The Inc. Network
Thought for Food
I've sketched a business plan for an ethnic-food restaurant, and I'm looking for fresh sources of start-up information. Can experienced restaurateurs share their secrets of success or warn me about some of the blunders that novices commonly make?
Name Withheld* * *
More than 80% of restaurant start-ups fail, and quickly. A saucy concept wrapped in a comprehensive business plan will get you only so far; to succeed, you must place your targeted diners' culinary preferences and satisfaction on a silver platter. If there's a key to long-term success, it's the realization that you're entering the hospitality business, says restaurateur Hayward Spears Sr., president of Hayward's Pit Bar-B-Que, in Overland Park, Kans.
Your first step is to see how the local population responds to your concept. There's no substitute for conducting your own market research. You might sponsor periodic focus groups to give representative members of the local crowd a taste of what you can offer. Ask participants to critique your concept and menu and rate your ideas against what your competition offers.
Such feedback from potential diners will help you fine-tune your menu so you can begin to turn that sketchy business plan into a viable financing proposal. For ways to more accurately project your costs of food, labor, insurance, heat, and lights (so you can determine your pricing strategy), you should work through Peter Rainsford and David Bangs's The Restaurant Planning Guide (Upstart, 800-235-8866, 1992, $19.95). The book includes mock income and cash-flow statements and balance sheets, and explains break-even and budget-deviation analyses.
Bill Fisher, executive vice-president of the National Restaurant Association, in Washington, D.C., points to two mistakes amateurs usually make. On the planning side, he says, they rarely develop alternative marketing schemes (such as home catering) to make up for a sudden loss of regular customers, as can happen if a big local employer shuts down. On the operating side, there's a great temptation among managers to cut volume deals with suppliers for food that often ends up as excess inventory. "Understand that food-inventory turnover -- which happens about 24 to 26 times a year -- strongly influences cash management," says Fisher. If you're no cash-flow whiz, learn some of the basics fast, or find professional help through state and local restaurant associations, listed in the yellow pages.
To gain more insights, order the Restaurant Start-up Kit from the National Restaurant Association (800-424-5156, $10). The organization gives its members discounts on its publications, training videos, and management courses. (Annual membership starts at $125.) Also, Cornell University's campus store (607-255-2934) can send you a catalog of its nearly 400 reference books for hospitality professionals.* * *
ABC's of DBA's
My husband and his two partners decided that the company they bought was not profitable enough to support three families. The two other owners left, and my husband and I took over the business. Because all the partners were listed on the "doing business as" (DBA) certificate, my husband's former partners were able to change our business address, and they began receiving and cashing checks for work that we did! How can we prevent this from ever happening again?
Name Withheld* * *
We hate to tell you, but registering a DBA will not protect you against fraud. Any number of companies can file for and receive the same DBA, because most states lack a clearinghouse to determine whether or not a DBA is available for use.
A DBA is a trade name under which a partnership or sole proprietorship conducts business, and it's often different from the name of the owner or the partners' names. The DBA is on file at the county clerk's office to let the public know who's behind a particular company name. A DBA doesn't give you the legal right to use that name, the way incorporation does. Thomas Hemnes, a partner with the Boston law firm Foley, Hoag & Eliot and chairman of its intellectual-property practice, explains that the right to a name arises through use in connection with a particular good or service and that the courts will protect the original bearer against subsequent uses. But in the event of wrongful use by another party, it's up to you to cry foul.
To get you through your problem now, you should file a new DBA and inform your existing clients, vendors, and providers that two partners listed on the old DBA have left and that you and your husband now control the business.
In the future you should draw up a partnership agreement that spells out precisely how the name will be used should the partnership dissolve. Before you commit to paying costly legal fees, try Nolo's Partnership Maker (Nolo Press, 800-992-6656, $129.95), a software program that helps you create your own legal agreement.
The partnership name should be treated like any other major asset. Typically, it belongs to the partnership and not to the individual partners, but sometimes a majority of partners can control it if that is stated in the agreement. Alternatively, one partner might have exclusive rights to the name. You need to work that out and state it clearly in the partnership contract.
