One of the things we do is cater into hospitals. When I was delivering an order one day, the client mentioned, somewhat seriously, that she was thinking about making the jump into catering. “Look at all the food coming into this place, look at how much you’re charging me, it’s so easy” I looked away and rolled my eyes and then replied (nicely, in a reality check type way) “The spoon I used to stir your pasta salad with was $15, the slicer I used to slice the meat with was $2000, the employee who made your food gets $18/hr plus benefits…your bill is $300, the owner is going to put about $15 in his pocket…not $300.”
And with that, someone just called in an order that needs to be delivered in an hour, I should probably go hand it to the people that need to build it.
OK. I’m curious. Tell me about the $15 spoon you use to stir the pasta salad. (Got a link to a site showing it?) I’m not doubting that it costs that much; I’m just interested in what it looks like. I’m already familiar with the $2000 meat slicer.
With all of those businesses nearby, it sounds like a no-brainer that you need to deliver.
I was in a corporate building yesterday (probably about 20 huge businesses in this one big building) and there was a flyer taped inside the elevator. It listed 5 sandwiches including a “sandwich of the week”, pricing and contact info. When I went outside there was a guy in the parking lot with a truck full of food to deliver. Seemed to me that some small deli with a very simple lunch menu cornered the market on this building and everyone wanted delivery.
Being within 5 miles of a lunch place seems ok but not having to leave your desk at all to get lunch makes me get my wallet out tout suite!
Also one thing I noticed from your last post is that you just want to throw away/give away old food. It’s a swell idea but that’s so far away from good business practice…you at least want to consider soups like SanVito said and bread pudding. Even casseroles with leftover cheese and meat bits. That food you buy is a representation of real money. You can’t just go throwing it all away.
Hi Joey, I was hoping you would show up. I will check out The E-Myth.
As to where I am getting my figures: The rent for the place is only $1300.00 per month before we negotiate it down hopefully to closer to 1k per month. They are hungry for a tenant. My husband will run the place by himself or with minimum wage help if need be. I’m allowing for utilities, wifi, insurance (I may be guessing too low, but I could also be way too high), a web site, some advertising. Plus the food.
Am I forgetting anything major? I don’t really care if I get the initial 20k we invest back. Unless I’m forgetting something, I think we can keep our expenses down to close to 5K per month. And since I only need to net 2K a month to be ahead, does it really have to be a 15K monthly nut?
I have to go to work. I’ll be back tonight for more reading. Thanks again to everyone.
My bolding. Yes: furnishing and equipping the place. Dont forget the $15 spoons. 
Just checked the Restaurant Depot site, I have no idea where I came up with $15, but for some reason that’s the number that was in my head. You’ll have to cut me some slack, I was on about 13 other calls while was typing that.
Also, to add to the $2000 slicer. I put about, let’s say, an average of $50 per year worth of parts into it and it’s only 6 or 7 years old and still looks and acts brand new, because we maintain it…and that’s because I can strip it down and drop a new $200 bearing in myself. It would cost a lot more to have a service person do it for me.
You need a business plan. You need to know exactly what all of that will cost - no estimated insurance amounts, no estimated rent (what if it goes up?), an actual headcount of how many minimum wage employees you’ll need, and if there are any minimum wage employees available, how much for a web site, how much is “some” advertising.
Those questions don’t even touch on equipment, regulations, inventory, time costs, marketing, etc., etc.
Consider defaulting on the rental property. Often walking away is best. I noticed you said you were trying to “do the right thing”. You can’t think of it in moral terms.
After spending a year or two on business plans and savings (and imagine how much you’ll save without the anchor of the rental property) I’d opt for a food truck. They’re trendy because they’re great. The concept works. You listed some potential customer bases within 5 miles, but when is the last time you drove 5 miles for a ham sandwich? You go to them. And if the spot doesn’t pay out, you can find a new spot. If there’s a nearby college, a short late night shift during bar closing hours is hugely profitable.
