New EL restauranteurs might get helping hand

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With credit lines in knots and entrepreneurs walking a proverbial tight rope, East Lansing officials are discussing an incubator program to provide steady financial footing for restaurateurs.

A restaurant incubator project, which is in the preliminary planning stages, could establish a workspace complete with a modern kitchen, shared storage and waiting areas. Separate, small seating zones for possibly five restaurants could be built in an effort to reduce startup costs for original ideas.

Officials working on the project said winning ideas potentially could be determined by a panel of judges who would decide which ideas were best and offer the restaurateur hopefuls space to begin operation.

“We continue to hear from the community, including students, that there is a need for more independent restaurants in the area,” said Lori Mullins, East Lansing community and economic development administrator. “And this is coming from that desire that has been voiced over several years.”

MSU students could benefit from the program, said Jeff Elsworth, associate professor of hospitality business entrepreneurship. With East Lansing housing about 950 hospitality business students — one-third of whom are interested in the restaurant business, Elsworth said — restaurateurs could work with an experienced and educated group of students to help with crafting a business plan, marketing strategy, training conduct and financial plans.

The program was introduced Tuesday during the Downtown Development Authority’s Business and Market Development Committee meeting. It would be similar to the Technology Innovation Center, 325 E. Grand River Ave., which started in October 2008 with 14 businesses. The city also opened The Hatch, an incubator for students, at (SCENE) Metrospace, 110 Charles St., this fall.

Elsworth said project collaborators hope the small-scale enterprises develop a committed clientele that could transform into multiple investors, allowing the concepts to branch out into their own buildings.

Investors are essential to the restaurant industry, which sees about 40 percent of its ventures fail in the first year, Elsworth said. He added startup costs are a significant deterrent to market entry and obtaining loans is “impossible” in today’s economic climate. As a result, and virtually all restaurants open with debt after purchasing equipment, licenses, decoration and seating.

“I always tell people when I’m consulting them, ‘Whatever you think it will cost you to open, multiply that by three,’” he said.

East Lansing City Manager Ted Staton said participating restaurateurs might view the incubator as an audition for investors and banks, two instrumental funding bodies that have been an increasingly unreceptive audience. Staton also said he believes the program could help keep students in East Lansing.

“We know that this generation is much more likely to start a business than previous generations, my generation for example,” he said. “So if we don’t provide opportunities for businesses to be started and created and grow here — we know this generation is going to go somewhere where they can do it.”

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