What's the Best Way to Add Limited Partners for a Bar?
Opinions expressed by Entrepreneur contributors are their own.This is not an area where you should go it alone. In short, you are selling securities, broadly defined as a form of "ownership investment." Securities are highly regulated, both at the federal and state level, and it isn't a subject to mess with. Investors need to be screened carefully to ensure that they have the financial wherewithal to make this investment--and that if they lose their shirts, it won't render them bankrupt (unlike taking the last pennies in Great Aunt Sophie’s retirement fund). Whether or not the financial terms you are considering make sense depends on how you worked the numbers in your business plan, the nature of the restaurant/bar concept, whether franchising is a possible expansion tool, and whether this concept will work equally well in other locations.
You also want to give serious thought to your exit strategy -- what happens if you are no longer involved in the business. Will that continue to make it attractive for these investors? The most important step you can take next is to consult with a local attorney and accountant who are familiar with and have done deals related to restaurant expansions. They should have their fingers on the pulse of industry standards, what return on investment that investors expect, the legal form of business entity that makes the most sense, and threshold buy-in amounts.