The key to food trucks is offering just a few things that you do really well. A big menu with lots of different perishables can sink you. Also, if there is a college nightlife scene to capitalize on, sell cigarettes at an exorbitant markup. Kids still smoke, and they will pay through the nose when they’re drunk and on foot at 2am.
Hey, your potential profit in the food industry is already razor thin. You can’t afford to let ethics get in the way. Do you know any successful restauranteurs? Would you first and foremost describe them as ethical people?
I worked in a bagel bakery-restaurant where we used the meat slicer on day-old bagels and then lightly toasted the bagel slices and sold them as bagel chips. So I agree with the suggestion of finding a way to sell stale bread and other food, rather than giving it to a charity.
I also agree with the idea of working (for free if necessary) in another deli for a few weeks or even more than a month to get familiar with the business. At the very least, you ought to be really familiar with all the standard sandwiches that people will be ordering, but you should also learn about the suppliers and how to handle customers.
Get quotes on insurance before you get started. You don’t want to guess at $500 per month and have it come in at $2700.
Also, and this is where a good CPA/financial planner can guide you, you’ll have to find out the rules for your state.
I wrote out this whole big thing (still in my clip board) about how to avoid workers comp and health insurance but a good CPA can guide you through that WRT the relevant laws for your state. The laws that allow it in Wisconsin might be irrelevant in your state, so it’s not even worth going there.
ETA, for the love of god, have your website done by a pro. Look at other people’s websites, see what you like, look at the webmasters names at the bottom, contact them, tell them what you liked, find someone local that you can call when there’s a problem. Talk to people in the area see if they like their webmasters, they’ll tell you if they don’t.
If your website sucks, people won’t look at it. Plan to spend $3-10k to get it up and running from scratch. Also, make facebook, twitter and foursquare work for you.
Oh my sweet fucking jesus NO.
The customer is NEVER always right. You will find scam artists, entitlement whores and sucky customers come out of the woodwork when you work in a service industry.
There is a huge difference between offering honest competent good service, and ‘the customer is always right’.
Get ye hence to customerssuck.com and Not Always Right and read for the next week or so.
And grow a backbone. If you have a posted policy, stick to it. Do not vary. When they whine, make sure they understand that it is not policy and stick with it. Otherwise you will find your profits pissed away at giving sucky customers gift cards, replacement foods, extra foods … As I said, there is a huge vast difference between good honest service and ‘the customer is always right’.
I’ve never owned a restaurant, but I know several people who do, and I’ve worked in a couple. I cannot stress this enough: cooking a couple of dishes for a potluck is nothing like commercial cooking.
You guesstimated 100 customers a day. Cooking for a hundred people in a day is not difficult. However, he won’t be cooking for a hundred people in a day, he’ll be cooking for 50 people in half an hour, and then doing nothing for six hours, then cooking for another 50 people for half an hour.
That’s really difficult.
Second that advice. I regularly read the Not Always Right blog and am constantly amazed. I mean, I tend to assume that since I’m not out to scam retailers and (usually) am not an idiot that everyone else is also honest and possesses some common sense. But reading those stories makes me wonder whether someone’s making up the stories or people really are that dishonest or stupid.
No.
You don’t have any experience running a business or working in a deli. Your rough plan is based on a lot of assumptions which may or may not be true. And with the kinds of financial stresses you described, sinking $20,000 into such a risky venture seems crazy.
You say your overhead will be $5000 a month and you can draw 50 customers a day (including weekends). That means you have to net about $3.50 per customer (price charged minus cost of food) just to break even. You have to net almost $5.50 per to take home your target of $2000 per month. Those are very high margins for a deli, and I think your customer projections are high, too.
And FWIW, I think you’re dramatically under estimating what it will cost just to open the doors.
My ex’s family runs a successful deli that’s been open for over 50 years. In the years we were together, I learned a lot about how it all works and there are SO many costs that aren’t factored in that need to be considered.
Here’s an off the top list of things that you need (obviously not all inclusive):
- Insurance. You’ll want liability (for when someone breaks a tooth, eats something they’re allergic to, etc. Even if it’s not your fault), property, work comp, auto (for delivery), business interruption for starters.
