How Restaurant Incubators Are a Win-Win for Investors and Chefs

Raising capital, finding a key location, insuring a business, and tackling marketing are only some of the demands that a new restaurateur must manhandle before even the first crawl into the kitchen. What if there were smart investors who were just unzipped enough to open a door or two for creativity? Or perhaps some cash, a place to sell food? What if business acumen, wrapped with just enough of an absurd bent on fiscal adventure to help a skilled kitchen hooligan, was a good qualification for an investor?

And the incubator was born. Up from the rubble of a deflated technology burst-bubble, the incubator evolved as a safe haven for the creatively inclined to nurture their idea using the resources — like money — of an investor without being strapped to a bank. Rather, the incubator offers guidance to usher new projects to market.

In the same vein, a restaurant incubator provides the physical space, along with other supports, to cultivate the growth of a spirited chef as they open their own place. Dotted throughout the country, like Chicago’s Intro and R. House in Baltimore, these incubators offer an opportunity for chefs that may otherwise be locked out of owning their own businesses. Brooklyn FoodWorks, for example, was created to cultivate creativity with a distinctly Brooklyn flavor. The New York iteration of the incubator employs a panel of industry experts and advisors to move the talent beyond the kitchen door.

How is a restaurant hatched? The incubator concept is part entrepreneurial, part marketing device, and all shared risk. A young chef, say, can have the skill and vision to drive a brand. That same chef can have organizational talent and can even be armed with a legion of labor-ready minions, smallwares, and solid recipes. What that same chef lacks can be the fiscal fortitude to get the restaurant going.

PHOTO COURTESY OF JIM BERMAN.

PHOTO COURTESY OF JIM BERMAN.

Vetting the candidates. The Smallman Galley, born from the entrepreneurial spirit of two Navy lieutenants, Tyler Benson and Ben Mantica, encourages the ferocious spirit of budding ideas from hard-working chefs. Over 100 applicants were vying for space at Smallman Galley’s Downtown Pittsburgh location through an online, social media-rich campaign that announced the venture. What soon turned out to be a national audience scrambling for the opportunity, Benson and Mantica pitted eight finalists at the Pittsburgh Public Market against each other for the four available spots at the incubator. Tapping locals from the food scene as judges, the chefs earning the highest marks for their food were offered 18-month residencies.

“They get the chance to open a restaurant with almost no risk. They bring their knives, pots, and pans,” says Benson. Staffing is the on the onus of the chef, as is sourcing food. Keeping the fiscal noose loose allows for maximum opportunity to keep the creative juices flowing while cash flow can be at a trickle, given the forum in which the chefs are operating.

“It’s not renting kitchen space.” Rather than a pop-up restaurant that can have little viability for long-term success, the incubator is a residency for the empowered culinarians. And unlike most restaurant operations, incubators are often customer-facing, allowing the kitchen crew instant feedback and authentic guest response to the new brand.

“It’s not renting kitchen space. The chefs get to interact with customers and bang out food,” says Mantica.  

That interaction can help shape the menu and the approach to the food in a face-to-face environment rather than the anonymity from behind a kitchen door or worse — when the only insight might be in the reputation-damaging platform of social media.

Win-win. In a fiscal climate with little hope for financial backing for new restaurants, incubator operators shoulder the responsibility of birthing the space for which the cooking takes place. Additionally, since the supporters are vested in the current — and future — success of the startups, there is constant learning.

“We have a curriculum that includes working with accountants, attorneys and architects,” notes Mantica.

In typical start-up fashion, keeping investors happy is fundamental. Most incubators offer breaks on rent and overhead in exchange for a take of the sales. A commitment to a long-term lease, for instance, this early in an eatery’s life could be prohibitive to even getting the doors open. But having a venue that allows incubator leadership and customers to be part of the chefs’ support network creates a community around the new operation.

“Because of the narrative, guests feel like they are part of the chefs’ growth,” says Mantica.

Customers at Smallman Galley will see the restaurants in their infancy and then, hopefully, be patrons at the new operations as the chefs make their way to restaurants beyond the incubator.

PHOTO COURTESY OF JIM BERMAN.

PHOTO COURTESY OF JIM BERMAN.

Shared risk, mutual benefit. The investment model calls for a mutual concern for the success of the fledgling operation. Obviously, the chef wants to launch the concept away from the confines of the security of the incubator catalyst. The process of building the startup, staking it with a unique product array and defining a brand is at the core of the business.

While the food spaces provide the fare for the curious crowds, at the Pittsburgh model, a room-length bar complements the dining area, appealing to the demographic that is willing to venture into the frontier of adventurous eating but still looking for the comfort of craft beverages.

The bar service also provides necessary income to keep the workshop afloat with predictable slumps in customer flow.

“At the beginning, a lot of people thought this was a school,” offers Benson, but now the space is now an interesting destination for meetings and other gatherings. “A little marketing changed that.”

One of the challenges? These urbanites are still a little reluctant to embrace communal seating, Mantica adds with a laugh.

Leaving the nest. Under the watchful eye of the investors, the chefs will launch their concepts at a property of their own.

“The chefs define their market; define who their customers are. And then they develop their business plan for their own restaurant space,” Benson says.

The incubator provides a “link with investors in our own network,” says Mantica.

Much like a more hospitable version of “Shark Tank,” the incubator maintains an ownership stake in the future success of the fledgling restaurants as they set out on their own in a space beyond the nest. With class dismissed, incubators can continue to grow talent with the financial feeding necessary to develop viable ideas to a market hungry for the next success story.