A major deciding factor while finalizing the restaurant concept is securing investment. Getting the capital required is often considered one of the biggest hurdles for restaurant businesses. There are many ways to secure investment for restaurants. This article will take you through the different channels of restaurant funding that are ideal for different needs and types of restaurants. Let’s see how budding restaurant operators in Saudi Arabia can secure investment for setting up their restaurant.
Proven Ways To Get Investment For Saudi Restaurants
Based on the long and short term capital requirements, a restaurant owner may decide to use one of these methods or combine two or more methods in his financial plan. Here are the different ways to get investment for restaurants.:-
- Self-funding or Private Investments
- Partnerships
- Bank Loans
- Venture Capital funding
These are mentioned in detail below.
Self-funding Or Private Investment
The best way to get investment for a restaurant is by putting up your own money. However, you should only consider this option if you are very clear about the restaurant idea, concept, and format. Entering the restaurant business is prone to many risks. It is advisable that anybody who intends to launch their own F&B venture avoid using their own savings unless there is enough disposable income or savings that do not impact their personal needs and expenses. One can even consider borrowing money from friends and family and return it as soon as the business starts generating profits.
Partnerships
One of the best ways to fund a restaurant is to opt for partnerships. It is always a better option to go for a partnership in the restaurant business as it reduces the possible business risks by sharing future profit and loss. If it is your first restaurant venture, try to look for a partner who already has some restaurant business experience. Remember to back the deal and partnership structure with a formal partnership deed approved by the notary.
Bank Loans
Bank loans are considered one of the safest and most feasible ways to get the initial investment and working capital for your restaurant business. However, for getting a bank loan, it is necessary to set aside collateral property. Moreover, bank loans require a lot of documentation and paperwork. With a proper business plan and suitable collateral, getting bank loans wouldn’t seem a hefty task.
VC Funding
With the startup wave emerging worldwide, the restaurant business has been witnessing some significant changes in the investment scenario. With emerging restaurant concepts and automation, transforming the industry, investors are beginning to see the industry’s enormous potential. Perhaps, this is one of the main reasons why venture capitalists (VCs) are investing more in restaurant chains. Venture capitalists typically tend to invest in the restaurant concepts and formats that are already successful and more than five profitable outlets. They typically invest money in restaurant businesses only for 5-7 years.
In this type of funding, the VC acts as an active director in your company and holds you liable for the business performance. You should only seek investment from venture capitalists when you want to scale and replicate your restaurant’s success in other cities or geographies.
Thinking of starting a restaurant business in Saudi Arabia? Utilize these useful tips to secure the right investment and funding for your restaurant venture, and let us know your thoughts in the comment section below!
