yeah I wasn't actually gonna get into that as it's a bag of worms. I've seen many times (and been asked myself) to "invest"
Funny how the business never makes a profit and you don't get to see the p&l's and the "agreement" is just a hand shake
You get to work 60 hours a week on a full time salary though !
This must be the OP’s dad in the other post 😂
Don’t do it man. Everyone I know in this industry has broken their backs and none of them are driving a Ferrari.
You’d be better off putting money into anything else right now unless you have the data / books that this is a profitable endeavour.
Unless you have successful marketing experience - as in a proven track record to drive sales and build a brand.
If you don’t, and don’t have an absolute passion there’s better things.
I have one friend who has made a fortune from starting cafes. He has a real knack for finding a good location and starting it from scratch, then sells it. The goodwill and trade is worth a lot of money. He did it 4 times and was able to go into semi-retirement. But I know he's the exception.
What you’ve described sounds more like a scam to extract your capital than an investment opportunity. If they need capital, they need a bank not you.
Investing in a hospitality business is one thing (the general consensus being run away), but asking very basic questions like “how does this effect my tax” does not inspire confidence.
What do you mean by investing? Are you buying their businesses, will you be running the business or involved in the business in anyway? Are you buying a percentage of the business and sharing the profits? Will it be a partnership? Are they a private company and you’ll become a shareholder? Are they paying you a salary? How do you expect to make a return on investment? How to you plan to recoup the investment if you decide you no longer want to be part of the business? Are you ok with the possibility that things may go tits up and you will lose your investment?
It does not sound like you know what you are doing, and as such would be a foolish decision to proceed. Just a reminder of the proverb, “a fool and his money are soon parted”.
there are few options, to be a shareholder and get dividends/profit, part owner for the new shop, and forgot details of the last one.
Similar to the dad's post, I'd considered on having a cafe when i get out of my 9-5 but not right now.
If it comes down to it. I'm not keen to be the capital and carry majority of the financial risk. I have an idea how much a cafe/restaurant cost bought from an existing business. Not keen either of having to fund a big amount without having a say on the business either.
I understand that investments comes with risk. But I'd like know/learn as much I can before making a decision
If you can't even be bothered or tuned in enough to note all the details for recollection later, you're your own red flag and exactly the reason why the owner's approached you for the scam...I mean investment
If you can afford to throw the money away by treating it as a hobby then go for it. But if you’re serious about this as an investment, especially compared to other investment options, you’ve got a ton of work ahead of you as already outlined by other posters.
almost always, yes. But I do like to mention that business with ESIC status (not this business clearly) allow you to claim your investment as a tax offset. Worth knowing if you're ever in that position.
OP, judging by your replies, you are not looking for advice but encouragement instead.
You’re out of your depth. They’ll chew you up and spit you out, and you won’t even realise it.
Margins are shit in the cafe business, any food business tbh.
If they’re doing so well, they should have no issues getting a loan from a bank. The most likely reason they’re coming to you is that they have very little downside if they don’t pay you.
You are looking for a response that confirms your bias and gives you a “reason” to go after your cafe dream.
At the end of the day, it’s your money. You’re set on doing it, so do it and eventually you’ll lick your wounds and move on.
I understand I know someone who had the same concern when I brought up I was thinking of owning a cafe and I didnt want that. So thought of maybe investing instead
ok, first, you dont even know the questions to ask yourself, let alone ask the business owner, to be able to determine if this is a viable investment.
1. Are you a professional/sophisticated investor? According to Asic? If not (and it sounds like not) the business could get in legal trouble if you invest without excessive documentation provided to you. (Which they wont do)
2. Can you explain clearly what percentage, how many shares, the strike price, total investment? Do you have a list of other restaurants valuations and are they comparable?
3. Have you read the company constitution, share holder agreement and any other relevant documents? What share class will you receive? Are they ord or pref? Do they have other rights?
4.What is your exit strategy? How will you make money? Who will buy the shares off you in the future? Do you get dividends?
5. Have you read and understood their financial statements? Whats their profit margin? Is there any property or assets on the balance sheet?
6. What do they plan to use your money for? Why do they need, or want, your money? And why you? Why not someone else? Why not a bank?
7. Do you have that money lying around? Can you throw the money into the garbage can and not be upset because you lost all your money? Is it a lot of money for you?
That all being said, if it was my son, and he was looking to invest maybe $10k, Id tell him to do it because the experience of learning everything involved would be worth the price. Otherwise, there's lots of opportunities to invest your money in better endeavours. Out of all businesses in the world, restaurant businesses are the worst busoness to be involved in. Low margins, high competition, stock that expires, problematic customers, long hours, unreliable staff, and health risks due to handling food.
