By YOURI KEMP

Tribune Business Reporter

ykemp@tribunemedia.net

A restaurant entrepreneur, who financed his expansion via crowdfunding, yesterday said he now plans to offer a short-term bond paying 20 percent interest to fund the $150,000 required for outfitting a third location.

Chef Kevin Culmer, chief executive of Tropical Gyros, told Tribune Business upon the release of his latest update to shareholders that the company has now secured the lease for a third location on Carmichael Road. It is targeting a December opening once the renovations begin at the end of this month, and is aiming to raise the necessary finance via a two-year bond with an extremely high interest coupon.

“The cost to build out this location will be in the area of $150,000, but we have locked into a five-year rental agreement of $1,250 per month,” Mr Culmer told shareholders. “While the cost to build this location out may be a bit costly, as we have to do some repairs to the exterior of the building as well, I felt that when comparing the rent of other units and the cost to build them out that, over the five-year period, we would actually be saving upwards of $75,000.

“For example, most rents were coming in around the $4,000 per month range, which works out to $48,00 per year as opposed to $15,000. That translates to $240,000 as opposed to $75,000 over that same period. When you factor in the build out costs of, say $60,000 as opposed to $150,000, we are looking at a cost of $300,000 as opposed to $225,000 over the first five years. In addition to that, our yearly overall operational costs will be saving us some $33,000 per year, increasing our net profit.”

Tropical Gyros does not plan to go back to the Arawak X crowd-funding platform for a second round because it would take too long, and it is also aiming to avoid commercial bank loans. “We’re looking at offering an interest bond over two years where we pay 20 percent over two years to private investors. We will pay it monthly and, at the end of the two years, they will get their money back with simple interest,” Chef Culmer said.

“I prefer to take on a little bit of debt right now to do that as opposed to trying to take the reserves we built up over the past six or seven months, and then we’re right back to not having any reserves to fall back on in the event of anything happening.” Chef Culmer added that if had sought to raise financing via Arawak X, the proceeds would not be available until December 2023 and this would push the Carmichael opening back to mid-2024.

Chef Culmer added: “All of our projections reflect that this location, with the increased sales hours and day, will help this location to achieve sales upwards of $2m per year, bringing our collective revenue to almost $5m per year.

“Even if we continue at this [growth] level we anticipate achieving a gross profit margin of at least 16 percent on the $5m in revenues for a company-wide profit of about $800,000 per year. This will bring hefty dividend returns for our investors and, at the end of the day, you will all be happy with your choice to invest in Tropical Gyros.

“Additionally, we have also engaged two persons who are keenly interested in owning a franchise territory for a Tropical Gyros franchise. I will always give shareholders an opportunity to not only be shareholders in the parent company but own a franchise if you so desire.”

Sales at Tropical Gyros are holding at “$535 per service hour, with our peak lunch hours of 12pm-2pm, where our sales per hour average is $1,065 per service hour”.

Chef Culmer added: “Sales at both locations have exceeded my expectations and projections. One of the concerns I had was the thought that opening the JFK location would result in a dilution of sales at the Rosetta Street location. That has not happened. In fact, sales have increased at Rosetta, with an estimated increase of 40 percent prior to the introduction of the share offering last June.

“We are currently averaging $219,136 per month combined for both store for total sales of $1.315m, with a monthly high in June of $238,971 and a low in January of $196,007. What this has also shown is that the brand is being well received and we are in a good position to explore new locations and to introduce franchise opportunities for perspective entrepreneurs.”