Your Questions About Investing In Restaurants Return

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Donald asks…

stuck on accounting problem?

The Fairway Restaurant chain had a 10% return on a $71,000 investment in new ovens. The investment resulted in increased sales and an increase in income that was 4% of the increase in sales. The increase in sales was:

a. $7,100.
b. $71,000.
c. $177,500.
d. $710,000.

whats the answer and how did u get the answer??


The Groovy Movie Chains has invested in a snack bar for its store, where individual pizzas would be prepared and sold. The investment cost the company $50,000. The company expects a sales volume for the new product to be 12,000 pizzas a year. Variable materials, preparation, and marketing costs are expected to be $1.75 a unit and fixed costs are estimated at $18,000 a year. Based on a desired 12% ROI, what should Groovy Movies charge as the selling price per pizza?

the answer to this one is $3.75 but im not sure how to get to it. can you explain this solution please ??
i just figured out the first question but im still lost on the second question.

Justin answers:

C 177,500

Investment 50,000 x 12% = 6,000 net return + 18,000 FC = 24,000 Contribution Margin

Sales less VC of $21,000 (1.75 x 12,000 pizzas) = $24,000 CM
Sales then must be $45,000 / 12,000 = $3.75 Sell price

John asks…

How should I allocate my 401(k)?

I want to start investing in my company’s 401(k), but am lost as to how I should allocate. I’m 24 and just want to be smart about it! I work for Darden Restaurants, so could also buy company stock at a 15% discount (that’s the ESOP fund below). They have Target Retirement funds, but I thought I could earn a better return allocating myself.

I have these funds to chose from:

Davis New York Venture Fund (A)
Harbor Capital Appreciation (Instl)
Vanguard Target Retirement 2035
Vanguard Target Retirement 2045
Vanguard Strategic Equity (Invstor)
EuroPacific Growth Fund (Class A)
Vanguard Target Retirement Income
Vanguard Target Retirement 2005
Vanguard Target Retirement 2015
Vanguard Target Retirement 2025
Vanguard Total Bond Market Index
Vanguard Extended Market / INV
Vanguard Total Intl Stock Index Inv
Vanguard Institutional Index Fund
Aston/Tamro Small Cap/I
RVST Stable Capital Fund II
Darden Company Stock Fund
PIMCO Total Return Fund (Inst)
Darden ESOP Stock Fund

Someone help! 🙂

Justin answers:

Do not do the Target Funds.
Put 20% in EuroPacific and 20% Pimco (each)
10% In the Darden ESOP (don’t overload the company you work for)
10% Astro/Tamro
10% Harbor Capital
10% Davis NY
10% Vanguard Stategic
10% RVST Stable
That’s what I would do for 3 months! Reviewing after each month!

Thomas asks…

i have been asked to invest money in a restaurant?

ok here is the brother is look n to open a restaurant.
and ask me to invest. he has been in the business a long time and he knows it well.he has opened several and has failed . i feel the reason he has failed is does does peaple wrong he gets greedy doesn’t pay the bills
i will give you a few details
the last time he asked my dad for money .business was doing very well
or at least that what he told me.he was always at the golf course always had a few friends with him getting drunk.
He always come to my house and brag and put me down.
i told be careful because what goes up must come down. well fast forward a few months. he never pad my dad he lost his restaurant
he had to move in with me cause he had nowhere to go.
he began to recieve letters from food venders he owed money.The IRS
labor department where he didnt pay his peaple. he filed a police report
that some broke in to the safe and stole money and tried to collect
insurance . which later he was charged for for.
Its a shame but my mom and i think the same about him he will try to
screw any one around if has chance to make money off them.
He could not pay me rent but he drove a jag and always had his clothes pressed
I have kept tellin him do the right thing,Karma, what you sow is what you reep be humble work and don’t look for the fast buck.what you put out comes back. put out bad and bad comes right back.Any way enough with the details. He asked me to invest some money in a resturant. i first thing i told him is i cant trust you.
but i believe if he applies him self he can make successful.
So my ques is how do i protect my self and make sure every thing is on the up and up. contract lawyer,accountant, bussines lawyer?
He mentioned he would give me a good return on my money
Time out i dont want good return can go buy a CD at the bank and get secure return i want to be part owner what do i do i really would like for my wife and i to qiut our 9to5 have something that can be ours
what percentage do i own depending on how much i put in? how much is it worth?
can accountant tell me or business lawyer?
i have to protect my investment there has to be a contract

Justin answers:

You more or less answered you own question. If you invest with your brother, you will have to spend just about all your time in that restaurant because he won’t. Sure he could change and finally learn from experience, but I would not want to have to find out the hard way that he is still the same irresponsible playboy as before.

