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Restaurants

The status: New York’s restaurant and bar business is white-hot, what with Red Hook’s reinvigoration by seasonal eateries and the East Village’s transformation into a throwback-cocktail haven. This presents plentiful investment opportunities—and given that “operating costs are rising, commodity prices are up, and restaurants are paying more for food and utilities,” according to Jim Laube, president of RestaurantOwner.com, most joints need more capital than ever before.

The game plan: Your first step is spreading the word to friends and colleagues, says Laube. “Most bars and restaurants are private offerings, meaning they’re governed by SEC rules—owners can’t advertise for investors.” And don’t expect to sink money into high-profile start-ups, since the likes of Danny Meyer don’t want your measly smackeroos. Instead, pick a sum you’re willing to part with—it could be as little as $500 or $1,000 —and approach a favorite independent business you know and trust.

We asked Delissa Reynolds, owner of comfy Prospect Heights standby Bar Sepia (with a favorable ten-year lease!), and she said we could become a partner and help her expand her backyard. “You’re always entitled to the money you put in, and you’ll receive a percentage of the profits based on how much of the business you own,” she says (the bar’s been around for nearly four years, so it’s more than breaking even). Justin Laman, 31, who runs a college-prep company, loved the concept behind Park Slope’s craft-beer bar Pacific Standard. “When they went over budget and sent an e-mail to acquaintances asking for investors, I signed up as soon as I could,” he says. He prefers to keep his returns figures confidential but allows, “I wouldn’t have done as well with stocks.” Typically, if the business succeeds, expect to wait two to three years for your investment to pay off, after which “it’s all gravy—you can receive a 25 to 30 percent return rate,” according to Laube. Just don’t expect free drinks or a meal—after all, would you really want to shortchange your own establishment?

Risk: 5 If you invest in an already-successful joint, you’re likely to at least get your original money back—though aren’t we heading into a recession? And isn’t the restaurant business notoriously bad? Reward: 7 “I wouldn’t have done as well with stocks” is music to our ears.