Speak the
partnership language.

Advisor equity

A small ownership grant (typically 0.25–1%) given to an advisor in exchange for ongoing strategy, intros, and judgment. Almost always vests over 1–2 years.

Carry / carried interest

A share of the profits an operator or partner earns above an agreed return threshold. Common in growth-partner and fund-style deals.

Convertible note

A loan that converts to equity at a later financing event, usually with a discount. A way to invest before agreeing on a valuation.

Distribution

Cash paid out to owners from the business's profits — distinct from salary.

Drag-along right

A provision letting majority owners force minority owners to join in a sale on the same terms.

EBITDA

Earnings Before Interest, Taxes, Depreciation, and Amortization. The standard profitability measure investors use.

FDD (Franchise Disclosure Document)

The legal document a franchisor must give prospective franchisees in the U.S. before any sale. Required by the FTC.

FF&E

Furniture, Fixtures, and Equipment. The physical assets of the restaurant excluding real estate and inventory.

Hold-co

A holding company that owns multiple operating entities (e.g., one LLC per location). Lets investors buy into a portfolio rather than a single store.

Key-person clause

A contract term that protects the business if a critical person (founder, chef) leaves or becomes incapacitated.

LOI (Letter of Intent)

A non-binding term sheet outlining the rough shape of a deal before lawyers write the definitive agreements.

Operating agreement

The governing document for an LLC. Spells out ownership, voting, distributions, and what happens when partners exit.

Pari passu

Latin for 'on equal footing.' Used when multiple investors have the same rights or get paid in the same priority.

Preferred equity

Ownership that gets paid back first (often with an agreed return) before common equity sees a dollar. Common for passive investors.

Pref / preferred return

The annual return preferred-equity holders earn before profits get split with common-equity owners. Often 6–10%.

Prime cost

Food cost + labor cost as a % of revenue. The single most important operating ratio in restaurants. Healthy is 55–65%.

Pro-rata rights

The right to invest in future rounds to maintain your ownership %. Standard for serious equity investors.

Revenue share / rev share

Compensation tied to a % of top-line revenue rather than equity or profit. Common in marketing partnerships and channel-specific deals.

ROFR (Right of First Refusal)

If a partner wants to sell their stake, the other partners get first crack at buying it on the same terms.

Royalty

An ongoing % of revenue paid by a franchisee to the franchisor. Typically 5–6% in food service.

SDE

Seller's Discretionary Earnings. Net income plus owner's salary, perks, and one-time expenses. The standard cash-flow measure for owner-operator deals.

Sweat equity

Ownership earned through work rather than capital. Almost always vests over time and is tied to performance milestones.

Tag-along right

If majority owners sell, minority owners get to join the sale on the same terms. Protects small owners from being left behind.

Term sheet

A short summary of the proposed deal — valuation, ownership, governance — used to align before drafting full agreements.

Trailing 12 (TTM)

Trailing Twelve Months. The most recent 12 months of financials, used because calendar years can hide trends.

Unit economics

The financial performance of a single location: revenue, cost of goods, labor, occupancy, and the profit that's left.

Vesting

Earning ownership over time. A 4-year vest with a 1-year cliff means you get nothing until year 1, then earn proportionally each month after.

Waterfall

The order in which money flows out of the business to different classes of owners. Preferred holders first, then common, etc.

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