Should My Husband and I Open a Deli?

In My Humble Opinion
1

Hi there,

I have not yet learned how to link to other threads and as I mentioned in another thread that I’m about to mention, I’m currently medicated, so I’m not sure I could learn how right this minute anyway…cause I’m starting to yawn now and I want to get this posted.

Ok, so anyhow, in a thread in Mundane Pointless Stuff, I introduced myself and mentioned that I was going to open this thread. If you want to read that, you can skip this next little part. It’s titled I changed my user name and became a member. Or something like that. Otherwise, here goes: Ok, I used to be raginghormonal, but changed my name to one I believe fits me better. And my husband and I are seeking input on our idea to open a deli. So here goes.

Some Background. My husband and I are considering opening a deli. He has been unemployed for over a year and there is not a lot to choose from in our smallish community. We may have an opportunity to rent or lease a very cute place that is almost turn key ready. We have some money to buy good quality ingredients and make the place look really nice. It is in a courtyard off of Main Street in a town of about 10K, with several other small towns around. It is a touristy town as well. I’m not sure of the numbers though.

Some of our known assets:
I’m really good with money. We are not wealthy by any stretch of the imagination, but we own our home outright. (Not that it’s worth all that much anymore.) Plus we have some savings. I’ve done bookkeeping for over 25 years, so I can keep our books and I have a very good CPA for stuff I don’t know.

My husband has always been told he is an excellent cook. This is from friends, family co-workers at pot-lucks, etc. I also have a couple of different cakes I make that I get special requests for. We watch a metric boatload of Food TV and consider ourselves foodies of a sort. This is not to claim any professional training in this industry at all. But we are clean, relatively smart, fit and healthy and willing to work hard.

I am working and will continue to do so unless it becomes unnecessary (please, please, please). So all I need to do is net 2K a month for this to keep me from touching our savings any further. Anything above that is gravy and twice that will allow me to quit my job and work the deli full time. I am very under employed, and though I’m not complaining, it wouldn’t bother me at all to work full time at the deli instead.

If I am doing my math right, I think we can succeed with as little as 50 customers a day that average $10.00 a purchase. Actually, I think that is even more than we need. But I’m just not sure If I’m considering everything that I need to and also, can we attract 50 customers a day? How can I know? This is where it gets scary for me. I’m fairly conservative. I think we can do this for about 20K. Do I risk this 20K, which amounts to about 15 months worth of our current short fall of my income vs our outgo. Or just keep working and use the 15 months for him to find work. Hope that he does.

See, here’s the kink. We have a rental home that we are probably about 60K upside down in. We are lucky enough to have tenants, so that helps, but we are still paying out about $800.00 a month over what we are collecting. We are trying to do the right thing and continue to pay the mortgage as long as we have savings left, but we are in our mid 50’s, so retirement is not exactly available too soon. We are emptying our savings at an alarming rate. Our interest rate is high because we’ve never refinanced this terrible investment since 2007. Our credit is excellent.

Ok, If you are still reading, thank you. Did I give you enough information for you to have an opinion? If not, please ask, I’ll answer anything not too private here and more private stuff in e-mail or personal messages. If yes, what do you think?

Should we go for it? I did hear on the news the other day that restaurants are one of the few industries doing ok in this lousy economy.

I welcome your input.

2

this might be suited better in an opinion forum. there’s very little factual info i can offer. from my MBA case studies:

  1. a one-branch retail eatery is risky for many reasons. one of them is the faddish attitude people take towards new retail businesses. if you graph daily sales against time, your first two months’ curve will rise steeply up from zero (introductory phase, word-of-mouth advertising.) somewhere between the third and the sixth month, the graph will peak and immediately fall just as steeply (market plateau.) if the business survives the nasty fall in sales, it will finally level out on the sixth month at a certain volume of sales and that’s how it’s going to stay as long as it’s in business. your challenge is to determine where that leveling-off will happen and whether or not you can live with that amount.

  2. the most viable location for a venture like yours (from several case studies) is where you have a captive market. what kind? be a concessioner in a school canteen, or an office, or hospital, or even a string of factory buildings. people will have no choice but to buy from you. but if you are going to try the open market, in a built-up commercial strip with a high volume of pedestrians, you’ll have existng and future competitors. and it’s always safe to assume someone is going to offer a superior and cheaper product than yours.

  3. right now, your finances don’t look too impressive for a new venture. why? because you’re already into an existing venture (leasable space.) it sounds good and it’s very viable for the long term. but as long as it still entails cash-out on your part, you might want to be more conservative with your available funds. better to have both of you working in order to assure steady cash. start a new business when the mortgage is paid and you have a place that keeps bringing in the cash. that’s the right timing.

good luck. see me after your first million, ok?

3

First of all, i wish you every success, it sounds like a very exciting venture and you wouldn’t be risking too much capital, so that’s all good.

My partner is a food retailer (fishmonger) and is also on the verge of opening her own shop, so I know exactly how you feel.