Ken asks…

How could I make millions in the franchise business?

Or a lot of money?

I plan on having a high paying career and I also plan on investing it in the market, putting more of it in a Roth IRA and putting some of it in franchising. I know I don’t have a million dollars laying around but I am just curious which franchises DO NOT cost very much AND give you VERY high return and make you A LOT.

For example. There is someone who lives in my town who I know owns 3 McDonalds Franchises. He already had money to put in them but his restaurants are VERY successful and his is obviously making A LOT.

How could I be able to do this?

Justin answers:

The thing about a franchise is it’s a investment. For example, a subway franchise can be had for 100,000. But it will only make 60,000 a year and then that is also based on you working it. If you buy 4 of them and pay someone 35 to 40k at each place to run for you, and you spend x time between them checking up and ordering etc you can make 80k on a 400k investment. That’s a 5 year payback and gravy after wards. Same with his Micky-d’s, You have to have money to do this to start with. BAnks wont loan full amount, esp now.

Chris asks…

Math home work that is not working out with me please help me!!?

Venture capital. Henry invested $12,000 in a new restaurant. When the restaurant was sold two years later, he received $27,000. Find his average annual return by solving the equation 12,000(1+r)^2=27,000.

Justin answers:

Get r alone





average annual return=$7500

Robert asks…

Rectangular stge. One side of a rectangular stage is 2 meters longer than the other. If the diagonal is 10?

meters, then what are the lengths of the sides?
2. Venture capital. Henry invested $12,000 in a new restaurant,. When the restaurant was soldtwo-years later he recieved $27,000. Find the average annual return by solving the equation 12,000(1+r)^2= 27,000

Justin answers:

First question. Sides are 6 & 8 meters. 36+ 64 + 100.

Charles asks…

Help us with this math equation from Math 209?

Venture capital. Henry invested $12,000 in a new restaurant. When the restaurant was sold two years later, he received $27,000. Find his average annual
return by solving the equation 12,000(1+r)^2=27,000.

(: thanks!!

Justin answers:

God bless you.

Steven asks…

I want to start a Restaurant Franchise, but don’t have the money. Are there any investors who invest in this?

I have a lot of experience in QSR(Quick Service Restaurants), and I have been wanting to buy a franchise and run it. I however do not have the money, and can’t get a loan that would be of the size I would need in order to have the money for the build out, equipment, and cash on hand. The Build out is around $225,000, and $50,000 Cash on Hand. The initial franchise fee is $25,000. I want to find an investor that wants to be behind the scenes, but can have the money to start this franchise. We could do this as a 50/50 partnership down the line, until the investor has made X% of the investment, and then I would be able to take over full time. So if the investor would put in $300,000; and wants 200% return, then once $600,000 has been paid back to the investor, then we would part ways, and I would continue on my own. Please let me know if anyone knows of what steps I can go about in order to do all of this.

Thank You!

Justin answers:

There are very few investors that are willing to invest more than what your own stake in the venture is without some assurances as to the success of the venture whether that be by control of the business or verifiable cash flow. If you have nothing at stake then there’s no assurance of fiscal responsibility. Reasonable cash flow expectations can be discounted to give a net present value to help determine the value of the investment.

Even so, no one will invest and consider the profit distribution as a buy out of their interest in the venture, if anything you will have to buy them out yourself to take the business back but the dividends paid would be an expectation as part of the ownership, they would expect to have a 50/50 share of the profit with any buy out of their 50% share coming out of your share of the profit not theirs. Your best bet may be to join a peer to peer lending website and propose the terms that you wish and see if people are willing to put money into financing your venture. If you present sufficiently attractive terms and assurances then your project may be financed, if not well then you don’t get the money. The idea of a peer to peer lending site is that it may be easier to find 15,000 people each willing to risk $20 on your dubious claims of a return then it would be to find someone willing to risk $300,000 on your word.

James asks…

Henry invested $12,000 in a new restaurant.?

Venture capital. Henry invested $12,000 in a new
restaurant. When the restaurant was sold two years
later, he received $27,000. Find his average annual
return by solving the equation 12,000 (1+r)^2=27,000.

Justin answers:

12,000 (1+r)^2=27,000

Divide 27,000 by 12,000

you get : (1+r)^2 = 2.25

Get rid of the ^2 by doing ^1/2 (or square root) on each side

you get: 1+r = 1.5

isolate for r, you get 0.5

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