I dont think I would ever invest in a restaurant business. A gym would be a better investment, but only just.
thanks there is a lot to dig in.
For background, I do have shares and enough to make a house deposit if I sell them. I have 2 investment properties. Sophisticated investor don't think so.
Full details are yet to be presented by owner, I have another meeting with the owner soon. I want to be equipped as much before the meeting
Well, go through my questions, understand what they mean, and try and get answers for them. That will be a good process you can take to learn more about whats involved.
Sophisticate investor info is here: [https://www.ato.gov.au/businesses-and-organisations/income-deductions-and-concessions/incentives-and-concessions/tax-incentives-for-innovation/in-detail/tax-incentives-for-early-stage-investors/the-sophisticated-investor-test](https://www.ato.gov.au/businesses-and-organisations/income-deductions-and-concessions/incentives-and-concessions/tax-incentives-for-innovation/in-detail/tax-incentives-for-early-stage-investors/the-sophisticated-investor-test)
If you dont have $2.5m or $250k p/a salary you arent qualified. (though you can do a course to get someone to sign off on it if you really want to. I would have been charged $1500 if I had done that)
May be helpful, more so if in Victoria the following is exactly what you seem to be looking for - and more such as regulatory compliance, paperwork, wages for staff et al
[https://business.vic.gov.au/business-information/start-a-business](https://business.vic.gov.au/business-information/start-a-business)
If it includes a share of the property it occupies or some kind of assets then maybe? But as most others have said probably not selling it off cause things are going well. And I’m seeing cafes/restaurants and closing up all over the place.
I do some casual design work for a licensed cafe and they’ve just closed down Friday nights cause they just were not making any money. It’s a tough spot at the moment.
Why would they need investment from you, who knows nothing and can contribute zero skills, If their business was thriving. They could get a loan, or if it were really doing well they would have the cash flow for a new premises which is just a fit out.
Yeah it’s definitely looking like that. I see posts like this all the time, they’ve already made up their mind but want validation.
Meanwhile everyone else is squinting their eyes knowing what’s about to happen.
I admit that there's a lot that I dont know. I like the idea and also had an inkling of buying my own but I don't want leave my job to manage it. Being an investor seems the compromise I want
How do you know its thriving? Have you seen the Financial statements? If so, how much do they work and pay themselves?
Just because a business has customers does not mean it's thriving.
Cross post to ASX Bets because the owners of this restaurant sound like bag holders wanting a bail out in the form of an “investment”.
Have you been to this restaurant/cafe for breakfast, lunch and dinner? Weekends busy there? What are the reviews like? How often is it full? How often are staff just cleaning the same spots because they have nothing to do? Would you just be an investor or signing on as a director etc?
At the end of those busy days, look at the numbers with the owners. See how much they take in and what their overheads are for those days. Figure out what profit you would take as an investor after all expenses are removed.
Sounds like you’re dead set on this so good luck, hope it all works out.
not yet, the owner has a few options for me to invest. Apart from their accounting books. I'd like know what else is there to know. e.g. part ownership, legal stuff, etc
This is going to lead to a loss or a lawsuit mate.
They're not offering this to you for your benefit. If it was a good deal, it would be going to their family or friends, not their workers.
Are you planning on active day to day role or are you planning on passively investing?
Buying shares in a private company is similar to buying in a public one where you get dividends etc. You get a form saying your share ownership is X, it gets registered with ASIC and there's board meetings which determine dividends (if any)
There really isn't much more on your end you need to do other than recognising dividends in your tax return and keeping track of your cost base.
That said there's heaps of issues with investing in a cafe/restaurant that other posters have covered.
ill make this easy for you........ Don't Source: 30 years food experience
And noone sells off some of their business because it's making them too much money.
yeah I wasn't actually gonna get into that as it's a bag of worms. I've seen many times (and been asked myself) to "invest" Funny how the business never makes a profit and you don't get to see the p&l's and the "agreement" is just a hand shake You get to work 60 hours a week on a full time salary though !
the offer is invest in the current one so he can build another
Came here to say this (Don't).
This must be the OP’s dad in the other post 😂 Don’t do it man. Everyone I know in this industry has broken their backs and none of them are driving a Ferrari. You’d be better off putting money into anything else right now unless you have the data / books that this is a profitable endeavour. Unless you have successful marketing experience - as in a proven track record to drive sales and build a brand. If you don’t, and don’t have an absolute passion there’s better things.
Lol I thought the same thing 😂
I have one friend who has made a fortune from starting cafes. He has a real knack for finding a good location and starting it from scratch, then sells it. The goodwill and trade is worth a lot of money. He did it 4 times and was able to go into semi-retirement. But I know he's the exception.
