Restaurateurs: How to Keep Investors From Owning You

Who is the only person to whom you should give control of your successful multi-unit independent restaurant company?

The person you just sold it to. Other than that, no one.

While you are at your company, keep control. No matter how tempting the offer, control your brand, concept, company, and IP. Period.

Ensure You Keep Control of your Brands

There are way too many stories of people who appeared to own the restaurants and company they had created — but who ended up losing control or had to buy their rights back from someone to whom they had given them. Or, worse, they ended up on the outside of the company they had started.

In our industry, there is nothing more valuable than the ability to develop a concept and enroll guests in its success. That talent is not more valuable than money.

When you are successful and running your business well, you can always raise money to grow your brand. But giving controlling interest in your brand to investors is too high a cost of capital.

Here in Dallas, this conversation is very timely: According to press reports, restaurateur Mico Rodriguez has had the unfortunate experience of being taken out of his own deal a SECOND time — this time, at Mesero. He’d previously lost his position at Mi Cocina, which he created — and which was arguably the greatest local market restaurant success of the past 25 years.

Mico would be the first to tell you he has had his share of personal and health issues — all of which have been extensively chronicled in the press. But to lose participation in your company twice? That’s a lesson for all.

When I decide to work on a startup, I will only do it for restaurateurs who understand the need to protect themselves.

Four Most Important Ways to Protect Yourself

  1. Chart a long-term path so you can have needed capital without giving up your IP or finding yourself on the outside of your company.
  2. Get a lawyer with a history of protecting clients who are creators and operators of their own concepts.
  3. Obtain professional advice on raising money from investors who won’t require you to turn over ownership of your concept, IP, or future — people who will be pleased to be rewarded by ROI in individual locations.  In general, be prepared to turn money away from people who are not right for you.
  4. Understand the value of your creation and what you can do. Very few people have the skills you possess.

Don’t let yourself become another anecdote. It’s no fun walking past a packed restaurant someone else controls that used to be yours.