Starting a cafe or restaurant is the dream of many young entrepreneurs today. However, unless you are thinking of starting small with a kiosk, food truck or your own home kitchen, opening a cafe or restaurant can be quite a capital-intensive venture.
A full-fledged cafe or restaurant from scratch can cost you anywhere between RM300,000 to a few million RM depending on your concept, size and location.
Even pre-owned cafe or restaurant don’t come cheap.
Take a look at these cafes and restaurants for sale around Kuala Lumpur on Mudah.my:
These prices don’t yet include the costs of any extra furniture or renovation you need to do on the property, which can easily add an extra RM100,000 to RM300,000 to your overall cost.
So regardless of how you intend to start your cafe or restaurant, this isn’t a business you can go in with little capital.
If you don’t come from a rich family who can spare a couple of hundred thousand ringgit here and there, you’ll be faced with the daunting task of raising money for your business on your own.
To help you overcome this hurdle, we’ve compiled a list of the most common ways FnB entrepreneurs raise money for their business. We hope this will give you a better idea of the funding options available and enable you to choose the best one for yourself.
Let’s get to it!
Before we jump into the options though, let’s take a moment to look at how your cafe or restaurant capital will likely be distributed.
Knowing this will give you a better understanding of the kinds of expenses you expect and allow you to more accurately estimate the amount you need to raise.
Every cafe or restaurant relies on strong branding for customers to recognize the brands. It’s pretty unlikely for your customers to remember your brand if you don’t spend enough time and money into creating one worth remembering.
This is especially true for a new cafe or restaurant with no brand assets yet. If this is you, you’ll likely need to spend some money on creating brand assets such as:
These can cost anywhere between RM10,000 to RM150,000 depending on the agency you hire, what you expect and the scope of your branding work.
Like any business, you’ll also need to carve out capital for legal fees related to your cafe or restaurant. Depending on your business, these might include partnership agreements or any certifications.
Expect to prepare anywhere between a few thousand RM to RM30,000 to cover your legal costs.
To ensure that your cafe or restaurant looks like one and functions like one, you’ll need to spend money equipping your cafe or restaurant’s kitchen, dining, and reception area.
Usually, this means purchasing things like:
Depending on the type of cafe or restaurant concept and your food products, these can run anywhere from RM35,000 to RM250,000.
On top of this, renovation on your premise will cost you anywhere from RM30,000 for modest renovations on the premise and more than RM300,000 for more elaborate renovations.
Finally, you’ll also need to prepare money for the day-to-day operations of your cafe or restaurant. These are the daily or monthly costs that you will need to pay to keep your FnB business going.
These expenses will include:
These can add up to anywhere from RM10,000 – RM50,000 a month, depending on your restaurant size and location.
Since most cafes or restaurants will take between 6 and 18 months before breaking even, you’ll need to have enough money to last for at least 6 to 18 months.
Now that you understand what goes into your cafe or restaurant investment, let’s take a look at your funding options. We will begin with the most recommended option:
This might not have been what you wanted to hear but using your own money is one of the best ways to fund your first cafe or restaurant.
Here’s why:
When you use your own money, you will have skin in the game. This way, you’ll be more committed to making the business successful since your own money is inside of it.
Additionally, being the main funder of your own FnB business will give you complete control of your cafe or restaurant. You’ll be free to express your creative freedom in any way you like without having to get approval from someone else.
If you don’t yet have enough capital to get started now, you can raise it by starting a smaller FnB business or working in a job first. Over time, you’ll be able to raise some personal capital to open your dream cafe or restaurant.
This isn’t the most appealing road for most, but one we would recommend especially for first time cafe or restaurant owners.
If you don’t see yourself ever saving enough money to start your cafe or restaurant, the next best option is to look for a partner to complement what you already have.
A good business partner is one that can not only contribute money into your business but also one that bring extra value to your business with their skills, time and effort.
While you don’t have to be friends with them, they usually have to be someone you can rely on to support you in areas you are not skilled in and share the same vision as you. This way, you can help and encourage one another to drive your cafe or restaurant business to success.
The last thing you want is a sleeping partner who only commits funds but doesn’t come into the cafe or restaurant on a day to day basis. These types of partnerships usually end badly and are best avoided.
If you really can’t find a good business partner to share your costs with you, or if you and your partner don’t have enough money to get your FnB business off the ground, the next best option is to go for a bank loan.
Without any prior business experience, however, SME loans are unlikely going to be open for you. Instead, you’ll probably need to apply for a personal loan to finance your cafe or restaurant.
The best place to look for a personal loan is on comparison sites like iMoney or CompareHero. On these sites, you’ll be able to compare offers from different banks and pick the most suitable one for you in terms of the interest rate, terms, and payment period offered.
Nonetheless, personal loans can be quite risky and we recommend only going for them when you really can’t pool together your own money to kickstart your cafe or restaurant.
While it shouldn’t be hard to get a personal loan, if you would like to explore funding options beyond bank loans, crowdfunding is the new kid on the block.
Crowdfunding simply means getting a lot of people to invest a small amount of money into your business.
The catch with crowdfunding is that if you want to get your cafe or restaurant funded, you must have a unique concept. If you are starting a conventional cafe or restaurant, it’s pretty unlikely for you to get funded.
Other than that, a cafe or restaurant businesses usually appeal to a local crowd, so it can get challenging to crowdfund for your cafe or restaurant if it is located in a less population dense area.
In any case, Pitchin.my (rewards-based) and CrowdPlus.asia (equity) are two of the most popular crowdfunding sites in Malaysia. If you think you have a unique enough cafe or restaurant concept, you can give crowdfunding a try!
Raising money from family and friends is the least attractive option for obvious reasons: when the business goes down the drain, the relationship usually follows.
However, if you’ve exhausted all your financial options but still don’t want to give up on your cafe or restaurant dream, your last resort is to raise money from your family and friends.
Going down this path, nonetheless, requires extra caution. No matter how good your relationship is with a family or friend, it is better to treat any money you get from them as professionally as possible.
This means only raising money from family and friends who at least know what they’re getting to, being clear with them about what to expect from their investment and having a formal contract in place.
These will help you to avoid any future misunderstandings or fights which can result in ruining your relationship with them.
Always remember: you can lose your business, but don’t let it take your good relationships with family and friends with it.
Raising money for your cafe or restaurant business can be one of the most daunting tasks you will be faced with.
The costs for branding, legal fees, assets, renovation, and operation will likely mean you’ll need to have a six-figure capital ready before you can even think about opening your cafe or restaurant.
While some of us may be lucky enough to have financial support from our parents to open the cafe or restaurant, most do not and have to raise money elsewhere.
While the best way to fund your cafe or restaurant is using your own money, if you really can’t afford it, you can look into partnering with a like-minded person, getting a bank loan, crowdfunding or even loaning money from your family and friends.
Nonetheless, launching your cafe or restaurant is only the first step in your long journey. To keep your cafe or restaurant tables occupied, you’ll need to master the art of marketing your cafe or restaurant.
How are you planning to raise money for your new cafe or restaurant? Let us know below:
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