The Best Way To Fund a Restaurant

Updated: Dec 3, 2019

Opening a bricks and mortar restaurant is a dream shared by many passionate foodies across the country. However, knowing how to open a successful venue may seem like black magic. Famously, the restaurant industry is one of the hardest to navigate, last year alone 1,100 unfortunately shut their doors and last month we received the sad news about Jaime’s Italian. But we know that won’t put you off!

We have been working with some fantastic restaurateurs, such as Pranee and Andrew Laurillard featured in this blog piece. The husband and wife duo started Giggling Squid and have scaled it to 30 restaurants becoming the UK’s largest Thai chain. Proving that correctly funded restaurants are not only surviving the tougher economic climate but thriving.

Where to Start?

When a restauranteur looks to open his first site it’s not just the menu that is vital, the branding, marketing, hiring staff and finding a location are all major considerations. Then comes the question, how do you pay for all this?

The amount of funding required to open a restaurant can vary by hundreds of thousands of pounds, depending on location and specification. Getting the money right might just be the difference between staying open past the hallowed first year of trading or not. The Laurillard’s attribute part of their success on getting this bit right.

In this article we discuss the main sources of restaurant funding that are available to passionate foodtrepreneurs. In fact we show those looking to open the next big thing that they have multiple options available to them. However, there is never a simple answer on how to finance a restaurant, since each and every restaurant varies more to the next, than the dishes on their menus.

Cash and Remortgaging

If you have successfully opened an initial restaurant concept and eager to open a second site, you could use the business’s cash to fund a second site. If this is your first restaurant and do not have cash in the business, you could put your personal savings into the business. And if you don’t have significant savings you could always remortgage your home to release some funds.

If your restaurant or bar has a large amount of cash in the bank to use to fund a second site, this is always going to be the cheapest form of funding, likewise with savings. Remortgaging your home is also another cheap way to raise capital, because the bank will have a first charge on an asset which tends to appreciate over time, so can be seen as a “safe bet”.

Like that 0.74p phone cover you bought on Amazon, cheap is not the best, especially not in this case. If your new restaurant location can be funded with a fraction of the cash in the business bank account then this should be a consideration. However, if the new restaurant consumes more than half the businesses liquidity then you are entering a dangerous territory. Cash, should be retained for a rainy day to cover costs such as staff wages, stock costs, late payments (as discussed in this article), down months and other unexpected costs.