How to Open & Operate a Financially Successful Specialty Retail & Gourmet Foods Shop

How to Open & Operate a Financially Successful Specialty Retail & Gourmet Foods Shop

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Table of Contents

Introduction

Chapter 1: For Those Who Love Elderberries and Fine Cheese — Starting Your Own Gourmet Store

Solidifying your vision

Ways to Explore Your Passion

What Do You Want Your Store to Be?

Visuals

Products

Niche Markets

Case Study: Rebecca Miller

Limiting Your Offerings

Size and Location

Goal-Setting

Creating Your Dream Store

Chapter 2: Getting Down to Practicality — Launching Your Business

Jump-Starting a Business

Starting From Scratch

Chapter 3: Making It Your Own — The Basics of Buying a Gourmet Shop

Real Estate and Its Value

The Value of Other Assets

Goodwill

Terms, Conditions and Price

Initial Investment

The Biggest Cost of All

Strategies for Buying an Existing Gourmet Food Business

Evaluating the Merchandise

Cash Budgets

Your Objectives

Financing

Borrowing Money

How Your Loan Request Will Be Reviewed

Closing the Sale

Chapter 4: How to Get Support Without Being Hampered — Investing in a Franchise

Definition of Franchising

Advantages of Franchising

Disadvantages of Franchising

Franchise Financing

Evaluating a Franchise Opportunity

Chapter 5: Planning for Success — Writing a Business Plan

Five Keys of Success

What a Business Plan Includes

A Sample Business Plan Outline

Elements of a Business Plan

Business Description

Products/Services

The Location

Location = Customers

The Marketing Plan

Customer Demographic Research

Competition

What Will You Sell to Customers?

Pricing

Advertising and Public Relations

The Management Plan

The Financial Management Plan

Operating Budget

Business Plan Resources

Chapter 6: Boots on the Ground — Pre-Opening Activities

Governmental Laws, Regulations and Licenses

City Business License

Opening the Store’s Bank Account

Organizing the Pre-Opening Activities

Pre-Opening Promotion

Contacting Purveyors and Suppliers

Opening Labor

Public Utilities

Phone Company

Wireless Provider

Gas and Electric Companies

Water

Security Needs

Locksmith

Fire and Intrusion Alarms

Support Service Providers

Sanitation Service

Parking Lot Maintenance

Plumber

Electrician

Refrigeration Service

Exterminator

Plant/Landscape Maintenance

Heating, Ventilation and Air-Conditioning

Janitorial Service

Coffee Service Vendor

Florist

Chapter 7: Your Greatest Asset — Successful Employee Relations

The Value (and Cost) of Employees

Hiring Store Employees

A Shortage of Service Labor

Key Points for Conducting Employment Interviews

Unlawful Pre-Employment Questions

Screening Potential Employees

What to Look for in Potential Store Employees

The Final Selection and Decision

Rejecting Applicants

Employee Handbook/Personnel Policy Manual

Writing Your Employee Policy Manual

Personnel File

Training

Orientation and Instruction

Outside Help With Training

Evaluating Performance

Scheduling

Terminating Employees

Letting Them Go

Managing Your Team

Chapter 8: The Reason You’re in Business — Your Customers

Who Are Your Customers?

People, People, People

Presence

Getting to Know Your Customers

Appreciation

Bringing in New Customers

How to Keep Customers Coming Back

Communicating with Your Customers

Customers for Life

Incentives

Discounts

Promotions

Frequent-Buyer Programs

Delighting Your Customers

Expectations

Ways to Delight

Word-of-Mouth Advertising

Points of Difference

Your Staff Makes the Difference

Motivating Your Staff

Focus on Making Your Customers Happy

Chapter 9: Getting the Word Out — Marketing Your Business

Hiring Marketing Experts

Do-It-Yourself Marketing

Guerilla Marketing

Desktop Publishing Applications and Ideas

Yes, You Need a Good Website!

Setting Up an Effective Website

Hiring Web Pros

Some Words of Caution

Find Support With Suppliers

Band Together

Investing in Customers

Calculating Your Customer Acquisition Cost

Customer Investment

Advertising

The Most Eyes

Your Advertising Effectiveness

Chapter 10: Public Relations — How to Get Customers in the Door With Little Cost

What Is Public Relations?

What PR Does (and Doesn’t Do) for You

PR is Different From Advertising

The Marriage of PR and Marketing

Launching a PR Campaign

Start Your PR Campaign Now

How to Apply Your PR Plan

Creating Your Press Kit

What’s News?

