PORTLAND, Ore. – Two eating establishments set to open in October – one a bistro/brewpub and the other a restaurant/deli – are about to learn whether foodies here will put their money where their mouths are going to be.

The Green Dragon Bistro and Brewpub wants $2,500 each from about 20 people, called “founders.” Kenny & Zukes, a traditional Jewish deli is looking for “members” to kick in $2,000 each.

The details differ, but in both cases the lenders will end up with no equity in the businesses and won’t earn interest. Instead, the businesses will reimburse their financial backers with discounts, special party invitations and other goodies. Each Green Dragon financial backer will get a guaranteed seat at the bar with his or her name on a bar stool.

The Green Dragon, which is seeking 20 participants because it has room at the bar for 20 stools, says it has 16 lenders so far. Nick & Zuke’s, which declined to say how many it is seeking, has 10.

“You’ll have a place to sit,” said Steve Bruce, who with his wife, Sonya, is lending $2,500 to the Green Dragon. “In addition to beer, they’re selling fun, that’s what attracted us.”

Some industry analysts say the unorthodox financing scheme adds even more financial risk to an already famously tough businesses.

“What’s wrong with a bank? What’s wrong with traditional funding?” said Art Marshall, a hospitality industry consultant in Vancouver, Wash. “The fact that these people are trying this tells me that something’s wrong.”

Nick Zukin, who is opening Kenny & Zuke’s with veteran restaurateur Ken Gordon, says the financing reduces risk. “This is a way to earn extra money,” Zukin said. “I’d rather not use traditional money-raising techniques because the expense of capitalization can kill restaurants.”

Gordon added that raising money isn’t the only reason to offer memberships.

“Part of it is getting people to participate in what we’re doing,” said Gordon.

The owners of both establishments say critics don’t understand the nonfinancial benefits of having customers in the businesses. Jim Parker, one of four owners of the Green Dragon and an experienced pub operator, said the establishment’s “founders” will do more than help it raise money. They’ll also help make it popular, he said. Participants will have a personal connection to his pub, he said, and will tell their friends about it.

Even the guaranteed stool should make his pub a friendlier place, Parker believes. If someone’s on a stool when its owner comes in, the bartender will offer the first stool-sitter a free beer if he moves.

“There’s no better thing at a pub than bringing two strangers together and creating a friendship,” Parker said. “It makes for fun and a building of community, which really is what a pub is to me.”

Mark Green, with the Family Business Consulting Group, says people who are starting restaurants would be better advised to use traditional ways of raising money – either getting investors and surrendering equity or borrowing funds and paying interest – and making sure loyal customers pay full freight.

The reason? Food and drink establishments, said Green, need high margins to survive.

“Restaurants are notoriously poorly run businesses that don’t make money and have astronomically high failure rates,” Green said. “If people really care about a restaurant, the best thing they can do is pay full price for their meal.”

Still, one experienced brewpub operator is excited about what the two establishments are doing. Bill Owens, the former publisher of American Brewer magazine and founder of three brewpubs in California, called the money-raising plan “symbolic of having fun.”

“I think it’s brilliant and wish I had thought of it,” Owen said. “It’s better than borrowing money from your uncle or your mum.”

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The Green Dragon Bistro and Brewpub, 928 S.E. Ninth Ave., Portland, Ore.: People who give $2,500 become “founders.” The cash is a personal loan to Jim Parker, one of the pub’s four owners. Founders are paid back $500 for five years, a guaranteed seat on a bar stool with their name on it, their first beer each night free, a mug with their name etched on it and 10 percent off their tab for five years.

Kenny & Zukes, 1038 S.W. Stark St., Portland, Ore.: People who give $2,000 become “members.” The cash is an advance purchase. Members get $2,400 in transferable gift certificates spread out equally over 24 months, 20 percent off catering services, invitations to all restaurant parties and two Kenny & Zuke’s T-shirts.

RB END BRINCKMAN

(Jonathan Brinckman is a staff writer for The Oregonian of Portland, Ore. He can be contacted at jbrinckman(at)news.oregonian.com.)

2007-08-29-EATERIES-MONEY

AP-NY-08-29-07 1705EDT