India's Most Influential Business and Economy Magazine - A Planman Media Initiative 
 Search  
  Other Sections
  
  • Home
  
  •  Cover Story
  •  B&E This Fortnight
  •  B&E Indicators
  • Finance
  • International Column
  • Interview
  • Policy
  • Politics
  • Scrutiny
  • Sector
  • Snapshot
  • Testimonial
 


Share |
International Column
 
Go to Page Number - 1   2   3   
GLENN COLLINS,CONTRIBUTING WRITER, THE NEW YORK TIMES
How restaurants in US are turning to the public for funds
Spurned by tightwad bankers, restaurateur-wannabes are taking cash from the community
Issue Date - 08/12/2011
 
Aaron Lefkove was struggling to raise close to $200,000 to open a New England-style clam shack in a Gowanus (Brooklyn, New York) storefront. Bank loans were out of reach. “We didn’t have the kind of collateral they wanted,” said Lefkove, a 31-year-old punk rocker and publisher’s copywriter, nostalgic for family visits to Bigelow’s New England Fried Clams in Rockville Centre, New York.“I liquidated my 401(k) and my IRA as well,” Lefkove said. “I even sold my guitars.” It wasn’t enough. He and a partner reached out to friends and family and used their own credit cards. Still not enough. “We picked up investors – some became partners, some would get a return, everyone was structured differently,” he said. “Even that was not enough.” So to help get his restaurant, Littleneck, over the finish line, the next stop was Kickstarter.com – a website that solicits donations to finance art, technology and business projects. Promising little more than good karma, some discounts and a T-shirt, he raised $13,000 from 162 donors – $5,000 more than his goal. With the help of a few final investors, the 38-seat restaurant began serving fried clams and lobster rolls in November 2011, with the chef Alan Harding in the kitchen. The Internet campaign helped Littleneck financially, but Lefkove sees other benefits. “Beyond the money,” he said, “it connected us to the community, got our name out – and engendered good will.”

Spurned by tapped-out investors and tightwad bankers in challenging times, restaurateur-wannabes are turning to their neighbourhoods, and the wider community of the Internet, to finance their dreams. It is part of the same movement toward community-supported financing that has capitalised farms, independent grocers, bookstores and other small businesses. Many primarily philanthropic websites like Kickstarter and Kiva.org have sought small sums in support of high-risk ventures, arts groups and charities under the rubric of microfinancing and crowd-sourcing. For restaurateurs it provides the added benefit of eliminating interfering investors who second-guess them and demand higher prices for higher returns. John Fraser used Kickstarter to raise about $24,000 for his short-lived but well-reviewed pop-up restaurant, What Happens When. And the Brooklyn Grange rooftop farm in Queens, New York, raised more than $20,000 that way. Claire’s Restaurant in Hardwick, Vermont – the town that inspired the locavore best-seller “The Town That Food Saved” (Rodale Books, 2010) – used a different community-based approach, getting $5,000 loans from local families at 5% interest. The Awaken Cafe in Oakland, California, sold $1,000 gift cards redeemable for $1,250 each, attracting money up front that let it open its doors. In the name of job creation, Howard Schultz, the CEO of Starbucks, is encouraging customers to earmark $5 or more to support loans through non-profit groups to businesses near the company’s stores. Chris Mooney, a 39-year-old music distributor who lives near Littleneck, had no such noble goals when he kicked in $100 for its Kickstarter campaign. “The more new restaurants in Gowanus, the better,” he said. “They’ll give me a tote bag, so that will be free advertising for them.” Online financing, or crowd-funding, as it is known, is not a panacea: The owners of the 38-seat Egg restaurant in Brooklyn, New York, couldn’t attract enough Kickstarter donors to establish their Goatfell Farm in Oak Hill, New York, so they resorted to family and friends.

 
To raise money for a new 60-seat restaurant, Parish Hall, the owners have targeted investors through “entrepreneur sho cases” – show-and-tell sessions for potential donors – by Slow Money, a national nonprofit that supports community businesses. “If we want to make the food industry truly sustainable, we must look at how we are funding the enterprises within it,” said Holly Howard, Egg’s operations director. Owners, she said, shouldn’t have to “cut corners in order to pay investors a huge return.” Perhaps the most ambitious plan is for the Elevens, a bar and restaurant that two designers, Scott Kester, 50, and David Lefkowitz, 44, are hoping to open in May in TriBeCa. They are asking for $500 from 2,000 strangers online (that’s $1 million when you do the math), so they can open without major investors. With a menu created by Daniel Patterson, whose restaurant Coi in San Francisco has two Michelin stars, and a drinks roster formulated by the mixology star Dale DeGroff, they hold out an appealing promise. Donors will be designated lifetime “seatholders,” entitled to priority reservations at the 65-seat restaurant, 25% discounts and access to privileges like exclusive tastings. Seatholders could transfer their seats to new donors for $500. Kester said the partners envisioned a neighbourly oasis. “So we said, let’s create something that is owned or shared by the patrons – like being in a club but not an exclusive one, since anyone can get in the door,” he said. “We trust people,” he added, “and you reap what you sow, and we are hoping that the people who are going to be seatholders believe in the kind of establishment we crave.” They are hoping that “others will use this concept and copy it,” Kester said. They also want to skip the traditional preopening secrecy. “We plan to be so transparent we’ll have a construction cam – you know,” he said.
          

Share |
 
Go to Page Number - 1   2   3        Next
 


      
Comments   
   
      
Leave your first comment

   


     Leave Comments to this story    
     
Name:  
Comments:  
Email id:  
City:  
 
 
Busines & Economy is also associated with :
©Copyright 2008, Planman Media Pvt. Ltd. An Arindam Chaudhuri Initiative. With Intellectual Support from IIPM & Malay Chaudhuri.