Buy a restaurant?

[Jon Klaus]

I have a friend who wants me to back him in buying a restaurant. He has been to one of the best Chef's schools, has good restaurant management experience, has a good work ethic, is good with people, and is trustworthy. He does not have much cash or credit. He hasn't had his own business in the past.

The restaurant is in a great location in a small town. It is performing poorly because the owner operators are under capitalized, don't know the business, and are burned out. The space itself needs updating. The landlord will let them out of their lease if I sign with him. $1400/mo.

Buying the owners out is low 5 figures. Updating the space is a question. The landlord won't do any tenant improvements and he won't give me a purchase option on buying the building. He will give a right of first refusal on buying it. I'm willing to do some improvements, but see this as an area of risk. My partner only wants to do a short lease (1-2 years) to see how it goes and I think I agree, especially since I may be guaranteeing the lease. So how much TI to do? The more we do, the better for the business, but the more risk if the endeavor fails.

Also, how should we structure the equity split with me investing all the cash and guaranteeing the lease? I would not be involved in operations. My partner would give full time and attention to the business.

What other considerations? I have a lot of small business experience, but none with restaurants.