Lowell Hawthorne is the Founder and CEO of American Company, Golden Krust Caribbean Bakery, and Grill, which is, a manufacturer and distributor of Caribbean food products and franchiser.
It was started in 1989 by Hawthorne and his wife Lorna, and four of his siblings and their spouses. The Company has grown from one restaurant to over 120 stores and restaurants across 9 states, with revenue of over $100 Million Dollars.
So how did it all happen?
Lowell Hawthorne immigrated to the United States in 1981, at the age of 21. He got a job working for the NYPD while studying for a Degree in accounting at Bronx Community College. After graduation, Hawthorne was later promoted to the role of Accountant.
In 89, Hawthorne then decided to go into business and hatched the idea of setting up a Jamaican themed restaurant.
He, however, needed funding in order to bring his business idea to life and therefore sought funding from banks. And as you can already predict, he failed in that quest.
Banks simply failed to see any potential value in his business concept and consequently he was unable to secure any kind of bank loans.
Undeterred, Hawthorne, along with his immediate relatives, pooled all their personal resources together and raised $107 000. Hence in 1989, the first Golden Krust Caribbean Bakery was born to the Bronx community.
The business concept caught on and by 1996, the company had expanded to 17 restaurants throughout New York City. There was no stopping him now, and in that same year, Golden Krust Bakery invested in a state of the art, manufacturing plant.
Having proven the business model, the ambitious Hawthorne then decided to exploit the additional business growth opportunity that his business success had brought him. He had proved the existence of value in his business model and so he decided to share that value with other aspiring entrepreneurs.
He, therefore, applied for and was granted a franchise license in 1996. On December 3, 1997, the first Golden Krust Bakery franchise store was opened.
In 2002, the company recruited New York Giants football star, Tikki Barber, to become their spokesperson. In that same year, the organization also added their combo-value meal, to their menu.
The business grew rapidly and by 2011, the company had over 120 restaurants in 9 states, with annual sales of $100 million.
So what business lessons can we glean from this story?
I want to discuss with you briefly, the funding model that was used by Lowell Hawthorn to start Golden Krust.
Funding can be one of the biggest deterrents to aspiring business people. It is fast becoming extremely difficult to find start-up funding. This is largely due to the fact that ideas are very risky investments.
A lot of things can go wrong with ideas when it comes to converting them into real businesses. Suddenly what seemed like a potentially lucrative idea is actually a worthless waste of time. Only the investors can`t get their money back.
Therefore it is natural that you will find it rather challenging to prove the value in your business idea.
However as we have seen in Lowell Hawthorne`s story, with a bit of creativity, you can make funding available for your project.
Golden Krust was born out of family and friends buying into the business idea and pooling resources together to make the project happen. This is one of the simplest and best ways of funding a business.
You may find that it is easier to pitch to, and negotiate with friends and relatives than it is with a stranger. You are more relaxed and free to express your ideas without feeling any pressure.
Any criticism of your business ideas by family and friends will most likely have your interests at heart. Therefore you are more inclined to accept their ideas because you know they want you to succeed.
This kind of funding can also be cheap to acquire since it is coming from your friends and family. They are hardly going to give you a raw deal for their investment in your business.
Word of caution
However, if you are going to seek this kind of funding, you need to be careful about how you go about it. First, be very clear and honest with them about the risks involved. Do not be vague about these risks, or give the wrong impressions.
They are taking a risk by investing in your business idea and that risk means they could lose all their money. Be as upfront about it as you can, and allow them to make their own decision.
Desist from the temptation of influencing them to make their decision. If you influence someone to invest, they could later argue that you made them do it.
Your job is to present your idea to them, outlining the potential benefit involved if all goes well, and the potential risks involved if things go wrong. After that, leave them to make their minds up on their own.
Secondly, be clear what they are getting in return for their money. The last thing you want is to have your family members and friends thinking they own part of your business because they helped finance it.
If you do not wish to share ownership with anyone, then state clearly what you are offering in return for investment. Clarify whether it is a loan or equity.
If it’s a loan clearly state how you intend to pay it back, and if it is equity then tell them how much of the business they will own in return for their investment. However, either way, they need to know they still could lose their money if things don’t go according to plan.
The fact that it is a loan does not diminish the risk to that money. Your business may fail to pay back the money and so they need to be aware of and be prepared to accept that.
Also, this is a business transaction and hence should be treated as one. Put your loan or equity agreement in writing, clearly stating its terms and conditions.
I know it may feel awkward to have to sign contracts with your brother or mother but trust me it is essential. This is money we are talking about.
You may think you know them well, but you will be very surprised to see the extent to which your loved ones will go to protect their own financial interests.
Just put it in writing. You have nothing to lose and all to gain by doing it.