MONEY
We Invested in a Restaurant Against Our Lawyer’s Advice
Even our accountant begged us not to do it
When my husband, J, and I were in our early 40s, the bartenders at our favorite bar invited us to give them $26,000 as an investment in a restaurant they wanted to open. I had heard many times over the years that a restaurant is a fool’s investment. Most go out of business shortly after opening.
Our friends had never owned a restaurant, nor did they have experience as chefs. They were in their early 30s and tired of working late nights and long hours, making money for someone else.
They envisioned a high-end hotdog restaurant. One of the guys bought a Cuisinart and practiced making hotdogs at home out of all manner of meats and assorted whatnots.
J and I liked the idea of investing in their restaurant, even though we thought it was crazy. Looking back, I think we liked the idea because it was crazy. We were deep in the parenting trenches. Every day we made sensible decisions in the best interests of our little family.
The worst proposal
The investment sounded like an adventure completely outside our lives as parents. We had saved some money, thinking we would send our child to a private school. But we changed our minds at the information session, deciding private school wasn’t for us and neither was the extraordinary cost. The money we saved was sitting in the bank.
The guys gave us an agreement that detailed the proposed financial structure: a five-year revenue share. I hired a lawyer to review the document. A few days after I gave the document to her, she asked for an in-person meeting and said she was bringing another lawyer.
The two lawyers sat around our kitchen table with me and J. They told us this was a terrible proposal, one of the worst they had ever seen. They had detailed at least 12 reasons why we should not do it. The gist their many concerns was that the guys could screw us over and we would have no recourse.
“Child’s play,” the lawyer said.
When they asked if we had any questions, I had one. If someone gets sick or injured at the restaurant, would investors be liable? They both said absolutely not.
But then they added, “But we strongly recommend you not give these people any money.”
My accountant expressed dismay when I asked how the investment would impact our taxes. While it would not be a big deal from a tax perspective, he begged me not to move forward with the investment, because he was sure we would lose all our money.
Armed with this expert advice, we met the guys at an Irish bar and handed over a check for $26,000. We gave the money we had saved to educate our child to guys we barely knew so they could chase their dream. OMG!
What do lawyers know?
We were the first investors who were not relatives. They did not even have a lease. They held onto our money for a couple of years (!) while they tried to get the collateral they needed to get a lease. The agreement we signed had no refund policy.
Finally the owners of the bar where they had worked put up the collateral and were brought in as a fifth partner. They secured a plum location, a historic municipal-owned building that used to be a train station. The building had character, yet several restaurants had failed there.
Kimball House — our restaurant — was a wild success right out of the gate. Their enthusiasm for hotdogs had faded, and instead they opened an oyster bar, something our city did not have in abundance at that time.
The renovation was beautiful, dark and cozy. The cocktails immediately had a reputation as the best in town. There was a French dessert on the menu called mille feuille that I never learned to pronounce but always ordered and devoured.
The restaurant got a James Beard nomination, the first of several, soon after it opened for Best Cocktail Program.
Years later, it’s still going strong. I’ve never had a bad meal or a bad time. The atmosphere is always fun and light, no matter what is going on in the world or in the kitchen.
The guys paid us back our money, plus 6 percent interest, and also a “revenue share,” per our agreement. I kept all the profits in a separate account, and when the five-year deal ended, we used the profits—$17,000—
to pay cash for an almost-new car.
We said it was the car that Kimball House bought.
Beat the stock market?
I never did the math to see if we would have been better off investing the money in stocks. The stock market rose during that time, and maybe we would have turned $26,000 into $43,000 over seven years. I am not keen to know.
We invested in a restaurant, and we had a lot of fun. We love going there and getting treated like trusted friends and not just guests. Friends often ask if we get free meals. No, we don’t.
The owners sometimes bring out an appetizer when we are dining with friends or it’s a special occasion. Once one of the owners, Jesse, brought out a salad, and as he went to pour the vinaigrette in dramatic fashion, I yelled, in even more dramatic fashion, “STOP!”
There was an inchworm inching along a piece of lettuce. Jesse scooped up the inchworm and thanked him for doing his job, which was to prove that the salad ingredients came straight from the restaurant’s garden. Everyone laughed.
Another time, one of the owners brought out a complimentary caviar platter for our anniversary. Ooh la la!
A crazy thing we once did
We are proud to have played a role in a restaurant that is so well-regarded. It was strange and a bit exhilarating to receive checks from a restaurant without working in the restaurant. It felt like we were making our money do the work for us, a concept that had always been far removed from our everyday lives.
A restaurant seemed more tangible than the stock market. It benefited our community and enriched our lives.
Our friends went from bartenders to seasoned restaurant owners. Ten years after they opened, they bought the building from the city. They also brought in an original hire as a partner, opened and later closed a second restaurant, survived Covid, helped launch a barbecue spot, and took over an oyster farm in Florida.
It’s an incredible success story in an industry rife with stories of broken dreams and financial ruin.
This was a fun chapter in our otherwise dull financial lives. We are not looking to invest in another restaurant. We are more cautious with our money now that we are planning for retirement. We are glad we took a chance on some friends when we were young and carefree.
The memory, like my tattoo, is evidence that I was once young and carefree. Sometimes it’s hard for me to remember that. I need the receipts.
About Priscilla Graham
I’m a writer and nonprofit communications professional in Georgia. I write about my journey to retirement. Love dogs!