One thing I would say is that going into food retailing without any direct experience is pretty risky. There are many things you won’t have thought about. My partner wanted to start her own shop as a career swop two years ago but rather than dive straight in she has spent the last 2 years working for someone else managing two shops, experience which has been totally invaluable. I would seriously consider, in your husbands position, getting a job in a similar establishment for a while to ‘learn the ropes’. As it stands, you wouldn’t have a clue about how/where to source your stock, how to store it, best practice in customer service, marketing (vital for a new venture), how to best utilize technology for marketing and even online sales. Should you consider home delivery? Do you know anything about hygiene regulations? Staffing? It goes on – real life experience will teach you a lot in these regards. My partner has been able to test drive a number of intiatives (stock changes, marketing) on someone else’s time.

Another thing my partner has realised is very important is wastage. In a food retailer like a deli or fishmonger, stock wastage is a major issue and can have a huge impact on profits. How will you make sure you can rotate your stock without throwing loads away? Can you find a way to use the stock you would otherwise have to chuck (eg making soups to sell to passers-by from veg that’s looking past it’s best)? I have heard, as another example, that cheese is very hard to store and is a mainstay of a deli. Do you know anything about storing cheese? Sounds like a minor point, but there will be many such questions.

The other thing that is vital is knowing your market. Who will your customers be? What are their shopping habits? If everyone nearby just hops in the car to go to Walmart to get everything, then you need to find something that will make them go out of their way. Tourists, for example, don’t go food shopping, but they ARE interested in buying lunch and on-the-spot snacks, so can you cater for that with ready made sandwiches, hot soups, portable salads, even cafe tables and a coffee machine? A deli is primarily of interest to ‘high net worth foodies’ who are happy to pay a premium for a special item – what proportion of your local populace could be described as such? You may have a population of 10,000, but if 9,000 of those are on low incomes and eat microwave dinners most nights then your customer base has shrunk dramatically. This is where shop location is also crucial.

Hope that helps as a starter for ten.

4

^
nice post. one other thing that seems to mark all successful businesses is the principal’s technical know-how. the very basic requirement.

5

I don’t know anything about the ins and outs of the deli business, but I thought I’d throw this out as an idea. A deli in my small town started out in a local convenience store, the kind of place in our area that has beer, wine, liquor, basic groceries, and basic home supplies. They had space in the back that had been underused, and a young couple interested in starting a deli moved in and used the space for a year or two. Eventually they moved to their own location.

Not sure if something like that might work for you, but if you could find the right business to piggy-back on, it might make the risk lower. Just a thought.

And another thought: what about a food truck? They’re trendy nowadays, and though the startup costs to buy the truck might be higher than renting a storefront, you at least have a real investment that could be sold if it doesn’t work out.

6

I’m not an expert in any field relevant to your plans or questions, but it seems to me that liking food (and being good at making it), although essential for this business, is significantly in second place to customer service. The customer may perceive that your focus is the high quality and individuality of the food, etc, but for you, the focus will be the customer.

You didn’t say much about this in your opening post, but I’m not suggesting you’re ignoring or overlooking it.

7

^
that’s another good idea. the deli was a new offering in an existing business operation. since the convenience store already has a loyal following, it’s a good idea to offer something new.

basic lesson: expansion of an existing business is always better than developing a new one from scratch.

8

Moved from General Questions to IMHO.

samclem, Moderator

9

Buy and read Anthony Bourdain’s Kitchen Confidential.

Bourdain worked as a chef in NYC for almost thirty years. This book is part memoir and part horror story. Sometimes both at once. He’s a good raconteur and you’ll want to take what he says with a big shaker of salt but he talks at length about the perils of first time restaurant owners who decide late in life that they want to open a business because they’ve been complimented on their home cooking. It’s not pretty. It’s way more work than just being able to cook.

Good luck!

10

Thanks everyone for the suggestions. I really do appreciate it.

Mangetout, yes, customer service would also be key. We do believe that the customer is always right and that and freshness of good quality foods would be our real focus.

We did consider working at a similar type of place, but there have not been any openings that we have seen in the local paper anyway.

A couple of ideas we have: Buy a good quality food saver. This will extend the life of a lot of meats and cheeses. We will have free wifi. Food to go or eat in. We hope to work something out with a local new bakery to make our breads for us. Maybe even a specialty type that they make only for us. Bread would always be super fresh. Day old stuff could go to a local food bank or something. I think we could absorb that. We have enough start up money to allow for some decent advertising.

Other pluses…There is a good sized hospital, a courthouse, several banks, a post office and quite a few other types of places all within 5 miles. A lot of the above is within walking distance and this is a walking type of town. We would try very hard to make sure that our menu includes items not otherwise available at the other restaurant options that are near. Quick, friendly service would also be a goal. These people are on lunch. They want food served quickly at a decent price that tastes good.

Also, we are sort of trying to imitate a very successful deli that we frequented before we relocated to this area about a year ago. Granted this is a much smaller city, but all I have to do is sell $500.00 worth of stuff a day to be making more money than we are now by quite a bit. As a matter of fact, even $300.00 22 days a month would be enough for me to call it a success. The question is, can we do even that small an amount and keep the freshness and service above average? What I wouldn’t give for a crystal ball…

Sorry, I got the wrong forum for this post and thanks to SamClem for moving it to the proper place. Thanks again to everyone for your thoughts. I’d love more input.

