EquityEats, the first funding platform designed by restaurant owners, not Wall Street bankers, to serve the needs of restaurants, unveiled their new business model today, which is currently being rolled out. The company spent two years testing and learning, deploying over $4,000,000 to restaurants to develop a new model that will change the restaurant financing industry. EquityEats provides fair financing to restaurants by providing them with cash up-front for any expense that they have and take gift certificates to the restaurant in exchange, which EquityEats then sells to foodies in the restaurant's community to pay themselves back.
Traditionally banks and investors consider restaurants high risk, so they make it very expensive and unfair for restaurant owners to get capital.
EquityEats discovered that restaurants typically need around $5,000 to $10,000 four times a year for unexpected expenses—maybe the fryer breaks or new plates are needed. Independent restaurants typically have single digit profit margins, so they need to watch every dollar that they spend and often aren’t able to save a lot of money. When a restaurant applies for funding through EquityEats, the restaurant is paid $5,000 to $50,000 within three days.
Here is what the process looks like:
Restaurant: Receives the money they need upfront from EquityEats and electronically sends gift certificates to EquityEats to sell, to earn the money back.
Customers: Receive extra credit to use at their favorite restaurant. For example, the customer can purchase a gift card for $500, but they will actually receive $750 to use at the restaurant.
EquityEats: Makes money by selling the gift cards for a little bit more than they buy them for from the restaurant.
Cost to the Restaurant: Historically, only 40 percent of the credit is redeemed in the first year because EquityEats only sells high-dollar value cards. In a restaurant, the actual cost of the food on a plate is about 25 percent of the price of the dish. This means that it only really costs a restaurant $1,000 to service $10,000 in credit in the first year which is by far the cheapest form of capital
Unlike traditional loans, EquityEats does not charge interest or have fixed monthly payments. The funds raised through EquityEats can go towards a restaurant’s marketing expenses, furniture, consulting fees, restaurant equipment, inventory, opening a second location and whatever else the restaurant owner so chooses to use the funds for.
EquityEats does not look at someone's credit or financials; they just have to meet three requirements:
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