Choosing Your PR Contacts

Developing Allies

Special Events

Talking to Your Community

Employee Relations Is Also Public Relations

Planning for the Unforeseen

Chapter 11: From Appliances to Zucchini — Choosing Your Sales Mix

Food

Making Choices

Lasting Trends

Case Study: Amy Isabella Chalker

Going Natural

Local Foods

Your Niche

Sweets

Beverages

Selling Food Prep, Storage, and Serving Items

Food Equipment

Professional Equipment

Specialty Equipment

Cooks Love Gadgets

The Basics

Beyond the Basics

Shopping

Chapter 12: Helping You to Do Your Job — Equipping Your Store

Equipment Budgeting

How Do I Keep Within My Budget?

Buying Used Equipment

Leasing Your Equipment

Making Wise Equipment Purchases

Which Quality Level?

Service Contracts

Equipment Records

Retail-Specific Equipment, Tools, and Supplies

Displays and Fixtures

Wall Fixtures

Freestanding Fixtures

Showcases

Package It Up

Cash Registers

Computers-How to Use and Profit from Them

Business Computers

Retail-Specific Computer Systems

Employee Scheduling and Attendance Software

Accounting Software

Other Computer Uses

Chapter 13: A Welcoming Space — Public Areas of Your Store

Creating a Design Focal Point

Exterior Areas

First Impressions

Covering Your Floors

Up Above — Ceilings

Let There Be Light

Colors That Complement

A Little Artwork

Your Restrooms

Front-of-the-Store Work Areas

Senses Check

Create a Presentation

Window Displays

Shelving

Chapter 14: A Place to Get Things Done — Back-of-the-Store Work Areas

Delivery Areas

Storage

Waste and Recycling

Your Office

Chapter 15: Attending to What’s Important — Creating a Safe and Productive Work Environment

Food Safety and Security

Protecting Your Customers and Employees

A First-Rate Facility

Bugs, Insects, and Animal Pests

Fires

Wash Areas

Storage Areas

It’s Good to Be Green

Conserving Energy

The Air We Breathe

Drinking Water

Chapter 16: Creating a Team — Your Store Staff

Retail Operations Manager

Customer Service Staff

Teacher/Demonstrator

Cashier

Stocking/Inventory Assistants

Chapter 17: How to Get What You Want — Purchasing Inventory

Before a Single Item Is Purchased

Create Wish Lists

Working with Vendors

Ask and You Shall Receive

Inventory Levels

Issuing

Identifying Inventory Theft

Chapter 18: All About Money — Cash Flow

Managing the Store’s Cash Flow

Being Paid

Cash Handling

Counterfeit Bills

Foreign Currency

Travelers’ Checks

Checks

Debit and Credit Cards

Other Forms of Payment

Chapter 19: Accounting 101 — Financial Management and Budgeting

Accounting Software

Budgeting

Monthly Budgeting

Total Sales

Tracking Sales Growth

Sales Categories

Labor

Payroll

Controllable Operational Costs

Services

Utilities

Fixed Operating Costs

General Operating Costs

Total Net Profit

Chapter 20: Balanced Budget — Basic Cost Control for Retail Operations

Operational Costs and Supplies

Ordering Operational Supplies

Beginning Inventory

Make More by Spending Less

Interpreting the Numbers

Penny Wise, Pound Foolish

Setting Standards

Cost Ratios

Pricing

Psychology of Pricing

Financial Analysis

Shrinkage

Purchasing and Ordering

Chapter 21: Efficiency — Controlling Your Labor Costs

Manage Time Wisely

Creating Productivity

Design and Equipment

Efficient Work Areas

Chapter 22: Moving On — Leaving Your Retail Business

Relocating Your Business

Your Exit Plan

Passing On Your Business

Grooming Your Replacement

Selling Your Business to Your Employees

Saying Good-Bye

Appendix A: Resources — Build Your Own Network

Bibliography

Photo Credits

Glossary

Introduction

When this book was first published, dial-up Internet was the way to surf the web, and e-commerce was still very new.

While the essence of the principles and suggestions has remained the same, in this revised edition we have updated the content to reflect changes in technology, changes in the specialty food industry, and the need for personal, specific testimonies from specialty shop owners who have taken the path that you are considering. The companion CD contains a multitude of updated sample forms that will help you keep accurate records and be efficient in managing your business.

The last few decades have shown that specialty food in America isn’t just a trend — it’s a growing industry that is an important part of the economy. It doesn’t matter that specialty or gourmet food is often more expensive and less necessary for survival than mainstream food. Customers just like higher-quality olives, and although elderberry liqueur is not a food staple, people will go out of their way to buy it.

Why do people like specialty food? By definition, specialty food is something out of the ordinary. If it were the cheapest, most generic version of a product, it would be mundane — the definition of ordinary. Basing a food industry on what is unique allows for a lot of creativity on the part of producers and consumers.