Oh, one more thing…Where I work, there are over 100 employees. We could afford to treat everyone there to a sampling of our offerings as a way to introduce our food. A lot of these people eat lunch out every single day. Which brings up one more good point. A lot of us are always watching our weight. This type of food can be eaten on a diet very easily. I can very easily lose weight or maintain a healthy weight and still eat at this type of place weekly. I know because I did it for years. But people that are not watching their weight would also have plenty of choices.

11

Thank you Merneith. My husband is a big fan of Bourdain. I’ll pick that book up asap.

12

You are not ready to open a deli. You do seem, however, ready to spend the next year readying a business plan. DO NOT open a business without some sort of business plan. You say you don’t know the numbers of regulars vs. tourists, you have an estimate of what people would have to spend to keep you afloat, but no idea what the market says they may spend, etc. Go get “Business Plans for Dummies” and complete every word of every line - marketing, audience, employment, regulations, and on and on.

I totally know what it is to want to do something so bad, but if you don’t do it right and work on the hard part versus the fun part, you will fail, and may end up in (much) worse shape. There will always be another “almost turn-key” storefront, and the next year will not be wasted - if anything, your cooking skills will increase.

You may also want to spend the next year operating a cheap deli cart or do cake sales at a local farmer’s market. That research and contact with customers will reap huge rewards when/if you do open a stand alone store.

But please don’t put any real money into it until you clean up the situation with the rental, and have 2 years of expenses in the bank.

13

I run a deli, or rather a small store who found that the deli and catering area is bringing in the majority of the business, I can try to answer some of your questions. My father owns it, the two of us run it.

Where did you come up with these numbers? Even if you could keep the store afloat for $15,000 a month, that’s probably not going to be enough to live on. If your net profit is, let’s say, a nice generous 10%, that’s only 18,000 per year (and in all likelihood it’ll be closer to 5%) . If this was a full time job that would be about $9.00/hour. There’s no way I would get paid $9/hr and have to put up with the incredible amount of crap that comes along with owning a business.

I see Merneith recommend Kitchen Confidential. I’ve never read it, but I’ve seen it tossed around in these threads before. I typically recommend The E-Myth Revisited which basically comes down to a very simple thing. If you love to cook, go work in a restaurant (or deli). If you want to own a business, go run a business (it doesn’t matter what it is, they all get run pretty similarly). But don’t try to open a deli because you want to work in one. You’ll never have the time or energy to run it and work in it and sooner or later one side or the other will suffer.
So, that’s my advice, if he really wants to work in a deli, go apply to a few. If he just wants to cook, rent a kitchen, get certified, start cooking things, sell them to the local delis and supermarkets and let them deal with the public and employees.

Having said that, I’ll try to answer any questions you have.

14

Many years experience in the restaurant business has taught me this;

The recipe for a successful eatery is exceedingly simple; Good food, good service, nice atmosphere/location.

Unfortunately, there are, literally a thousand ways for it to go south, even with those things in place and functioning. Restaurants opened by people with no experience almost always fail. Even when they have purchased an already established business. I’ve seen it first hand, many, many times.

Running a restaurant is enormously time consuming, the amount of hours it takes is far more than you imagine. And it takes many more skills than being a good cook, or liking people, believe me.

Before you risk your security, one of you needs to get a job in a restaurant for 6 months and then reevaluate your plan.

I wish you nothing but luck, I think you’re really going to need it.

15

The OP is talking about a deli which is totally different from a restaurant so I don’t want to go off on a tangent, but this statement is why so many chefs and restaurant owners wind up divorced.

16

looks like Joey P came in with a healthy dose of reality. 100+ customers a day each making $10+ purchases? cripes. and i just came in to suggest you should sell funnel cake, yogurt parfaits, and strike up a deal with the local high school supplying them with pre-game meals for the athletes.

17

I think there are several episodes of “Kitchen Nightmares” (British version) that are extremely instructive on the problems faced by owners who are not experienced in running a food business, or think that home-cooking methods will translate to a restaurant environment.

ETA: my parents work together in their own business (not food related) and it has come close to ending their marriage on many occasions. Think long, and hard about working together. Have frank discussions, now, not later.

18

I just want to reinforce what most people are telling you: it is very important to get some hands on experience before you commit. If there aren’t any jobs locally, go to a nearby city/town and ask the owner if he would be willing to let you work (for free, if necessary), even if for a short while, and talk to you about his business.

You’ll learn a lot and it will give you some real perspective.

19

Note that you can sell $300 or $500 worth of goods each day and still go bankrupt, if your costs are higher than that. Do you know anything about where you’d buy deli meats and cheeses? As someone mentioned, do you know anything about the food hygiene regulations?

On the other hand, you could get quite a bit of business from the businesses you mentioned, particularly if you can provide catering for business meetings.

20

This can be true, but to counter it, Mrs Nine and I have worked together for many years, and I’d say it has strengthened our marriage. We know several couples who feel the same. But, you do have to be a particular sort of couple to withstand living in each others’ pockets 24/7.