NY Times Looks at a Startup Cafe

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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