What to Look for in a Restaurant Business Partner
Originally Posted on Typsy by Doug Radkey – 11/01/2017
If you’ve worked as a leader in the restaurant industry, then you know what it’s like. You know that leaders have to be willing to make sacrifices and acquire the systemized thinking, social skills, creativity, stress management, and passion that it takes to be successful.
Becoming a restaurateur combines an enormous amount of passion and vision. You have to create food, drink, and overall experiences with a drive that is undeterred by the high number of unprecedented risks. You must be determined, positive, confident, adaptable, and crave learning experiences.
And even if you do have all of those qualities, it can often be too much for one person to endure. This is when considering a partnership might be ideal for some.
It’s not uncommon for restaurants to be started or initially operated by a partnership, and you will be hard pressed to find a well-known restaurant brand that didn’t start as a partnership before becoming a larger corporation.
However, partnerships aren’t easy. They come with their own set of challenges, both at the start-up phase and during the operational stage.
There must be a common vision, mission, and commitment, and a high level of communication, creativity, and expertise between partners. Effective partners will also play off each other’s strengths and weaknesses to succeed in this cutthroat industry.
Here are a few elements to consider when determining if a restaurant partnership is right for you. This is what you should be looking for in a business partner today.
1. Have a Three-Step Plan
Before engaging in serious partnership discussions or agreements, it is crucial to complete a feasibility study, concept development plan, and business plan. Is the idea of a partnership even feasible? Can your restaurant concept withstand not only the market, but also two or more owners? Is there enough of a profit margin for all partners to live a healthy lifestyle? What are the short and long-term goals?
Many questions need to be answered before you make any decisions, and these plans will lay the foundation needed to move forward.
2. Conduct a SWOT Analysis
There should be a competitive SWOT analysis within the business plan, but it is also ideal to complete a thorough SWOT analysis (strengths, weaknesses, opportunities and threats) on both a personal and partnership level.
What strengths and weaknesses do you each possess, what opportunities exist if you decide to partner, and what threats will present themselves if you formulate a partnership?
For full effectiveness, have all potential partner(s) complete the same and analyze all of the responses.
3. Create Statements
To ensure potential partners are on the same page, it is imperative that you all have a similar vision, mission, value, and culture statements. Complete an exercise, similar to the SWOT analysis, in which each individual writes a statement addressing those four categories. These answers should then be compared against one another.
A partnership will inevitably run into hard challenges if visions and goals are not equally aligned. If you cannot cohesively agree on these statements at this stage, don’t move on to the next step.
4. Review the Laws
It’s absolutely critical to review your national and local business laws, regulations, taxes, and how they may relate to structured partnerships, liability, and asset management. Many countries, states, provinces and local municipalities have different information on their registered requirements.
Study this information and review it with both an accountant and a lawyer, so you can determine which partnership structure is best for your unique situation.
5. Draft an Agreement
Restaurants, bars, and other hospitality related businesses are really no different to traditional businesses. There needs to be a comprehensive and clear partnership agreement in place, even if it is a friend or family member as the potential partner.
The agreement must clearly state the financial structure of the partnership (investment, return and profit share) in addition to property management involvement, labor involvement, and overall activeness within the business.
Will both partners be active in the day-to-day operations, or will one act as a ‘silent partner’? Often, one partner looks after the back-of-house while another looks after the front-of-house, or is one partner just there to assist in finances while the other operates the business? Every minor detail must be documented, reviewed by a lawyer, and signed for liability and accountability purposes.
At the end of the day, successful partnerships rely on setting realistic (S.M.A.R.T) goals, open communication, frequent meetings, defined roles, and sound business structure. Only partner with other individuals who are willing to be open, honest, and respectful, and share the same values that you do.
You will need a balance of planning, trust and talent to be compatible. There will undoubtedly be stressful situations throughout the start-up phase, operational phase, and overall partnership that will reveal who you have really partnered with.
By executing these steps, you should be able to limit any surprises. The same goes for partnerships as it does for business in general; if you fail to plan, then you plan to fail.