IF YOU WANT TO INVEST IN A RESTAURANT
“If the whole idea is that you always want to be able to score a reservation, stop right there,” says Bastianich, who has opened more than 20 restaurants with his partner Mario Batali. “Vanity restaurant investments never make money.” Instead, when you’re looking for a partner, search for someone who is opening her first or second restaurant—that way, you know she’ll be the one in the kitchen. You can also check out the website of the National Restaurant Association (-restaurant.org) as well as Nation’s Restaurant News (nrn.com).
And remember, a restaurant is a business. “You have to figure out what it’s going to cost to open, run and, realistically, how much revenue you can produce,” says David Robkin, a -private-equity investor. Here’s how deals typically work: “A chef will start by raising a few hundred thousand dollars from family and friends,” says Robkin. “They form a limited partnership and arrange how to split the profits between the chef-owner and the investors.” There’s no standard business arrangement, but often initial investors get their money back plus interest, and then the chef-owner and investors split the rest fifty-fifty (or whatever percentage they’ve negotiated). “Because of the limited life of restaurants,” says Robkin, “investors usually want to see their money back within three years.” In Robkin’s investments, he shoots for a minimum return of 20 percent annually: “If you can’t figure out a way to make that much, you should find other things to do with your money.”
Yes, the risks are high. Three out of five restaurants close within three years of opening. Also, “it’s very hard to get your money out,” says Robkin. “If you’re in a partnership, you may sell your share to someone within the group, but it’s hard to sell it outside the restaurant.”
IF YOU WANT TO INVEST IN A
BROADWAY OR OFF-BROADWAY SHOW
Finally, more on investing in the theater. I would do it again, but this time with lower expectations; now I know that only about 20 percent of Broadway investors make back their money. I would also think harder about whether I wanted to invest in a revival or a new show. Revivals, which tend to be beloved, have a built-in fan base and so are inherently less risky. What new shows offer is subsidiary rights: When you buy into that production, you also buy into all subsequent stagings. So when a high school in Montana puts on a production five years from now, you’ll get a check.
To find the right show, says theater producer Ken Davenport, become a regular reader of Variety.com and Playbill.com. You’re looking for posts about plays that are holding their first readings, which are intended to lure investors (contact information is usually provided). Another method, he suggests, is to look for the names of producers you like, Google them and ask to be put on their e-mail or investor lists (but watch out: Some require a minimum investment of $10,000 to $100,000).
Jean Chatzky, More’s consulting money editor, can relate: She has kids, a husband, a mortgage and an aging parent. She knows just how far you need your money to go.
For MORE advice on racehorses, click here.
Want the latest beauty, fashion and lifestyle tips? Click here to sign up for our fabulous weekly newsletter!