Specialty food can mean many things — the product could be:

• From a far-flung geographic location (maybe the food being sold only grows overseas and not in the U.S.),

• Of high quality (it could be one of the finest cottage cheeses in the U.S.),

• Very rare (maybe the food or product is only available in small quantities because it’s difficult or expensive to produce, or maybe it’s unique to a particular region of the world),

• Eco-friendly, natural, or organic (butter could be a specialty when it is made in an unusual way that is especially careful of the environment),

• Made locally (cupcakes can become more exciting when they are made only using ingredients from farms within a 20-mile radius of the bakery),

• Produced in a unique way (this could include everything from packaging to presentation to the way the food was cooked),

• Used in the cuisine of a certain country or ethnicity (Mediterranean specialty food is popular in the U.S., for instance),

• Prepared according to the specifications of dietary rules in certain religions (the food could be halal or kosher),

• Free from certain ingredients that many consumers are allergic to or prefer to avoid (gluten-free, lactose-free, and GMO-free products are increasingly common),

• Especially healthy in some way (probiotic-rich food is all the rage these days in specialty stores).

A briefer definition comes from the Specialty Food Association’s State of the Food Industry in 2016:

Specialty foods are defined as goods or beverages of the highest grade, style, and/or quality in their respective categories. Their specialty nature derives from a combination of some of all of the following qualities: uniqueness, origin, processing method, design, limited supply, unusual application or use, extraordinary packaging, or channel of distribution/sales.

Thousands of customers are ready to experience food that reflects inventiveness, creativity, and passion.

That’s the good news, and that’s where you come in. If you’re reading this book, you’re passionate about specialty food. Maybe your grandmother had some recipes with unusual ingredients that you think others would appreciate. Maybe you just really enjoy talking about and tasting unique varieties of olive oil. You want to learn how to share your delight in gourmet food and make a living while doing so.

But here’s the bad news — it’s hard for you to do that with a shop of your own. According to the Specialty Food Association’s report, the majority of specialty food sales come from large mainstream retail stores — four-fifths to be exact. Kroger® is already selling fancy gourmet products, and many people may not want to stop at a separate store geared toward more exclusive products if they can make one stop at Kroger® and get those items along with their household necessities.

Further bad news is that specialty food sales through food service are growing faster than retail sales: 27 percent versus 19.7 percent, respectively. In other words, if someone wants to eat gourmet savory yogurt, he or she might go to a restaurant and have it as part of a meal rather than buying a container of it at a gourmet store.

And it isn’t exactly specialized knowledge that starting a business of any kind requires a lot of money, hard work, and ongoing compliance with state and federal regulations.

Entering into the specialty food industry with a retail store comes with its own difficulties. You need to be clearheaded and understand that specialty sales accounted for less than an eighth of total food sales in the U.S. in 2015. In the same report, the Specialty Food Association (or SFA) states that the specialty market has grown into a $94 billion industry. But with overall food sales close to $800 billion including specialty food sales (according to the Organic Trade Association in 2016) the biggest distributors and money-makers are not specialty food retail stores.

But don’t be disheartened! This is where we come in.

First, the growth in sales from specialty food stores is not slackening. Between 2013 and 2015, the SFA report states that sales in retail stores increased by 20 percent.

Second, there are more ways than ever before to sell products you find or make yourself. The vast majority of specialty food manufacturers sell their products online, through a variety of means, from Amazon to Facebook.

Despite the growth in specialty sales through food service, manufacturers prefer to sell via retail — at least for now. As the SFA puts it, Manufacturers say retail sales — whether through distributors or direct — are their biggest and fastest-growing sales channel. However, they are enjoying success via the foodservice market as well.

Third, there are many opportunities for you to explore. Researchers have documented potential niche markets and trends that entrepreneurs like you should take advantage of.

Pre-made snacks or ready-to-drink beverages were a big trend among specialty food products in 2015. Selling a product that is convenient — and not just gourmet or unique — is a great way to get sales.

Also, non-GMO products are set to become a major market. Nearly half of specialty food manufacturers are planning to introduce non-GMO items in 2016, according to the SFA report.

Fourth, opening your own store is most likely a better path than trying to make a product and sell it to manufacturers. According to a 2012 report prepared by the Canadian government on the specialty market in North America: [S]upermarket share of the industry is actually shrinking, and it is specialty and natural food stores that are driving sales growth in the market. This trend may also benefit small producers and exports, as these store formats may provide easier market entry than trying to supply to large supermarkets.

Don’t worry if you find this big-picture outlook overwhelming. Maybe your friends have told you that your strawberry jam is the best they’ve ever tasted, but the idea of setting up your own website (not to mention researching niche markets and trends) stresses you out.

