Running a Restaurant/advise

Advertisement


Question
Hi David.

I am a Mexican chef that will partner up with one person in Boston.
I want to know how much % of profits will be fair for both of us.
He will invest arround 100K for a small takeout place, I won't invest a dime. The concept, dishes, menu, logo, slogan, etc. is very original and is 100% mine. He tried my food in Mexico with some of his relatives and they said ...let's do it. We all think that this is going next homerun in US once all concept is unique.

Should I ask for salary plus % of profits? I will be working on the BOH and he will be doing the FOH but as you may know my job will be more time cosuming than his...by far.

And what if we get very succesfull and are able to franchise? How much to split on franchising?

I really apreciate your advise.

Best regards.

Luis

Answer
Hi Luis,

My pleasure to try to help you.  There are a hundred different ways to create a partnership like you are talking about.  Has he offered to provide you with any ownership in the business?

First, YES, definitely you should receive a fair salary if you are going to manage the BOH.  That is separate from any other compensation you receive.  After all, you are filling the role of a kitchen manager.  On top of that it would only be fair to you to either give you a percentage ownership in the business (even though he is furnishing the capital.  Your percentage of the profits should be equivalent to the percentage of ownership.  I have seen 50/50 arrangements and others where the investor putting up the capital wants to maintain a majority ownership in the business.  Basically, it comes down to what you can negotiate with your partner.

I am not sure if he (or the two of you) have formed a new corporation yet, but if you are to receive ownership in the company it needs to be called out in an Operating Agreement.  This agreement should cover every detail of the partnership including compensation, how profits are paid out, how the company is to pay back the investing partner and more.  It should also address what is to happen if one or the other partner wants out of the business, what happens if the business is successful and opens more units (or becomes a franchisor) and much, much more.

We are able to write these kinds of agreements but we are not attorneys.  A competent business attorney should review and edit a document like this because it is a legal agreement.  Laws vary from state to state.  It will be well worth the time and expense to do this right.

Luis, I wish you the best.  If I were you I would negotiate your salary as the KM, then negotiate as much ownership in the business as your partner is willing to let go of.

I hope this helps.  If we can help you all with the Partnership Agreement, I would be happy to quote a fee for that.

Best of luck either way!

David Foster
Foster and Associates
dfoster@fosterandassociates.net
(417) 877-0428 office
(417) 849-1903 cell  

Running a Restaurant

All Answers


Answers by Expert:


Ask Experts

Volunteer


David Foster

Expertise

We have been in the restaurant industry for over 40 years and consult with restaurants, casinos and hotels nationwide. We love helping restaurant operators succeed and can answer any questions related to restaurant start-ups, business plans, operations, labor costs, food costs, liquor costs, employee turnover, marketing etc.

Experience

I am a seasoned foodservice veteran with nearly 42 years experience in the industry. My extensive background includes overseeing multi-unit, multi-concept restaurant operations ranging from cafeterias to fine dining, and everything in between. I have a strong hands-on operations and marketing background that give me a unique insight into the “Real World” challenges of the restaurant industry. I have extensive concept development, menu and recipe development and kitchen layout and design expertise. I am effective in analyzing operational needs and identifying practical solutions in today’s very dynamic foodservice environment. In the industry, I am respected by my peers and have served on the Board of Directors of the Missouri Restaurant Association and have been a featured speaker on the subject of Home Meal Replacement at various national events. I also served on the Culinary Advisory Board of the Ozark Technical College as well as serving on the Board of Directors of Big Brothers, Big Sisters of the Ozarks.

Organizations
Member of the National Restaurant Association, Past Board Member of the Missouri Restaurant Association, Past Board Member of Big Brothers, Big Sisters of the Ozarks

Publications
The Consultant, Seasoned Views (a trade magazine for the restaurant industry)

Education/Credentials
Attended Drury College, Springfield, MO, Varsity Management, SRI

Awards and Honors
I have had restaurant projects featured in The Consultant (a magazine for foodservice consultants with worldwide circulation). I was honored for achieving the highest level of management competence by the Selection Research Institute.

Past/Present Clients
Sugar Creek Casino, Classic Rock Coffee Company, Mark Twain Brewing Company, Springfield Brewing Company, Bruegger's Bagels, M&M Grill, Paco Joe's, Holiday Inn, Hilton Garden Inn, Buffalo Run Casino, Golden Corral Corporation, Crosswinds Café, Chinese Chef, Mr. Dunderbak's Old World Market & Café, Bullfeather’s Wings and Grille, Mainstreet Market, Bear Rock Café, Cartoon's Oyster Bar & Grill, T's Redneck Roadhouse, Jim's Steakhouse, Neighbor's Mill Bakery & Café, Crazy Vine, San Francisco Oven, Maria's Mexican Restaurant, Andy's Frozen Custard, The Granite Club, Umi Japanese Steak, Seafood and Sushi, Springfield Grocer Company, US Foodservice, Premium Standard Farms, Smithfield, Dakota Organic, Kraft Foods, Allens, Inc.

©2016 About.com. All rights reserved.