The Year of Living Dangerously

How one restaurant persevered through the crucial first 12 months in business

thereby eliminating the problem of employees wasting food or taking it home.

The business had also begun to experience cash flow problems. “We had months when there was a big cash flow problem,” remembers Phillips. “We had a weekly payroll of between $7,500 to $8,000, and at times we only had half of that in the bank. We were pretty tight. I’m glad to say we never missed a payroll, but it was scary at times.”

Phillips and Lowe went to several banks to try to get a $30,000 line of credit, but they were unsuccessful. “We couldn’t get it,” says Phillips. “They said our business was too new at the time. We were able to get a $10,000 credit card but not the $30,000 line of credit we wanted.”

With some of the more troubling issues out of the way, the partners began discussing the expansion of the small restaurant, a plan that had been in the cards since the start of the enterprise. “Our customers asked us to expand,” discloses Phillips. “We had loyal customers who said they would not come back to Fusion unless we expanded because they didn’t like coming down and then having to turn away because of the crowds.”

One of the café’s regular customers heard about the planned expansion and told the partners about his employer, the Enron Corp., and its Houston Economic Opportunity fund. The fund provides venture capital for start-ups and existing businesses-like Fusion-in alliance with major banks, including Wells Fargo, Bank of America, and Washington Mutual.

“They are an investor, a partner, just like my Aunt Martha,” explains Phillips. “They said, ‘we don’t want to buy any of your partners out.’ But they do get a preferred liquidation right, which means that at the end of the day, if we have to liquidate assets, they would get paid back before anybody else. And that’s it.”

So instead of going to a bank, the partners went to the fund with expansion plans in hand. At the beginning of July 1999, Phillips and Lowe received $270,000 in capital funding.

In September 1999, they were able to hire a general manager with restaurant experience to help run the business. That’s when things finally stabilized and they were both able to step back and concentrate on their expansion efforts.

Planning for Expansion
Work is now under way on the remodeling of the original restaurant site. They were able to lease an additional 1,500 square feet next door, and the build-out is moving ahead. They plan to triple the size of the kitchen and add additional tables that will seat about 50 customers. The exterior of the restaurant has been spruced up with new paint, awnings, and more lights. It will take about $70,000 to complete the renovations.

The partners also surveyed their customers and asked where they would like to see another Fusion Café set up. Some 62% of the respondents were in favor of the area near Rice University-where a number of eclectic shops and restaurants are located-as the ideal spot.

In February

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