Investing in Restaurants – The Potential Downfalls of Investing in Restaurants

Investing in restaurants can be very lucrative. There are those who are actually what one would call “restaurant investors” who invest in them for a living. There are also those that invest for a living and restaurants are only a part of their portfolio. Then there are those who simply have casual investments that include restaurants. Yet still there are those who are not really in the investing game, but have a particular restaurant that is near and dear to them that they want either to help out or want a piece of the profits from, or both.

Those investors that simply include restaurants as part of their larger portfolio are at the least risk from those downfalls common to the business. Since most brokers tend to try to keep a portfolio as balanced as possible, any issue with their food service investments would be mitigated financially by the lower risk funds in their grouping. These common downfalls, however, can be much more dangerous to those who are tied up in restaurants alone.

These investors may have a love of food or the business, or they may actually have an emotional tie to the business. For them, investing in restaurant, or a particular restaurant, is about more than money. It is about helping out a business they believe in. For example, if a loved one wants to open a restaurant and needs a partner, the partner is then invested in the restaurant. This person would be someone who believes the owner can provide good food at a good price, and that this along with great customer service will make the business a success. Another scenario is that an established restaurant may fall on hard times, and an investor who may frequent the restaurant offers to make and investment to help see it through.

These types of investors are at the most risk from the possible pitfalls that are unique to investing in restaurants. One of these is cleanliness. It is imperative to the business of a restaurant, just because of the very nature of the business, that it is spotlessly clean. This includes the hygiene of the employees. One case of food poisoning linked a restaurant is all it takes to take the business down for good. Another common problem that befalls restaurants is location. A business that has been successful for years and is in a great location can be completely done for if the face of the city changes. Interstates, new shopping centers, and normal migration can all cause location issues.

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