NY Times Looks at a Startup Cafe

by Tim Berry / Entrepreneur.com
Thursday, January 3rd, 2008 at 3:49 am

Whoops, I’m sorry. I linked to the first of this series when it came out, but I was caught in a holiday mood on Dec. 19 when the second one was published. This is a series by Brent Bowers in The New York Times looking at three startups, first now and then six months later.

I posted about the first one in this blog Dec. 13, in a post called A Look at a T-Shirt Business Startup. The source story for that was An Enthusiast Entrepreneur Kicks Off a T-Shirt Business.

This next one is about a new cafe: Cafe’s Growth Is Promising, but There’s That Lack of a Stove. It tracks how sales shot up pretty quickly as the cafe opened, but so did payroll. Founder Caitlin Adler has sales and expenses in control now, just a few weeks after opening.

Before November was out, the weekly tally was edging toward $7,000, beating projections by $1,000. By then, Ms. Adler had introduced Sunday brunches, added upscale soups and sandwiches and treats like $6 lemon meringue tortes and $5.50 chocolate praline mousse bombes and increased her full-time and part-time staff to 14 from five. She was also offering “open mike” nights for customers to sing or do comedy acts, a staple of the previous owners.

But the problem, Ms. Adler said, was “payroll.” It shot up to a peak of $11,000 a month in November, double her projections, forcing her to dip into an emergency line of credit–new cash infusions from her parents, who are bankrolling Sweet Bites. (She and her boyfriend, Chris Vuich, who runs the non-pastry side of the menu, have yet to pay themselves a salary.)

She’s in better shape now …

This week, the 25-year-old Ms. Adler was feeling even better. Weekly sales are now above $7,000, and she has cut back her staff, reducing monthly payroll to $9,000, which for the first time she can meet on her own. To woo more customers, she plans to install a prepared foods case after Christmas and begin wine tastings in the spring.

A month ago, she was forecasting revenue of $10,000 to $12,000 a week by June; now, she projects $12,000 to $15,000.

Like most entrepreneurs, she has had brushes with Murphy’s Law. She started Sweet Bites in October 2006 as a wholesale maker of gourmet brownies, but found she could not compete at craft fairs with vendors of cheaper chocolate-covered apples and fudge. “The lesson I learned was: Find the right market,” she said.

At the Sweet Bites cafe, she has been dogged by other surprises. She had to postpone the opening by 10 days, for instance, to hire plumbers to plug hidden leaks and electricians to repair faulty wires, and she is frustrated by how much time she has to spend paying bills and doing other office work.

It’s an interesting review of the new business, along with some expert opinions. I was particularly impressed with advice about bookkeeping (get somebody else to do it) because it isn’t as obvious and might be just as important. Also, a loan from her parents, with the threat of her father taking over 50 percent of the business if she doesn’t repay it.

First, she has to turn a profit–a daunting challenge, according to Mr. Foley, the restaurant consultant. “You never make money the first year,” he said. “You rarely make money the second year.”

Complicating matters, Ms. Adler has to start paying back hefty loans from her parents–interest-only for five years, then a lump sum remittance of the principal. If she fails to meet those terms, she has agreed to make her father a partner.

“Will his stake be 50 percent?” she is asked. She frowns. “I don’t know about 50 percent,” she replied.

I like Brent Bower’s premise. He’s introducing three startups now, then visiting them after six months to see what’s changed.

I’m looking forward to meeting the third company, and the follow-up stories six months from now.

Continue to read Tim's blog >BackTrack<

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