately lots of restaurants had to shut so there is lots of distressed asset available in the market which has also given a way to expand in unknown covid period.

What are the top keys to lure investors?

The first question to a restaurateur is where I want by business to get in 5, 10 or 20 years of a horizon. For us it was very clear that the market that we are operating in that is Chai can be extremely huge. Every Indian consumes two cup of chai everyday. There is also potential to create a global brand with chai which nobody has been able to do so far believed Raghav Varma, Co-Founder at Chaayos who was very clear from the very first day of the business that they would need institutional equity capital as a debt or some other route will not be able to get them fast as per the growth aspiration they had. And, today the tea chain has 100+ stores across country.

We have asked many of our investor that what is that got you to invest in us. For us the size of the market is one of the biggest points that come out. If you need to expand and raise money via equity you need to show the investor that it excites a larger share of the market,” added Varma by pointing that the second most important thing is obviously the team, the execution that you put together and obviously how differentiated is the entire product and what kind of product market you have been able to achieve.

So, these are the core thing that an investors look out when they are putting their money in your brand. At every stage you will have a separate outlook as to what it is it that the investors want from an overall risk v/s return factors.

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