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Expert Answers to Biz Questions

Listen in! Pick up some expert advice to a reader's question that we selected from CyberSchmooz.

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The Biz Question

How does one go about testing a new idea for a unique type of food service without investing large amounts of money in equipment that satisfies the health regulations? A family member and I have an idea for a food establishment that only offers complete home-cooked meals and/or homemade soups by the quart that working moms could drive up and take home, ready to eat. The business would only be serving meals to the supper crowd. How do we 1)test to see if folks like the food 2) if it would be feasible in our area 3) and of course, if it would be profitable? Any suggestions or ideas on researching this would be greatly appreciated. Thanks!

Julie

Answer from our Guest Expert Mark Bower of Aberdeen Mobile Home Repair

Hi Julie!

Hmmmm, a take-out restaurant that's only open for supper? Interesting concept, but before I answer your questions, let me ask you one big question -- Why isn't anyone else doing this?

In testing your idea you need to understand your market. You say your target audience is to working Mom's on their way home from work who would prefer to pickup a quick homemade meal than a burger. When doing your marketing, there's several things you want to keep in mind. First, Mom's are normally in a hurry to get home. Yet, it's no secret that they may first have to stop at the grocery store. Yet, most larger grocery stores have deli's who target the same market you're after. In your marketing you need to address that fact -- will the Moms make an extra stop just to visit your establishment, or will they just grab something at the grocery store deli to avoid that extra stop! You need to know. Also, don't forget about the Dad's! As a Dad myself I bring home food more often than my wife does.

Many diners tout home-cooked meals. To test if your soups and meals are well-liked, send out samples to be tested. Make arrangements to bring in a free dinner to the staff at a local office and stick around for feed back. Sure, everyone will say your food is good, but you know the difference between 'good' and 'ravin good'. If you decide to start your business, then this will be a good idea to use as a marketing tool.

Now, the iffy part. You ask, "Would this be profitable?" In short, NO. Almost every stand-alone restaurant that has tried serving only one, even two meals a day, has fallen flat on its face. Why do you think McDonalds, Burger King and other fast food places started serving breakfast? If you could find a fully-equipped building to rent, rent would probably be at least $1500/month. Utilities would be another $300 or so. Figure at least another $1000 for monthly overhead such as insurance, advertising, taxes etc. Then, there's the cost of your food which will be around 30% of your sales. If you were open every night, you'd have to average 50 or more orders a night at $5 per order in hopes of breaking even. Then, if you both want paid for your labors, then your looking at more like 100 orders just to earn a meek living.

The biggest strike against your plan is that your not fully utilizing the facilities you would need for your business. However, if you could lease the facilities to someone else during the day who may want to serve breakfast or lunch and share the expenses, then you may have a shot at this business. Just don't discount the amount of prep-time you'll need to have fresh, ready-made meals for pickup.

Summary:

First, do a realistic balance sheet. Once you determine what you think your expenses will be, add 25-50%. Remember to include a wage for yourselves, and then a profit margin. If the numbers don't show it, don't do it. Keep your emotions far far away when doing the numbers. Stay realistic. No sense in buying a job, especially a job that doesn't bring home a check.

If the numbers prove positive, then do your marketing. Count the cars that drive by your tentative location. Sit in the grocery store and watch people. How busy is the deli? Chat with other Mom's. Ask them if they are bringing home supper, or cooking at home. Ask others about your idea. Get honest feedback. Again, keep your emotions about your business out of the way. You won't be honest with yourself if emotions are running high.

If your marketing proves positive, then it's time to test your recipes.

The restaurant business is a very fickle industry. Be careful! Remember, if you do start your business -- you've got to be a salesperson first, a restaurant guru second!

Mark

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