This might be time to start food business
By Laura Raines For the AJC Your cakes and pies bring rave reviews, and you’ve thought…
Georgia (Jan 3, 2011) — By Laura Raines
Link To Articlehttp://www.ajc.com/business/advice-for-food-business-789832.html
For the AJC
Your cakes and pies bring rave reviews, and you’ve thought of bringing them to market. But is this the right time to start a food-related business? That depends on your business savvy.
Living in Ghana and California, Cecilia Washington grew up cooking for family and friends and savoring the flavors of West Africa. In her teens, she adopted a healthy diet that was organic and vegan. She began experimenting with alternative baking methods and nontraditional ingredients years ago, when she realized that friends with food sensitivities could rarely eat sweets.
“I think that people with gluten intolerance, food allergies or other health issues need treats, too,” said Washington.
“The idea for the business came when I was between financial services jobs. I visited stores and discovered that no one was catering to vegans and gluten-intolerant people in the refrigerated section.”
She saw a niche where she would help others, but she took her time creating her products and testing them. She continued to work in the financial sector, while studying culinary arts at the Art Institute of Atlanta.
“I thought that was the quickest way to learn about this new industry I was entering and to get constructive feedback from professionals,” said Washington.
Washington opened Cecilia’s Bakeshop in late 2006, specializing in all-natural, vegan, wheat-free and gluten-free desserts. With her Atlanta-based business, she sells her signature refrigerated cookie dough to stores like Whole Foods and her cakes and raw pies to customers by appointment. “I’m continually building the brand through store and food event demonstrations. Just because your product is on the shelves doesn’t mean you have it made.”
Washington self-funded her business through savings, and her financial expertise paid off.
“I knew how to manage my costs and how to price products. I knew I couldn’t sell my chocolate cherry cookie dough at $4.99 and make a profit,” she said. “When you’re making a premium product, your food costs are high and your margins low.”
She saves costs by shipping with other bakeries and does many jobs herself. She hires part-time workers as she needs them.
“If you start a business when the economy is down, you have time to build your brand. You could do the farmers market circuit,” said Washington. “Then you’ll benefit when the economy takes an upswing.
“Having a unique product distinguishes you. … If it tastes good, people will follow.”
Everyone needs to eat, so it’s not surprising that many of the top business startups each year are food-related, said Gary Roberts, professor of management and entrepreneurship at the Coles College of Business at Kennesaw State University. He sees a ready market for food businesses even in this economy since 90 percent of the work force is still employed and going out to eat is a relatively affordable luxury.
“The key is finding a very specific niche that no one else is doing and realizing that it is a business. You need a good business plan,” he said. “The ‘me, too’ ideas generally fail. We don’t need another coffee shop like Starbucks -- that model is working well.”
Roberts first heard the business idea for High Road Craft Ice Cream & Sorbet a year ago from two students in the KSU executive MBA program where he teaches entrepreneurship.
“I knew it was a real winner because it was a business-to-business model, and they both had good expertise. One partner was a chef and knew the industry. The other had the sales and marketing experience,” said Roberts.
Keith Schroeder saw the need for high-quality, custom-made ice cream for Atlanta chefs in 1995 when he graduated from culinary school at the Art Institute of Atlanta, but his career took him to restaurants around the country.
“When I came back to Atlanta, the opportunity was still here,” said Schroeder. After 9/11 and the recession, restaurants saw cuts in budget and staff, yet top restaurants still wanted to serve signature desserts.
Schroeder knew that organic, premium ice cream or sorbet in flavors custom-blended for a restaurant would fit the bill in a cost-effective and time-efficient way. He was equipped to whip up signature flavors like Bourbon Burnt Sugar and Asian Pear, “but I enrolled in Kennesaw’s executive MBA program to gain more skills before venturing into business on my own,” he said.
For the MBA capstone project, Schroeder teamed up with fellow student Hunter Thornton, who had seven years of experience in corporate sales. Thornton admired Schroeder’s drive.
Still, it would take 38 iterations to perfect their business plan. Seeing that they meant business, Roberts connected them with university resources. “Lydia Jones in the Small Business Development Center [at KSU] got us on the phone with other small-business owners who had succeeded and failed. She also helped us line up equity investors,” said Schroeder.
Charles Hofer, the Regents Professor of Strategy and Entrepreneurship at KSU, worked with the team to prepare them for a national venture capital competition at the University of Nebraska. High Road Craft took first place and earned $7,000 for the business.
“Getting our business plan in front of experts who would beat it up and make it better was some of our best learning,” Schroeder said.
Schroeder and Thornton launched their business on Halloween and had made their sales quota and signed 30 restaurant, convention center and catering clients within a month. They were on track to double sales in their second month.
The success or failure of a food startup depends on a sound idea and the owner’s skill and understanding of the market, said Roberts. “Location is important, and having enough capitalization at the start is critical, but if someone is careful and meets business criteria, this could be a very good time to start a business,” he said. With investors in place, Schroeder and Thornton found that commercial rent and equipment-leasing costs were lower than expected.
Schroeder advises future entrepreneurs to spend time refining their business plan and to thoroughly understand the regulatory hurdles in the food business. “There are labeling, packaging and marketing issues to be overcome,” he said. “But there are so many free resources out there.”
Some resources include The Edge Connection (for micro-enterprises), the Georgia Small Business Development Center Network, and academic business faculty and entrepreneur programs in universities.
A leader in innovative teaching and learning, Kennesaw State University offers undergraduate, graduate and doctoral degrees to its nearly 43,000 students. With 11 colleges on two metro Atlanta campuses, Kennesaw State is a member of the University System of Georgia. The university’s vibrant campus culture, diverse population, strong global ties and entrepreneurial spirit draw students from throughout the country and the world. Kennesaw State is a Carnegie-designated doctoral research institution (R2), placing it among an elite group of only 6 percent of U.S. colleges and universities with an R1 or R2 status. For more information, visit kennesaw.edu.