Enterprise Insight: Launch Strategy

In this month’s Retail Spotlight, we discussed a single-product concept and how it is successfully operating in the city despite high rents and intense competition. In this month’s Enterprise Insight, we will discuss the strategy of launching and growing a single-product enterprise with specific case studies.

The benefits of launching a simple-product specialty shop are obvious: lower costs, less (slightly) to worry about, and a way to stand out in NYC’s crowded food landscape. But getting it done isn’t so obvious. Based on the most successful examples we’ve come across, the most effective path is participation in the NYC market scene.

The New York City food market scene started to simmer in 2011. That’s when the team behind Brooklyn Flea, which had been incubating some food vendors, launched Smorgasburg in Williamsburg. Since then, Smorgasburg has expanded to Dumbo and to a permanent facility, Berg’n, in Crown Heights. Across the river, UrbanSpace had transplanted from the UK and started the Grand Central Terminal and Union Square holiday markets around 2003. In 2008, UrbanSpace went food-forward with Mad. Sq. Eats just off of Madison Square Park.

These markets have become proving grounds for concepts looking to test the sharky NYC restaurant waters.

Take, for example, Dough, the wildly popular doughnut shop in the Flatiron district. Dough started in Williamsburg’s Smorgasburg long before launching a brick and mortar shop. Dough simmered in Smorgasburg, building a reputation, testing recipes, and earning real revenue. Then, this past fall, the company opened their first shop with lines around the block.

Likewise, Melissa Weller started selling bagels in Smorgasburg in 2013. Weller had been kneading and baking for the likes of Thomas Keller and Roberta’s before starting her own company, East River Bread, and selling at the market. Now, Weller has been tapped to team up with Major Food Group to bake those bagels for their next concept, Sadelle’s.

Entrepreneurs eager to start their foodservice business in a market have plenty of homework to do in advance. The most successful concepts have done their market research and crunched their numbers. The markets do not allow overlap between concepts, and each market has a different rental agreement. For example, the all-indoor Gotham West Market charges market-rate rents, while at Berg’n, vendors pay a percentage of their overall profits.

The biggest barriers to entry in the foodservice business are capital and exposure. Focusing on one product allows you to keep capital costs down and increases your chances of getting into a market such as Smorgasburg, which increases your exposure.

Big Gains for Organic Food

In 2014, US sales of organic food increased by 11%, to reach a total of $35.9 billion.  The Organic Trade Association, which released the survey, also noted that organic foods accounted for 5% of total foods sales.  Produce, which accounts for 36% of organic food sales rose $13 billion–a 12% increase over 2013.

Regionally, the rise was unilateral;  while the West Coast and Northeast purchase nearly 90% of their groceries from organic sources, the increase in sales was seen everywhere.  “We really moved beyond… the old assumptions about organic being niche and having sort of a cultural blanket over it,” said chief executive of the OTA, Laura Batcha.  “O.T.A.’s consumer survey has… found that organic doesn’t have any demographic… regional or partisan boundaries.”

Batcha noted also that the growth was “striking” because of major shortages in supply–less than 1% of farm acreage in the US is devoted to organic agriculture.  What was once the domain of specialty retailers like Whole Foods, organic foods have now gone mainstream: Walmart started offering organic products in 2013, and eight of ten parents claim to buy organic products.

In New York City, the rise is most apparent with the expansion of concepts such as Organic Avenue and Digg Inn.  Organic Avenue raised almost $10 million in 2012, and closed another round in 2013 for an undisclosed amount.

To read more, click here.

Rebelle Launches on Lower East Side

The chef of Paris’ revolutionary Spring, Daniel Eddy, has returned to the States to open Rebelle with Pearl & Ash’s uber-successful wine director, Patrick Cappiello.  The duo see the bistronomy trend that bubbled up in the Parisian restaurant scene as the major inspiration for Rebelle–particularly given Eddy’s involvement in Spring, which helped usher in the movement in Paris.

The pair have opened a restaurant that pairs serious food with a casual setting–exploring French classics in a modern way.  For example, beet bourguignonne made with salt-baked beets in place of beef, and leek vinaigrette with soft-boiled egg, Dijon, and leek ash.  Cappiello is running the wine program with gusto; the list has 1,500 French and American labels.  Per Se and Guy Savoy alum Jessica Yang is running the pastry department and churning out grand finales such as rhubard, lemongrass, and vanilla in various textures.