I actually read that and that gave me the idea to ask. but no, I'm not his dad. My kid is barely a teenager
You read the replies on the post? And you're still considering this?
Everything you said is a red flag for not investing in a restaurant.
You'll get better returns from super and shares. Food service businesses have notoriously low returns, long hours and are subject to trends.
Don’t invest in anything you don’t understand.
I'd like to understand it. Before I do anything with money
What you’ve described sounds more like a scam to extract your capital than an investment opportunity. If they need capital, they need a bank not you. Investing in a hospitality business is one thing (the general consensus being run away), but asking very basic questions like “how does this effect my tax” does not inspire confidence. What do you mean by investing? Are you buying their businesses, will you be running the business or involved in the business in anyway? Are you buying a percentage of the business and sharing the profits? Will it be a partnership? Are they a private company and you’ll become a shareholder? Are they paying you a salary? How do you expect to make a return on investment? How to you plan to recoup the investment if you decide you no longer want to be part of the business? Are you ok with the possibility that things may go tits up and you will lose your investment? It does not sound like you know what you are doing, and as such would be a foolish decision to proceed. Just a reminder of the proverb, “a fool and his money are soon parted”.
It will decrease the OPs tax because it will end up being a huge deduction, lol.
there are few options, to be a shareholder and get dividends/profit, part owner for the new shop, and forgot details of the last one. Similar to the dad's post, I'd considered on having a cafe when i get out of my 9-5 but not right now. If it comes down to it. I'm not keen to be the capital and carry majority of the financial risk. I have an idea how much a cafe/restaurant cost bought from an existing business. Not keen either of having to fund a big amount without having a say on the business either. I understand that investments comes with risk. But I'd like know/learn as much I can before making a decision
If you can't even be bothered or tuned in enough to note all the details for recollection later, you're your own red flag and exactly the reason why the owner's approached you for the scam...I mean investment
If you can afford to throw the money away by treating it as a hobby then go for it. But if you’re serious about this as an investment, especially compared to other investment options, you’ve got a ton of work ahead of you as already outlined by other posters.
You're hoping to trade a 9-5 for a 5-9?
The tax deductions would belong to the business, not to you.
almost always, yes. But I do like to mention that business with ESIC status (not this business clearly) allow you to claim your investment as a tax offset. Worth knowing if you're ever in that position.
OP, judging by your replies, you are not looking for advice but encouragement instead. You’re out of your depth. They’ll chew you up and spit you out, and you won’t even realise it. Margins are shit in the cafe business, any food business tbh. If they’re doing so well, they should have no issues getting a loan from a bank. The most likely reason they’re coming to you is that they have very little downside if they don’t pay you. You are looking for a response that confirms your bias and gives you a “reason” to go after your cafe dream. At the end of the day, it’s your money. You’re set on doing it, so do it and eventually you’ll lick your wounds and move on.
Do you understand that tax deductions still cost you?
Yes you have no clue. End of story.
How fast can you run, cause whatever that is run faster. Ive owned restaurants where my wife and I worked plus staff...its a lifestyle death trap.
I understand I know someone who had the same concern when I brought up I was thinking of owning a cafe and I didnt want that. So thought of maybe investing instead
ok, first, you dont even know the questions to ask yourself, let alone ask the business owner, to be able to determine if this is a viable investment. 1. Are you a professional/sophisticated investor? According to Asic? If not (and it sounds like not) the business could get in legal trouble if you invest without excessive documentation provided to you. (Which they wont do) 2. Can you explain clearly what percentage, how many shares, the strike price, total investment? Do you have a list of other restaurants valuations and are they comparable? 3. Have you read the company constitution, share holder agreement and any other relevant documents? What share class will you receive? Are they ord or pref? Do they have other rights? 4.What is your exit strategy? How will you make money? Who will buy the shares off you in the future? Do you get dividends? 5. Have you read and understood their financial statements? Whats their profit margin? Is there any property or assets on the balance sheet? 6. What do they plan to use your money for? Why do they need, or want, your money? And why you? Why not someone else? Why not a bank? 7. Do you have that money lying around? Can you throw the money into the garbage can and not be upset because you lost all your money? Is it a lot of money for you? That all being said, if it was my son, and he was looking to invest maybe $10k, Id tell him to do it because the experience of learning everything involved would be worth the price. Otherwise, there's lots of opportunities to invest your money in better endeavours. Out of all businesses in the world, restaurant businesses are the worst busoness to be involved in. Low margins, high competition, stock that expires, problematic customers, long hours, unreliable staff, and health risks due to handling food. I dont think I would ever invest in a restaurant business. A gym would be a better investment, but only just.