For situations in which there is no formal agreement, most states have adopted the Uniform Partnership Act to establish a set of fair rules for governing partnerships. Check with your secretary of state's office to see if the act is in effect in your locale. If yours is a messy split, a receiver can be appointed by the courts to end the partnership, close the accounts receivable, and distribute what's left to the partners.* * *
Designs on Design
I need to know how to design the packaging for retail-store display of my product. Is it cheaper for me to package the product myself after I have the artwork done professionally?
Sheryl Laur Products
Bayside, N.Y* * *
You can't design any of your marketing materials well without really understanding your company first, says David Hertz, president of Syndesis, in Santa Monica, Calif., a maker of lightweight concrete and an Inc. Design Award winner. That means you, the CEO, are acting designer-in-chief because you're the one with the clearest vision of how you want design to celebrate your business and its values.
To see how Syndesis uses design to its competitive advantage, read "The Medium Is the Message" (January 1993, [Article link]). For more advice, contact Boston's Corporate Design Foundation (617-236-4722), which provides educational and research materials.
You'll need to make decisions quickly about two aspects of packaging: its physical makeup (for instance, whether it's a box, a wrapper, or a bag; whether it's plastic or paper); and its "look." Another Inc. Design Award winner, Judy Jordan, managing partner with Jordan Sparkling Wine in Healdsburg, Calif., says that the visual theme of your package should be simple, recognizable, and relatively consistent with other product lines and the rest of your marketing tools (such as brochures, mailers, and business cards). The visibly coherent message you send will strike a positive note with customers. For additional guidance on issues of corporate and brand identity, you might consult with specialists at Package Design Council International (703-318-7225).
But you don't need top-dollar market research to tell you that the battle for retail shelf space is more brutal than ever. You're well advised to enlist a professional package designer before you attempt to stuff boxes with product and cart them to market yourself. A designer can offer creative advice as well as innovative, responsible, and economical ways to ship your "three-dimensional ad," says Greg Erickson, editor and publisher of Shelf Presence (708-215-8910, 14 issues for $259), a newsletter that uncovers trends in the packaging industry. What's more, you'll get plenty of leads by ordering a directory of the 2,200-plus members of the Industrial Designers Society of America (703-759-0100; the directory is $85).* * *
Importing on the Cheap
I've been visiting foreign countries, collecting art and jewelry that I'd eventually like to sell out of my own shop. How can I import more cost-effectively?
Full Circle Imports
Litchfield Park, Ariz.* * *
You should start gradually. "Import from one country and see how it goes," says Yen Lu Wong, president of Global Consortium, a Los Angeles company that facilitates international business. Wong also advises that you do plenty of homework: you'll save time, energy, and money, she says, by familiarizing yourself with a particular country's credit and accounting practices, cultural nuances, and export restrictions before you go abroad.
You must take a disciplined approach to bargaining with foreign merchants. Gerald Cerce, chairman of Accessories Associates, a manufacturer and importer in North Providence, R.I., offers a proven strategy for resisting goods you don't want (and being overcharged for items you do like): "Keep in mind who your customers are, buy within your own specialty, and know your top dollar -- the highest amount you can afford to pay," he says. As a rule, your final retail price for an item should be two to three times more than what you paid for it. When it comes to setting prices for your items, be sure to factor in your personal travel expenses, duty fees, and later, freight costs, if you ever decide to buy in bulk.
Your shipping costs can be reduced sizably if you hire a freight forwarder instead of shipping through your own channels. Plus, a forwarder can save you the headache of handling packing and customs-clearing paperwork. You can find freight forwarders through export-management associations or by calling the National Customs Brokers and Forwarders Association of America (212-432-0050).
To further your education, contact the Organization of Women in International Trade (call 301-953-0676 for membership fees), a national organization with regional chapters that holds "cram" courses on the issues, updates, and dos and don'ts of international trade. For more money-saving strategies, read How to Be an Importer and Pay for Your World Travel (Ten Speed Press, 1993, $8.95), a fun and informative guide by world travelers and savvy importers Mary Green and Stanley Gillmar. It includes a glossary of terms; current customs regulations and tariff schedules; and explanations of monetary transactions. n* * *
Reported by Karen E. Carney, Louis Carranza, and Vera B. Gibbons.