Brooklyn-based hOmE, which is responsible for many of the austere, beautiful dining rooms around town such as Mast Brothers, Black Seed, and Telepan Local, designed the space with an emphasis on marble, custom textiles, and simplicity.  The dining room features a chef’s counter overlooking the open kitchen, and a bar with a separate snack menu and cocktails from master mixologist, Eben Klemm.

Rebelle is now open.  To read more, click here.

Seafood sees Big Opportunity with Fast Casual

Fast casual has crossed many boundaries in the past few years–from burritos to pizza–and seafood might be next.  Chicago-based research firm Technomic has released a report noting that seafood consumption is on the rise; nearly three-fourths of consumers who ordered more seafood entrees over the past two years said they did so to eat more healthfully, the report says.

Consumers see seafood as healthier than beef, pork, and poultry, and as in line with vegetarian and vegan meals.  Half of respondents indicated that these meals–pescatarian, vegetarian, and vegan–are as satisfying as meals with meat.  Sixty-two percent of consumers surveyed have a beef, pork, or poultry-free meal at least once a week, and 69% have a seafood entree at lease once every 90 days.  Furthermore, about half of the respondents said they would like restaurants to offer a wider variety of seafood, vegetarian, or vegan entrees.

“Health will continue to drive the seafood and vegetarian menu mix, and it can be leveraged both to spur interest in these options and to benefit the concept as a whole, by broadening appeal, reducing the ‘veto vote’ and creating a health halo,” said Kelly Weikel, director of consumer insights for Technomic. “These options also provide a point of differentiation that younger consumers look for as inventive, yet satisfying vegetarian and seafood items featuring on-trend ingredients to create a contemporary, unique and better-for-you positioning,” she added.

While chains such as Pret A Manger, Au Bon Pain, and Panera Bread have introduced items with shrimp or lobster in the past year, only 6% of seafood entrees on US menus are found in fast-casual restaurants.

“Currently, seafood is mostly the province of casual-dining chains, and with few limited-service brands able to approach the size of Long John Silver’s and Captain D’s, the white space in between those segments leaves plenty of room for young fast-casual restaurants to develop quickly in urban, affluent areas,” said Darren Tristano, executive vice-president for Technomic. “Securing a supply of fresh fish and managing price points are certainly challenges for limited-service seafood brands, but this type of cuisine lets new chains leverage many attributes people love about fast casual, including perceptions of greater ingredient quality, bold flavors and customization.”

To read more, click here.

Tartine Bakery New York Bound

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San Francisco’s most beloved bakery, Tartine, has announced that it will be joining forces with another San Fran favorite, Blue Bottle Coffee. Opened in 2002 by Chad Robertson, Tartine Bakery is highly renowned for their artisanal baked goods and their cult following. Blue Bottle Coffee, also celebrating its thirteenth year, was founded in Oakland, California by James Freeman and is best known for their extensive brewing guides and focus on single-origin beans.

Robinson will become CEO of the bakery which will now be a part of Blue Bottle. Blue Bottle founder and CEO James Freeman has been friends with Robinson for 10 years, but their alliance is only a recent and spontaneous development reports Inside Scoop. Tartine’s restaurant, Bar Tartine, will remain independent as it will be sold to chefs Nick Balla and Cortney Burns.

With the merger, the famed San Francisco bakery will be introduced to New York as well as Los Angeles by the end of the year. Previously, Tartine had previously announced their plans for an expansion that would bring them overseas to Japan, where Blue Bottle recently opened their first Tokyo based venture. This fall will also bring the debut of the bakery’s first ice cream shop, Tartine Cookies and Cream, which will open in the Heath Ceramics building in the Mission District. Blue Bottle currently has 19 locations throughout California, Manhattan, Brooklyn and Japan. In 2012 Blue Bottle made the news when it raised $19.6 million from investors and in 2014 they raised an additional $25.75 million.

To read more from the New York Times, click here

Retail Spotlight: Brigadeiro Bakery

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Across the city, more and more foodservice shops are opening to serve a singular product type. This isn’t a new idea, but it has certainly become the trend among bootstrapping entrepreneurs looking to get started in this competitive and pricy city.

It isn’t always successful, but when it’s done right, it can be great! This month, we are taking a close look at Brigadeiro, a small shop in the north west corner of SoHo serving sweet Brazilian specialties.

