The Restauranteur’s Dilemma
August 14, 2019
“I think I’ll open a restaurant. It seems like a surefire way to make some fast, easy money.”
–No sensible person, ever.
There isn’t a sane human on this planet who opens a restaurant because it’s a fast and easy way to piles of guaranteed income. Nope. Instead, the majority of restaurant founders start their descent into madness from a different precipice. They’re possessed of a deep need to create and share a much-beloved cuisine with a community, replacing empty spaces in life with something nourishing and delicious. They may be brilliant business people but it is the connection between food and people that compels them to take such a notorious risk and become restaurant founders.
In the years that follow, some founders prevail. Their restaurant concepts win wild popularity. Their dining rooms deliver authentic experiences. And then there is the food. Oh, man the food; it becomes a part of their customers’ lives. “How did we live before this?” they wonder. “What were we eating this whole time?” The best restaurateurs win the hearts, minds, and palates of their hard-earned fans.
And in the best cases, the founder has the energy and resources to expand; to open a second location. And a third, and so on as the customer devotion persists and grows.
It’s an incredible moment, built on fresh ingredients, unremitting labor, and shrewd decision-making. It’s also rarely a terribly smooth process. When it happens though it’s magical. Sharing this validation with patrons and employees is heady and satisfying,
It’s also all-consuming. Founders only dimly remember weekends and holidays at home. They’re constantly moving between locations. The revolving door of hiring and training spins at a blinding pace. Costs, margins, and expenses get in the way of the creative process that seduced the founders.
The founder is at a crossroads. What to do? Stay small and self-managed? Expand? Package up the enterprise and find a buyer? Here is where success has created a new dilemma. It’s a source of tension and distraction. The opportunity might be massive, but there aren’t many tools to help point the way or ease the journey. Financing and development infrastructure is practically non-existent. Banks are stingy and risk-averse, friends and family are already tapped and invested, and the leaders who can share proven approaches to enterprise growth are nowhere to be found.
It was this vexing situation that Mercato Partners GP’s Greg Warnock and Andrew Smith created the Savory Fund, an answer to the restauranteur’s most difficult dilemma: “Where do we go from here?” Warnock’s career in founding and managing private equity funds Smith’s extensive background in building and scaling restaurant businesses meant that these two were well prepared to solve the problem in a creative way.
Narrow Focus; Broad Growth
Imagine for a moment, that the Savory Fund is a very niche fairy godmother – one of those really powerful ones that look like Sophia Loren and sound like the Oracle in the Matrix. Late one night, the Savory Fundmother appears in the founder’s driveway. Everyone is tired, after raucous dinner service, hours of dishwashing, restocking, cleaning, till counting, and prepping for the next day’s service. And then, she’s just there: the Savory Fundmother, possessed of ample funding, sage counsel, demonstrated growth experience, and fabulous hair.
First, Savory Fundmother waves a spatula and lifts off the founder’s shoulders, all the burdens that distract from the original mission. Freed from this weight, the founder can return to the connection between the food and people.
Far from being discarded, this load is spread to a team of experts in various fields necessary for creating durable, repeated success. These operators are skilled everything else that must be mastered: site selection, development, construction; negotiated leasing and equipment acquisition; employee hiring, training, retention; publicity, events, social media, promotions and launch mechanics. The founder is finally free.
Free to do what? Where is the founder going from here?
The founder is growing a restaurant from 3 locations to 30 locations. With each new location, the restaurant gains acclaim and a new following. The enjoyment of new food expands, time and again, across new swaths of human diners. The restaurants reach new diners in new states and new buildings, improving the employment opportunities and enriching the tax base wherever they go. Wherever they grow.
Do You Believe in Fairies?
Did not think so. So, here’s the interesting part. It’s one hundred percent real. This strategy, this access to fund-structured capital, and this team of operational experts are all here today at Mercato Partners. And while it is a new model, it is certainly not unproven. The Savoy Fund model is profitable at every brand level and at every location within every brand. The experts are paid for by the restaurant brands themselves and do not tax fund management fees nor any other source that would diminish returns for a limited partner. This thesis is sound.
And the beleaguered but deserving restauranteurs? How do they feel? Happy and sated, like their customers.