Restaurant startup. . .on trade!

Use trade dollars to pay for your first year’s lease plus your printing and advertising? That’s what Charlie Hawkins is doing at his new Amore’s Italian Restaurant in a prosperous area of Houston, not far from the business campus housing a major Compaq/HP installation.

Charlie Hawkins had been a restaurateur for years. But he needed to conserve cash when starting up a new Amore’s location. National Trade Banc quickly found a partici-pating real estate developer who owned a vacant 2,600 sq. ft. commercial space already built out for foodservice. A commer-cial-size refrigerator, kitchen fixtures, tables and chairs were already in place.

Lease on trade

Assisted by a National Trade Banc expert, Charlie and the developer crafted a multi-year lease. The first year was prepaid in trade dollars. A small amount in cash went toward common-area management.

To enable the deal, National Trade Banc prepurchased on trade thousands of dollars in scrip — essentially restaurant gift certifi-cates. NTB also issued an interest-free trade credit line, repayable in trade dollars. The credit line allows Charlie to pay for other expenses on trade, such as printing color menus and buying prime time Houston cable TV advertising media. The developer, meanwhile, gained immediate spending power because the first year’s lease on trade was prepaid. The developer utilized his trade funds to conserve cash on his own business purchases.

Meanwhile, National Trade Banc is reselling Amore’s scrip to other NTB members. One member says, “I love being able to buy a great Italian dinner — and treat my good friends, using trade dollars I earned from my own surplus. It’s a bargain!” Thus Amore’s is starting life in its new location with built-in clientele: diners using the scrip. These customers help fill tables, always a challenge for startups.

What’s more, friends they treat aren’t trade exchange members and thus return as cash customers. (That’s why diners on trade each generate an average of 4.3 new cash customers, according to a restaurant industry survey.) “We capture these new customers at zero advertising cost, without discounting meals and without giving away as much as a Coke®,” notes Charlie Hawkins. The direct cash cost of each meal served on trade is simply the cost of food.

(Diners on trade pay tax and tip in cash — and alcoholic beverages where available. Also, if the meal tab exceeds scrip face value, the difference is paid in cash.)

Other costs of doing business aren’t part of the trade cost. Why? Because a restaurateur must pay the electric bill, for instance, just to keep the doors open — whether he has customers or not.

Charlie Hawkins’ next challenge: opening more Amore’s locations and then franchising the chain. He’ll get help from an experienced franchise attorney — another National Trade Banc member.

If you happen to live in Houston or plan to visit, be sure to contact us for some Amore’s scrip. As Charlie’s Ital-ian grand-mother used to say, “Mange! Mange!” (Eat! Eat!)