Dividing Up Restaurant Ownership
Dividing Up Restaurant Ownership
There are several factors that go into dividing up restaurant ownership when you are first getting started. Before you even open your doors, you’re going to need to make sure to have proper documentation that all parties agree to. You must be prepared for the future—whether it’s through expansion or—in dire circumstances—arguments or closure.
One of the most challenging aspects of owning any business that you enter with a partner is deciding the amount of equity everyone is entitled to. In short, how big a piece of the pie does everyone get? The key to making this decision as painless as possible is a standard operating agreement. If you are an LLC (limited liability company), chances are that all the owners of your restaurant will get a different percentage of the company. The reason you want an ownership agreement is that it clearly outlines ownership structure and profit interests. Check out the Toast article “5 Benefits of a Restaurant LLC Operating Agreement” to learn more about operating agreements.
To determine ownership, you’ll want to look at key factors such as monetary contributions, the skills and experience each partner has, and the time spent on operations. How much will the business skillset of your partner(s) contribute to your restaurant’s success? And remember that as you’re getting your new business up and running, it’s okay to change your operating agreement based on the time, effort, and skills being contributed by the other owners. One person may really be stepping up to the plate while another is lagging behind. In this case, reevaluate your divisions and adjust accordingly.
Are you leaning on investors to get your restaurant off the ground? There’s nothing wrong with that tactic, but be prepared to grant partial ownership to them. When the time is right, you can also consider buying out your investors—and a Flex Pay loan from ARF Financial may just be the perfect solution, allowing you quick access to funds and low, weekly payments.
What about vesting? There are many schools of thought when it comes to vesting agreements within your new business. Some would argue they aren’t necessary, while others would say they are a non-negotiable. As with everything in business, do what you and your partners feel is best. If you are worried that granting 25% of your company to a partner who might bail after a couple weeks, only to return years later claiming they still deserve 25% of your profits, realize that a vesting agreement is probably a good idea.
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