Negotiating Business Deals/What to propose to an investor of my restaurant?
My question is the following. I own a small pizzeria and I have been in business for almost a year. A good friend of mine is very interested in investing in a second location and would simply put the money while I manage things.
I am still not sure what to propose but would the following make sense: He puts the money to open the second location and I'd be in charge of running the operation. As far as ownership, we'd go 50-50 and basically divide the profits. In the case however that business goes downhill, and loses money, his money would be at risk. What could I offer him in this event? Perhaps I assume 50% of the risk. So basically if his $20,000 investment fails, and we close down the restaurant, I pay him $10,000?
What would you suggest?
I don't believe you should have any monetary responsibility in case of business closure. Please remember that time and experience are just as valuable commodities as money. Therefore, your partner brings to the table money and you bring to the table your time and expertise. In case of business failure, your partner is losing what he invested - money, and you are losing what you invested - your time.
One thing is very important to start partnership. You have to sign buy-sell agreement that spells out all terms of the partnership and what happen in case of closure, dissolution of partnership, death or disability of partners, divorce of a partner, etc.
I hope it helps.