Brigadeiro is both the name of the shop and the name of the sweet, condensed-milk confection that the store specializes in. The shop, which seats fewer than 12, is simply and attractively decorated with tile, blonde wood, and splashes of color in the packaging and product display. The narrow space with minimal distraction draws you right in; you know immediately what the place is about. The display case sits center in the service counter showing off the namesake treats:

Chocolate. Pistachio. Chocolate+Vanilla. Banana Cinnamon. Oreo Cookie. The store has a rotating selection of brigadeiro that range from the modest and traditional to modern and approachable. At its core, the same product, but dressed differently to great effect. This is the way to do a single-product shop. Everything we tried was delicious, and the packaging was as much a feast for the eyes as the candy was for our sweet tooth.

The confections were definitely great. However, from the business standpoint, there is a lesson just as worthwhile to learn from the Brigadeiro shop: high-value and creative alternatives to traditional items of expense. Brigadeiro is turning butter, sugar, and condensed milk into $2.33-per-piece, high-margin products. Instead of sinking capital in static, expensive branded packaging, Brigadeiro uses attractive printed paper to wrap boxes and seal with a branded sticker—an inexpensive, dynamic approach. And ultimately, instead of trying to start an enterprise that demands a bigger space, a broader concept, and a larger staff, Brigadeiro is staying small and staying focused on making the best Brazilian candy in the city.

Brigadeiro Bakery is located on Sullivan Street at the corner of West Houston.  To read more, click here.

Guest Post: Establishment of U.S. Hospitality Businesses Is a Win-Win for Foreign National Investors and the U.S. Economy and Culture

By Steve Maggi, Esq., SMA Law Firm

In the most international city in the U.S., New York City is full of ethnic businesses, especially in the restaurant industry, where every nationality’s cuisines has representative places to eat. Fueling the growth of foreign fare restaurants is the E-2 investor visa.

Immigrants with a reasonable amount of capital and a solid business plan to start a new company, or buy a business or franchise, can apply for the E-2 visa depending on their nationality(ies) and whether the U.S. has an investor treaty with their country(ies). The decision of whether to grant the visa is based on the probability of success of that business. This determination takes into account both how detailed and innovative the business plan is as well as the demand for the business’ products and/or services, as well as the amount of funding required to get a business up and running until it begins to generate revenue sufficient to lead to its growth and success. Here are some things to keep in mind about this particular visa:

  • The E-2 visa gives the applicant 5 years to form a successful business in the U.S.: The continuation of the individual’s legal stay in the U.S. is based upon the success of the business. So if the business fails, the visa is terminated and the holder must return to his or her country of origin or apply for a change of status to another visa or for a green card based on another venture, job offer or direct family relationship with a U.S. citizen or resident. The good news is that as long as the business remains successful, the visa holder can continue to live in the U.S. indefinitely. The visa can be continually renewed every five years as long as the business remains viable.
  • Only an individual with experience and/or interest in running a small business should apply: While the visa may accomplish an important goal of family reunification, it should not be used by someone who is not serious about running a business or lacks an entrepreneurial mindset. There are other potential means available for someone just looking to invest money and come here to stay with relatives, such as the EB-5 visa. The E-2 is best used by a person who wants to work hard and do what it takes to maintain a profitable business. If they lack experience sometimes a franchise model is the best one, as they are instructed and guided by the corporate entity which controls the brand, which of course maximizes the probability of success.
  • The application process is relatively simple: Many visa applications have a mandatory two-part process, ie. the petition must first be reviewed in the U.S. by immigration officials here and then, if approved, an applicant must apply for the visa itself at his or her corresponding U.S. embassy. In contrast, the E-2 visa can be applied for directly in U.S. embassies vis-a-vis consular processing, a process which is a quicker and less expensive application process, and can reduce the chance of denials (one chance of denial versus two). The application can also be done if the applicant is already in the U.S. through a change of status.
  • E-2 applicants are only be eligible if they come from certain nations: E-2 investor visas are only available to citizens from countries that have bilateral investor treaties with the U.S. Notably, citizens of the BRIICS countries (Brazil, Russia, India, Indonesia, China and South Africa) are not currently eligible for the E-2 visa. In those cases, the alternative may be EB-5 or other categories. However, it is important to point out that if someone possesses dual or multiple nationalities, that they can qualify based on just one nationality which has an existing treaty. For example, Israelis, Portuguese and Greeks (to name just a few) don’t qualify, but if they have any other treaty country nationality as well, they do.

In many situations, the E-2 visa can be a win-win situation for all involved. It leads to more businesses, which not only add to the cultural fabric of the nation in general, but also creates tangible jobs and improves the U.S. economy. Nowhere is that more abundantly clear than in the Big Apple and the its vibrant restaurant scene.

If you want more information please feel free to contact us at info@smalawyers.com.

© 2015 SMA LAW FIRM

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