- Electricity
- Water
- Gas
- Tables
- Chairs
- Stainless steel equipment
- Napkins
- Containers
- To go bags
- Cash register
- Some type of order taking procedure, paper-computer
- Depends on the deli, but could include meat slicer, grill, plates, silverware, dishwasher
- Cleaning equipment
- Signage
- Refrigeration
- Oven
- Menus
- Advertising
- Lighting
- Licenses
- Drink dispenser (if you choose to sell fountain pop, this is actually one of the biggest money makers)
- Payroll company
- Taxes
- Suppliers of produce and meat (which could mean additional expenses if you want everything fresh) Sysco/Bix and all those kinds have different tiers on quality. There are also deli meat suppliers which can offer different prices and deals.
- Back up money. What happens if the counter breaks or the refrigeration goes out?
- Bathroom stuff (gotta have a bathroom and have it clean)
- Wall decoration/paint. (Gotta have ambience).
There are a ton more things I’m sure I’m forgetting.
My advice? Start very small. Work with the local health code department and get your home kitchen set up to allow commercial sales out of it (think stainless steel everywhere). Do catering of sandwiches out of your house and delivery to local businesses. If that gains traction, then think of opening up a real location.
Opening a restaurant requires A LOT of hours. More than just the hours it’s open for business.
Many good comments here, but let me add one more. You say that your husband is thinking of hiring some “minimum wage help if need be”
Oh he need be.
First there’s the issue of when this deli is open. Let’s say 11AM to 8PM Monday through Friday, and from 11AM to 2PM Saturday and Sunday. That’s 51 hours. Is your husband preparred to work that long, by himself, every single day of the week?
What about 65 hours? Because you need at least an hour before to prep and an hour after to close. Again, doing it all himself.
What about 80 hours? Because you need time to pay the bills, take stock of supplies, reorder supplies, negotiate with wholesalers or shop for the materials yourself.
What if the trash needs emptying or someone spills their Diet Coke all across the floor during the lunchtime rush? You can’t let that litigation hazzard just sit there but if your husband’s the only one working, cleaning up means no one’s available to make the sandwiches.
And is your husband also going to switch off between making the sandwich and ringing someone up before going back to making another sandwich? Because that’s really slow and i can tell you that as a customer I get extremely annoyed at how long it’s taking just to get my damn food and get on with my day.
Finally, there’s an inherent security risk in only having one person manning the entire store the whole time. It’s a prime target for robbers.
All these questions and things to think about over a simple question of whether your husband goes it alone or hires some help. Imagine what else needs this much thinking as you set up your business.
Yikes, 30 years ago where I am it cost my then boss roughly $100/sqft to open a deli/catering shop and I don’t live in a very high-cost-of-living part of the country. I can only imagine what it would cost today. What other people said, take a year and get experienced professional help developing a business plan and gaining experience in that business somewhere else then expect to be absolutley cash poor(on a personal basis) for the next 10 years waiting for the business to pay off the initial debt you will incur to start and keep alive your shop the first 5 years. If the business survives that long.
If you do open a deli please be good. A lot of them are just plain terrible. Makes me wonder how (or why) they got in the business. Awful bread. Run of the mill products. Weirdness… like weird ordering system, weird rules (NO FREE ICE), weird sandwiches, weird soup. Etcetera.
The last few posts have excellent and sobering points. Still, a food truck skirts many of these issues. Especially the tough ones like staffing and hours. A storefront has to stay open all day, while a truck can capitalize on the lunch window and drive off.
We sell a lot of soup at our store. Some of it we make here, some of it comes from food service places and some of it comes from a local soup place. This local soup places always puts weird crap in their soup, I swear they put cinnamon or curry in damn near everything but chicken soup.
In fact, every day that we have one of their soups on, the employees (and myself) will all try some and try to guess what boneheaded ingrediant they used that makes you say "mmm, this is really good—wait, WTF, ewww is that…mustard? no, curry, no…[checks ingredients] of course, why wouldn’t you put horseradish in tortilla soup.