How To Turn Grease Into Gold
By Brian Caulfield

(Business 2.0) – Glance through a list of startups that have attracted venture capital recently, and one stands apart from the usual techie crowd. Minnesota-based Restaurant Technologies Inc. raised $25 million this year by helping restaurants manage their supply of cooking oil.

What makes cooking oil a hot opportunity? More than half of the 878,000 restaurants in the United States are equipped with deep fryers, which collectively pump out 3 billion pounds of waste oil each year. Handling that grease is a slippery business. Dumping used oil down the sewer is illegal in many cities, and fryer-related burns are a leading cause of injury among restaurant workers.

RTI founder and CEO Paul Plooster came up with a hands-free way to manage cooking oil. His startup provides restaurants with equipment that drains old grease and fills fryers with fresh oil, all at the flip of a switch. Customers pay an average of $700 a month for deliveries of clean oil and a special tank to store the used stuff, which RTI carts off and recycles. (The reclaimed cooking oil is later sold and turned into everything from chicken feed to bio-diesel fuel.) All this grease-management gear costs RTI $9,000 per restaurant, but the company provides it gratis in exchange for a long-term contract.

Plooster hatched his idea while hawking soda-fountain carbon-dioxide systems to restaurants during the 1980s. As he picked up the basics of the restaurant bulk-supply business, he started looking for new markets to serve. That, he says, is when he noticed "shortcomings in the way restaurants handled oil." Since its founding in 1998, RTI has amassed more than $100 million in startup capital, including last spring's $25 million fourth-round investment--an infusion that put the company near the top of the more than 600 startups that landed VC funding in the first quarter of 2004.

RTI's equipment is in more than 5,600 eateries--including 3,000 McDonald's restaurants--generating revenue of $56 million last year. The company is not yet profitable, but Plooster hopes to change that within a year.

Industry analysts are upbeat about RTI's prospects, but success is hardly certain. In addition to the expense of outfitting restaurants with new oil-handling equipment, RTI has had to invest in a fleet of service trucks, regional depots, and a sales force. For now, the company is concentrating on clusters of eateries in cities like Seattle and Atlanta to rein in costs. Any venture-funded startup can appreciate RTI's rationale: The goal is to serve the greatest number of clients with the fewest possible resources, to get into the black before the money runs out. -- BRIAN CAULFIELD