What Venture Capital And PE Funds Invest In The Restaurant And Hospitality Industries?

Off the bat, the majority of restaurant and hospitality businesses do not scale to produce venture-style returns, say to yield a 7x return in 7 years. Most restaurants die in 2–3 years by their owners, not running it like a business because they cannot see beyond the stove.

The restaurant business is ready for a significant overhaul, with technology playing a significant role in serving up new and better customer experiences. Mind-shifting opportunities ahead.

I wrote an article on the macro-issues of restaurants a while ago, which I will dig up and post here on my site soon. I have gotten a few similar requests for funding strategies in hospitality.

For restaurants and hospitality businesses to produce venture-style returns, those businesses need to escape the self-imposed sub-priming of their operating model, not something most owners/chefs can envision let alone execute on. Because they latched onto a huge macro-economic problem, Starbucks bucked the trend and succeeded in raising money from venture capitalists, albeit from ones with many diversified fund vehicles, including private-equity and pipes.

Hence, the traditional hospitality business is typically private-equity kinds of opportunity at best, post-chasm, if they managed to produce a replicable scale independently. You can find those investment firms by paying attention to the trade news of restaurants, by which the publication of their investments signifies their thesis of interest.

Mind you, some of these firms are hell-bent on the franchise model of which I am not a big proponent, for it generally destroys the quality of the brand experience, albeit in well-timed cases not before the greater-fools find out post-IPO or another exit.

So, to answer your question accurately; search for restaurant news on Google, and in a few days, you should be able to list the most active hospitality investors in the United States. What firms you are attracted to depends on the operating model you intend to deploy.

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