Chef Marcus Guiliano Discusses Healthy Restaurant Partnerships

Opening a restaurant is expensive, time-consuming, and stressful, so it's no wonder many aspiring restaurateurs choose a partner with whom to share the burden of getting their restaurant off the ground. Like any relationship, a successful business partnership takes a lot of work, communication, and compromise.

Chef Marcus Guiliano has built a business helping fellow chefs and restaurant owners to overcome their biggest challenges. His book 50 Mistakes Business Owners Make and the accompanying website seek to help restaurateurs learn the same lessons Guiliano and his colleagues have over the years, including the common pitfalls entrepreneurs make when setting up a restaurant partnership.

With more than two decades of experience in the industry, Chef Marcus has seen his fair share of the drama that doomed partnerships can entail. He's been part of a few himself, and has coached countless other chefs to avoid the mistakes he's made and seen repeated. We reached out to Guiliano to get his seasoned take on what makes for a successful restaurant partnership.

Know Your Role

Unclear expectations are the root of several of the problems Guiliano described, including many he experienced firsthand.

"When it comes to a partnership, everyone needs to know exactly what their role is. One of the most detrimental parts is when people start to overlap," says Guiliano.

Each partner needs to know exactly what he or she will be responsible for throughout the day-to-day operations of the restaurant. As an example, Guliano points to how he and his wife share the responsibilities of running their current restaurant, Aroma Thyme Bistro.

"My wife and I have our strict 'departments,' so to speak," he says. "She does payroll. She does front of the house. I do the menu development. She puts her input in on the menu development and I help her with payroll if I have to."

One of the most common sources of anguish that Guiliano has observed over the years is when restaurateurs fail to distinguish between the role of partner and investor. Separating the two is all about understanding expectations. "A lot of people don’t understand that their role as an investor is to support the restaurant, not to 100 percent micromanage the restaurant where you drive everybody crazy... where you want to come in and run it yourself."

In the successful ventures Guiliano has observed, the investor's role is to make sure the restaurant is financially sound, while leaving the kitchen work and customer service to operators and managers.

Compare the passive role of an investor to the hands-on work of what Guiliano describes as a "sweat-equity partner." One of his friends has found success in establishing a system with which he's opened 40 restaurants by teaming up with such a partner.

"[My friend] has a system now where he will take one of his main guys - his manager or his main chef - and say, 'Let's open another restaurant and I'll give you a certain percentage after five years. You have to work it.' These are sweat equity partnerships that require no money going into the situation."

Sweat equity partners invest no money. Rather, they assist a restaurant owner in getting a concept off to a strong start, earning a regular salary in the process. After a period of years, usually five, that partner begins to earn a certain percentage of the restaurant's profits as a reward for his or her role in building the restaurant into a successful venture.

Novice restaurateurs who try to combine the roles of investor and partner fall into a trap that Guiliano describes as "buying yourself a job."

"I've seen so many operations where you walk in and see two people who have put all the money in, who've put their lives' savings in in some cases. They're sitting there and they're busting their butts, working day and night, and the restaurant has no vision, they have no vision. Basically what they've done is they've bought themselves a job. They got their $100,000 together and they bought themselves a job. I don't think any restaurateur wants to imagine themselves saying, 'Well, I'm going to put 100 grand to buy myself a job.' Work for someone else where you're going to get a paycheck and not have to worry about paying the bills and not have to worry about having to put any kind of investment money in."

Sweat the Small Stuff

Guiliano has seen partnerships fail because the individuals involved did not ask enough questions and discuss enough details at the outset of their ventures. Setting a step-by-step course for the future of the restaurant is something that all partners should agree on at the start.

"You need to draw out your blueprint for 5 years or 10 years," Guiliano says. "Where do you guys want to be? Do you want to be opening more restaurants?"

Money obviously plays a big role in the course any restaurant partnership takes. Guiliano recounts a partnership he was in that began to head south early because of confusion over the funding source.

"So the money that he said he had should have been put into a bank account from day one and sitting there. Instead... he's out of money now and we're all of a sudden broke before we can even open the doors, and I'm being told that he's not putting another dime into the place because he's already maxed out, but he didn't put in the amount that he said he was going to put in to begin with. When it comes to the money part, I would say that 9 out of 10 restaurants never have enough money.

"There needs to be a check and balance system saying what's getting spent, who's spending what. There were certain points where I really put my foot down. He wanted a $25,000, wood-burning, rotating pizza oven. I said, 'There's no way we're spending $25,000 on that kind of oven.'"

The details, right down to the name of the restaurant, can have a big impact down the road, warns Guiliano.

"What about the name of the restaurant? Is it named after your two daughters, and if you guys end up splitting ways, your daughter's name is going to be on that restaurant for the life of that restaurant?"

It's not just your partner's expectations you'll need to account for, but also the expectations of his or her family.

"Talk to all the family members and plan it out," Guiliano advises. "You know, your dad or your husband is putting money in here, do you expect anything in return? Do you expect anything for the kids? Do the kids expect it to be their restaurant in five or ten years?

"Towards the end of our breakup, [my partner] looked at me and said, 'You know, Marcus, all I ever wanted was a restaurant for my kids.' That's why I added the kid part in, because that wasn't what I wanted. I didn’t want to build a restaurant for your kids. I wanted to build a restaurant for me, and so we could build more restaurants. This was all laid out very, very, very clearly. So when he told me, 'I just want a restaurant for my kids,' I said, 'We've totally drifted off path here and we need to go separate ways.'"

Experience Counts

Another bit of advice Guiliano offers is to make sure your partner's experience in the industry is a good match for his or her intended role.

"The first problem with the industry in general is that a lot of people get into the industry that have no experience whatsoever," he says. "They have no idea what they're doing and they're just totally winging it. The only reason that they're afloat still is that they have plenty of money or they're living off the reputation of the place they just bought."

It's OK for a restaurant investor with no experience in the industry to get involved, so long as he is willing to let an experienced operator take the reins, and only when he knows what he's getting himself into.

"First of all, if anyone gets into the restaurant business, they must know upfront that this is the riskiest investment that they're ever going to make. There are absolutely no guarantees. The failure rate is obscene," Guiliano reminds us.

One of Guiliano's partnerships ended on a sour note because his partner, who had no experience in the restaurant industry, wanted to take a role in the everyday operation of the business.

"My investor looks at me, who turned out to be a partner, and he goes, 'Marcus, I could never run a restaurant, I'm not a people person. I would tell people off every night.' He goes, 'I don't know how you do it. I just want to build a restaurant, and then build another restaurant, and build another restaurant...' We had this all laid out, then after opening day he doesn't want to leave the restaurant. He goes to every single table and is literally begging the guests for negative feedback and then coming to me the next day with a list of 20 things that went wrong the night before."