You just want enough people to buy and enjoy your jam for you to make a living!

The Specialty Food Association emphasizes that simply being local is one of the most important ways for food to be considered a specialty.

The bottom line is this: You can find a way to make your products exciting and unique, through either manufacturing or marketing, or perhaps both. This book will help you decide if you want to have a full- or part-time job in your very own retail store.

Chapter 1:

For Those Who Love Elderberries and Fine Cheese — Starting Your Own Gourmet Store

Economic fluctuations aren’t deterring the growth of the specialty food industry, which grew 13.7 percent between 2013 and 2015, according to the SFA. In fact, budget-trimming for some folks means dining out less and creating gourmet meals at home instead. This shift in spending means business opportunities for you!

Operating an independent retail store is hard work. Your success depends upon your entrepreneurial skills along with excellent research. Realizing your dream can be an exceptionally rewarding endeavor — personally and professionally. The ingredients for success go well beyond an elegantly appointed store or the best names in cutlery; they are a complex blend of passion, vision, risk-taking and business acumen.

Solidifying your vision

Your dream of owning your own business sparks your quest, but creating a solid vision of how you want to accomplish your dream is the foundation of success. Creating a vision will help you write your business plan, sell your concept to lenders and potential investors, and communicate your desires and needs to architects, contractors, designers and suppliers.

Below are some ways to help you solidify your vision. This understanding will help you make decisions when faced with compromises, budgetary problems and unforeseen obstacles.

Ways to Explore Your Passion

• Close your eyes. Can you see your dream operation? Are the glass displays filled with artfully arranged cooking utensils? Are the spices and oils carefully arranged according to color? Do regulars come in just to see what is new? Do people enjoy tasting your samples? These images all represent your passion.

• Take a few hours of uninterrupted time to think over your personal and financial reasons for committing your energies and your nest egg. Will you be taking on a partner or tying yourself to a long-term loan? It takes time to become profitable. Are you financially and emotionally prepared for this investment?

• Create a list of the positives and negatives of being in business for yourself. Every venture has risk, or negatives, but the positives should outweigh them. If your entrepreneurial spirit is not dampened by the potential risks, your next step is to give your vision a voice.

• Determine what talents you can bring to the process. Do you love searching for exciting new food products, or are you more interested in selling? Do you want to let hired design professionals handle the details, or do you prefer to be consulted on every detail from the front door to the receiving door?

• Be creative and effective with your use of technology. Have an idea of how you are going to market yourself. Will you set up a Twitter account for your new store? How should you design a Facebook page to get the most likes? Could you post videos on YouTube about your store?

What Do You Want Your Store to Be?

Since you are reading this book, we can assume that you are a foodie — someone who reads cookbooks, enjoys trying new restaurants, has all the latest cooking gadgets, or travels 85 miles round trip for the perfect loaf of French bread. In other words — you have the passion!

Now turn your thoughts to selling your passion. What do you want to sell, and how will you go about it? Retail stores come in many different sizes, shapes, and styles, and there are thousands of choices on what you could stock and how you could present it.

Before you can start developing your business and marketing plans (see Chapter 5), you need to sit down and write a thorough description of what your store will look like, what kinds of products you will carry and who will want to buy these products. Every decision from this day forward will be based upon that definition. However, because this definition is based upon assumptions and unknowns, you will be redefining and fine-tuning it along the way. If you do not revise this definition, it probably means that you have not thoroughly researched your business prospects and customer needs.

Remember, this is a definition from the heart — not based on research at this point. When you close your eyes, can you mentally walk up and down the aisle and see what your customers will see?

Write a one-minute elevator pitch. If you found yourself in an elevator with a wealthy investor, how would you describe your vision (and secure the cash) in the time it takes to travel up 20 floors? Show your passion while emphasizing the tangible benefits.

Visuals

Imagine what your store will look like — this is called merchandising. How you merchandise your products directly affects the crowd you attract, creates perceived values of your wares and increases your sales per customer visit.

Your store should reflect your personality and your interests. If you love home-style foods and sunflowers, your store could have a casual, comfortable feeling. If you are a dress for dinner person, perhaps the classic black and white (with a dash of red) is more like a store you would want to share with others.

When you research your ideal customer and demographics, you will need to be certain that your merchandising style suits their expectations. If your style does not connect with your potential customer base, they will not be coming into or returning to your store. You may find that your store’s appearance needs to change somewhat. However, be aware that creating a store that feels alien to you may be a warning sign.

Your product offerings may demand a specific look. For example, a store featuring hot stuff begs for a stimulating red décor. We will discuss merchandising and theme décor in Chapter