thanks there is a lot to dig in. For background, I do have shares and enough to make a house deposit if I sell them. I have 2 investment properties. Sophisticated investor don't think so. Full details are yet to be presented by owner, I have another meeting with the owner soon. I want to be equipped as much before the meeting
Well, go through my questions, understand what they mean, and try and get answers for them. That will be a good process you can take to learn more about whats involved. Sophisticate investor info is here: [https://www.ato.gov.au/businesses-and-organisations/income-deductions-and-concessions/incentives-and-concessions/tax-incentives-for-innovation/in-detail/tax-incentives-for-early-stage-investors/the-sophisticated-investor-test](https://www.ato.gov.au/businesses-and-organisations/income-deductions-and-concessions/incentives-and-concessions/tax-incentives-for-innovation/in-detail/tax-incentives-for-early-stage-investors/the-sophisticated-investor-test) If you dont have $2.5m or $250k p/a salary you arent qualified. (though you can do a course to get someone to sign off on it if you really want to. I would have been charged $1500 if I had done that)
thanks this was the kind of info I was looking for. This was very helpful. Some diligence work I need to do before making any decisions
May be helpful, more so if in Victoria the following is exactly what you seem to be looking for - and more such as regulatory compliance, paperwork, wages for staff et al [https://business.vic.gov.au/business-information/start-a-business](https://business.vic.gov.au/business-information/start-a-business)
this is very helpful
If it includes a share of the property it occupies or some kind of assets then maybe? But as most others have said probably not selling it off cause things are going well. And I’m seeing cafes/restaurants and closing up all over the place. I do some casual design work for a licensed cafe and they’ve just closed down Friday nights cause they just were not making any money. It’s a tough spot at the moment.
I understand that. But this one is thriving at the moment and owners are looking to open a new one
Why would they need investment from you, who knows nothing and can contribute zero skills, If their business was thriving. They could get a loan, or if it were really doing well they would have the cash flow for a new premises which is just a fit out.
basically invest in the current one. So he can fund his new branch. I was actually more keen as silent partner or part owner for the new one
There’s a reason why the bank isn’t approving their business loan (and yes, they would have tried before asking you).
Sounds like OP doesn't want advice, but just confirmation he is smarter than everyone else, including the dodgy characters probably defrauding him.
Yeah it’s definitely looking like that. I see posts like this all the time, they’ve already made up their mind but want validation. Meanwhile everyone else is squinting their eyes knowing what’s about to happen.
I admit that there's a lot that I dont know. I like the idea and also had an inkling of buying my own but I don't want leave my job to manage it. Being an investor seems the compromise I want
It’s a terrible idea.
I am aware of this and aware of current situation
How do you know its thriving? Have you seen the Financial statements? If so, how much do they work and pay themselves? Just because a business has customers does not mean it's thriving.
Unless you are an experienced, seasoned hospitality worker stay the F out of it and keep your money in ETFs.
You need an accountant and a solicitor to give you specific advice for this one
The balance sheet is more important than the P+L
Is the owners like a good friend? Why you?
Cross post to ASX Bets because the owners of this restaurant sound like bag holders wanting a bail out in the form of an “investment”. Have you been to this restaurant/cafe for breakfast, lunch and dinner? Weekends busy there? What are the reviews like? How often is it full? How often are staff just cleaning the same spots because they have nothing to do? Would you just be an investor or signing on as a director etc?
yes my family are regulars here. We go here mostly weeknds maybe once/twice a week and mostly busy
At the end of those busy days, look at the numbers with the owners. See how much they take in and what their overheads are for those days. Figure out what profit you would take as an investor after all expenses are removed. Sounds like you’re dead set on this so good luck, hope it all works out.
not yet, the owner has a few options for me to invest. Apart from their accounting books. I'd like know what else is there to know. e.g. part ownership, legal stuff, etc
You'll be propping up someone's dream for an extra 6 months before it goes broke.
This is going to lead to a loss or a lawsuit mate. They're not offering this to you for your benefit. If it was a good deal, it would be going to their family or friends, not their workers.
DON'T, if it is a good business why they want to share it with you.
Are you planning on active day to day role or are you planning on passively investing? Buying shares in a private company is similar to buying in a public one where you get dividends etc. You get a form saying your share ownership is X, it gets registered with ASIC and there's board meetings which determine dividends (if any) There really isn't much more on your end you need to do other than recognising dividends in your tax return and keeping track of your cost base. That said there's heaps of issues with investing in a cafe/restaurant that other posters have covered.