Science of Service Episode 2: Funding your restaurant's growth with a hospitality CFO

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Ever wondered how to fuel your restaurant’s growth and make expansion dreams come true? Securing the financial backing to scale your operations can feel overwhelming, but it doesn’t have to. From defining your goals to understanding financing options, this recap of the Science of Service Podcast episode with Georgina Cavendish, CFO in Residence at MarginEdge, delivers essential insights.

Georgina draws on her 15+ years of experience in the restaurant industry, having worked on both sides of the Atlantic and with brands at every stage of growth. Today, she shares her expertise on navigating the funding landscape and how to ensure your business is investor-ready.

Step 1: Define Your Expansion Goals

First things first, ask yourself the big question, how big do you want to grow? Not every restaurant concept is suited for world domination. Assess whether your brand lends itself to multiple locations. For example:

• Is the demand unique enough to generate excitement in new markets?
• Does the experience or product work across different locales?

If you’re envisioning a nationwide or global rollout, make sure your restaurant’s concept fits the bill.

Step 2: Understand Your Financial Position

Before seeking external funding, evaluate if you can grow organically through reinvesting profits or utilizing savings to fund a few additional locations. A typical roadmap for restaurant growth involves self-funding up to 5–6 locations, proving the concept works before pursuing external funding.

Know your numbers: Georgina highlights the importance of understanding metrics like EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization)—a key profitability measure investors look for. Strong financial performance can be your ticket to attracting the right partners.

Step 3: Explore Funding Options

When organic growth isn’t enough, it’s time to consider external funding. Georgina outlines three main options:

1. Traditional Bank Loans

• • Pros: Stability, no equity sharing.
  • Cons: Repayment pressure and less flexibility during missteps.

Traditional loans are better suited for established businesses with predictable cash flow.

2. Private Equity or Venture Capital

• • Pros: Provides growth capital and access to investor expertise and networks.
  • Cons: Requires giving up equity and some decision-making control.

This route allows you to focus on scaling without immediate repayment obligations. Be sure to partner with investors who align with your vision and values.

3. Crowdfunding

• • Pros: Builds both capital and community, great for brands with loyal followings.
  • Cons: Administrative challenges with managing multiple investors.

Platforms like Kickstarter can create a buzz around your business while raising funds, especially when paired with loyalty rewards (e.g., free products for investors).

Step 4: Make Your Business Investor-Ready

Investors want to see a well-organized, scalable operation before making a commitment. Here’s how you can prepare:

• Organize your financials and operations. Investors will scrutinize everything from your profit and loss statements to your recruitment and training processes.
• Invest in systems early. Tools for inventory management, sales forecasting, and scheduling not only streamline operations but also impress potential investors during due diligence.
• Build consistency. Document standard operating procedures (SOPs) for processes like recipes, training, and quality assurance. This reduces risks, especially during scaling.

Step 5: Build Relationships and Leverage Networks

When working with private equity or venture capital, relationships matter. Unlike banks, investors often immerse themselves in your business, offering guidance and connections that can accelerate growth. Whether it’s negotiating leases or hiring senior leaders, their input can be invaluable.

However, misalignment can cause friction. Georgina stresses the importance of creating a partnership based on trust and shared goals. Open communication and collaboration with your investors will go a long way in shaping the success of your expansion.

Additionally, lean on your industry network. The restaurant world is famously tight-knit, and connecting with other operators or experts can offer fresh perspectives and invaluable support.

Step 6: Invest in Support and Tools for Growth

Scaling a restaurant business is no small feat. Attempting to balance day-to-day operations while preparing for funding can lead to burnout. Georgina’s advice? Don’t do it alone.

• Consider hiring a fractional CFO or consultant to prepare investment plans and financial projections.
• Implement robust systems early to track sales, inventory, and labor efficiently. Investing in tools now saves money and headaches later.

Final Thoughts

Whether it’s passion-driven growth or full-blown global domination, scaling a restaurant business requires careful planning and the right financial strategy. Start by defining your goals, selecting a funding option that suits your vision, and preparing your business for investment with organized financials and solid systems.

Remember, building a trusted network and preparing for the demands of investors can make all the difference. And as Georgina emphasizes, the restaurant industry is a small, supportive community eager to share advice and insights. You don’t have to do this on your own.

Want to explore more strategies for scaling your hospitality business? Check out Science of Service for additional insights, operator resources, and untold stories from industry experts. Don’t forget to tune in next time for tips from an operator who cracked the code on scaling successfully with private equity.

Episode time stamps:

00:00 Introduction: Scaling Your Restaurant Business

00:47 Meet the Expert: Georgina Cavendish

04:33 Georgina's Journey: From the UK to the US

07:40 Funding Your Growth: Options and Strategies

10:25 Understanding Financial Metrics

13:55 Navigating Private Equity and Venture Capital

25:30 The Importance of Relationships in Private Equity

28:07 Preparing for Investment: Practical Tips

34:31 Conclusion: Insights and Next Steps

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