In October, we discussed the process of conceptualizing your foodservice enterprise by reviewing the market, location, and concept components and how they fit together. This month, we are discussing what’s next in the development process: planning profits, people, and processes. Similar to before, we will review these pieces individually and how they’re interconnected.

Plan for Profit: Business—any and every—exist to make money. If your foodservice enterprise isn’t planned to make penny, the chances of success and sustainability are slim. Thus, we have to start with the financials. Once you’ve determined your concept, market, and location, you must take a closer look at your budget.

Budgeting begins with determining the following:

1. Capital Budget: based on the three pillars, you should be able to estimate the necessary capital required for construction and startup.
2. Revenue: you will need to model the following:
   1. Product Prices: Based on your concept, market, and location, determine the range of prices you will charge for your products
   2. Number of Transactions per hour: you should take traffic count from similar concepts near your desired location to determine an estimated transaction count
   3. Product Sales: based on your traffic counts, estimate the sales of each product per transaction
   4. Average Check: use the prices, transactions, and sales to determine average check
3. Recipe Costing: during menu development, it is absolutely necessary to cost your recipes to ensure that the product, price, and profit potential are aligned.
4. Labor: this is the second piece of this puzzle, and is further discussed below.
5. Expenses: Evaluate your location and concept to determine approximately what your expenses will be.

Plan your People: Next, it is important to determine what your labor needs will be. In a previous Enterprise Insight, we discussed labor costs at length. Just as in that discussion, it is important to plan ahead for your labor needs with an eye to costs, as per planning for profit.

Additionally, though, developing your talent pipeline has as much to do with culture as it does your profit and loss statement. When hiring for a new location—whether it’s the first or fifth—ensure that the team is going to fully embrace, embody, and deliver the brand and what your company stands for. Hire slowly and intentionally, and plan ahead for the needs of the organizational structure.

Plan your Processes: Equally as important as your people and profits is your process—you need to know how things will operate in order to maximize both people and profits. Thus, this piece needs to be considered at the same time as the previous two, because it is systemic.

For example, if you own a bakery, you need to understand how and when your baked goods will be restocked. This decision is both tied to and will drive the people and profit portions—not enough staff and you won’t be able to restock in a timely manner, and sales will suffer. Or, you might have too much staff, which can drive sales, but may overrun your labor budget.

All in all, this gives a snapshot of how the different components of the development process are interconnected.

“Farm-to-Table” restaurants have gone from niche to mainstream, and using local products is now nearly a rule for any restaurateur or chef opening a new enterprise. However, not every cafe needs to rely entirely on the city’s Greenmarkets in order to make an impact with local items. In this month’s Enterprise Insight, we will review three methodologies for sourcing locally and examples of each.

Generic

Sometimes, the easiest way to keep it local is simply by sticking with what you can get in each season. For Maman, a new bakery-café in SoHo, their strategy is just that; vegetable-focused fare that’s seasonally and locally sourced. The café doesn’t call out specifically from which farms their products are coming; they let the produce speak for itself. This method goes hand in hand with the café’s preference for vegetable—but not necessarily vegetarian—dishes, which we discussed earlier this month in our Retail Spotlight.

 Item-Specific

Eataly’s items might be mostly imorted from Italy, but its flour is New York State grown and milled. Obviously, the majority of Eataly’s products are coming from Italy—jams, sauces, coffee, etc—but the bakery runs on flour milled in nearby Clinton Corners by Wild Hive Farm. Wild Hive Farm owner Don Lewis sources whole grains of heirloom wheat from local farms and mills over 300 acres worth just for Eataly—roughly 3,000 pounds of local flour per week!

Programs similar to these are most common—using local ingredients for high-impact items balance the benefits of using and highlighting local ingredients with the problems of availability and seasonality. For example, a patisserie could exclusively use local eggs, and make a note of it on the menu. Bars have a huge inventory of local wine, beers, and spirits to choose from, and intrinsically must note where the beverage comes from.

Farm-Forward

The most obvious and most common form of using local ingredients is now almost a necessity. Citing the provenance of specific ingredients started back in the days of Savoy, Blue Hill, and Union Square Café getting their food from the greenmarkets. Restaurants like these put a strong emphasis on farms and the relationship between the chef and the farmers. This movement has evolved to the use of rooftop gardens, like Rosemary’s, and functioning farm-restaurants, such as Blue Hill at Stone Barns.

For many hospitality enterprises, accessibility is the biggest issue with local sourcing. Fortunately, New York State is making big progress in this area—going as far as to set up a marketing campaign around local products. “Taste NY”, as the program is called, even has a retail store in Grand Central Terminal, which exclusively sells products made in state. And GrowNYC, the agency that runs the Greenmarkets around the City, has started a local distribution company, Greenmarket Co, which delivers from farmers to wholesale customers. Whether you’re operating a fine dining enterprise that is showcasing the best in season from the best producers or seeking to bolster local agriculture on a larger scale, using regional product can drive revenue and good will.

Whenever a new fast casual enterprise, restaurant or bakery is in the works, it’s only natural to want to start with the menu and design. However, that won’t guarantee success. Foodservice businesses require more than an appealing menu in order to successfully launch and survive. They are the sum of three parts coming together to form a whole—the concept, the market, and the location. These three give and take from each other to form the tangible business.

In order to ensure the longevity of your new venture, it is necessary to start in the center, and work around:

Ultimately, the first question and last question to ask is whether the concept, market, and location are all mutually supportive and financially viable.

The Concept: What are you serving and how are you serving it? This encompasses the menu, service style, purpose and values.

Concept and Location: Does the size and location of the physical space support the concept, and vice versa?

The Market: Who are your guests? What are their wants and needs, and what job is your concept doing for them—baked goods for special events, dinner for 10, or healthy lunch served fast?

Market and Concept: Does the market exist to support your concept—that is to say, if you’re opening a healthy fast-casual lunch spot, are there enough working professionals in the market looking for lunch to support the business?

The Location: Where will the restaurant be and what is the footprint?

Market and Location: Is the location accessible to your market? In the above example, the location you choose would need to be near enough to the market of working professionals seeking lunch options in a timely window.

These three come together simultaneously—you cannot begin to conceptualize your new business without giving all three equal attention. For example, a third-wave coffee shop needs great coffee, an affluent market willing to pay for premium coffee, and a location accessible to the market with a footprint small enough to be sustainable on an $8 average check.

On the opposite end, a fine dining restaurant needs a much larger location—but the average check justifies the occupancy cost so long as the market exists—Per Se would not be successful in Detroit, no matter how low the rent.

Next time you’re in the planning stages of a new restaurant, bakery, or café, remember that the old adage of “if you build it, they will come,” is not planning for success. Success requires planning around the concept, the market, and the location.