Checks, Please

Under the rule, the restaurants can raise money only from people whose net worth -- either by themselves or with their spouse -- exceeds $1 million or who had income of at least $200,000 in each of the two years before the investment. Before Sandground will even have a conversation with a potential investor, he sends a one-page questionnaire to see if he or she qualifies under the SEC rules. Then the investor can sit down with Sandground and have a conversation about how the deal would work.

Typically, Sandground, the restaurant owner, and financial advisers have worked out a spreadsheet showing investor returns over 15 years. Of course, this spreadsheet is sort of pie in the sky, assuming that everything goes well and the restaurant is profitable. But nonetheless, it can show what an investor's money flow might look like. Sandground shared a spreadsheet with The Washington Post for a deal he completed, though he declined to identify the restaurant.

The deal had about 50 investors and called for a 10 percent yearly return for each investor. If there's additional money to distribute beyond that return, 80 percent of the profit would go to investors and 20 percent to the owner. The process would repeat annually until the investor got back 100 percent of his principal, at which point the profit-sharing would be 40 percent to investors and 60 percent to the owner. (Oh, and the investors typically get discounts on meals.)

The deals are expensive for even celebrity chefs, who have to sacrifice much of their early profit. If a restaurant is really hot for the first few years, as often is the case after a successful opening, investors would get most of the profit. And only later, perhaps after the hype dies down, would much of the profits go to the chef. Richard said the risk for him is worth it: "They help me achieve my dream of a restaurant."

But how are the deals even found? Chefs and restaurant owners around the District said their investors are typically people who have dined with them for some time. Bashir, the doctor who invested in Hudson, is a little different: Popovsky was initially one of his patients. Popovsky had to pick up Bashir's investment check at the Washington Hospital Center colonoscopy suite, where his investor was working that day.

Many of the investors in Richard's new bistro have dined over the years at Citronelle and have followed Richard's rise to the upper echelons of chefdom. Richard didn't exactly have to beg them to invest; he cajoled them through their bellies. If he heard that a potential investor for Central was dining at Citronelle, Richard sent a tuna burger to the table to show the kind of meal he would offer at the new restaurant.

Then he would stop by the table, which is akin to William Shatner showing up at a "Star Trek" convention. "Everyone wants Michel to show up to their table," Sandground said. And the fact that a trip to a table can help seal an investment also goes a long way toward explaining the motivations of restaurant investors. After all, how many people would buy $50,000 of Lockheed Martin stock just because they met the chief executive? As Bashir put it, "There's an ego reward with these investments."

"The people who invest in restaurants are people that are avid diners who want to be part of the club," Wiedmaier said. "They get the VIP treatment. They are in with a name chef. They have fun doing this. They are going out to eat."