restaurant chains - a scalable business?

Filed in archive Venture Capital on September 10, 2003

I made a visit to the outskirts of the city yesterday to learn more about the economics of restaurant chains. A local chain of lifestyle Mexican restaurants called Bolero presented their business yesterday. The group has started with a single bar and expanded to 16 restaurants with EUR 20 million in yearly revenues now. Although shared infrastructure like marketing, finance and sourcing bring down costs, the founder raised concerns about the amount of scalability. The restaurants deliver a fine sense of entertainment and have therefore to be unique in their atmosphere. So there is not much more to share besides the "overhead" costs. Most restaurants feature the double use and get a bar style after 10 p.m.

What was most interesting to me, the financing was done mostly using loans from breweries. They offer substantial amounts irrespective of your risk rating assigned by banks. Conditions vary widely, but it offers mostly the only possibility for entrepreneurs to raise money.

Most business plans I have seen, do target the upmarket fast food niche, which is still having substantial gaps in germany. But probably consumer focus is on a lower prized food for lunch as there is hardly a success story I know of.

Another interesting field until Starbucks finally decides to take Germany by storm are upmarket coffee places. A local Starbucks clone concept Balzac Coffee has raised VC in 2002 from Granville Baird Capital Partners and shows a good growth in Northern Germany.