Tuesday 23 January 2018

We're starting a 'street food' cafe but rental deposits can run to €40,000 - what can we do?

Feargal Quinn

Question:  My wife and I want to start an ethnic 'street food' cafe but rental deposits alone on a cafe can run to €40,000. We tried microfinance, crowdfunding, banks etc but there doesn't seem to be anywhere out there that funds startups and potential franchisors. Where can I go from here?

Answer: Thank you for your email. It is a little bit of a chicken and egg situation. It will be difficult to secure money without evidence that the concept is already working and that you have proof of trial. You will find your chances of securing finance will dramatically increase if you are able to show some concrete sales figures.

If I were in your shoes, I would try to create a pop-up version of your street food concept and operate at a number of markets in the first instance. Aside from you being able to use this as evidence when trying to secure borrowings, it would also allow you and your wife to fine tune the model based on customer feedback and experiences at the market.

In my opinion it would be a very big jump to go into a new industry and open a permanent café with all of the investment that is required without first putting a toe in the water.

I also think that it would be important for you to seek feedback on why all of the above institutions are declining your project for funding. Is it that you have provided them with insufficient information? Are they dissatisfied with the level of detail in your business plan? Have they taken a view that the concept will not work?

The answers to each of these questions will help determine how to proceed next. It will also be vital that your application is accompanied by a robust business plan where you are able to show the commercial projections, menus, operating model, marketing plan etc.

For the person making a judgement call on your application, the main piece of information they are reliant on is your business plan. If you feel this is not up to scratch or could do with strengthening, then talk with your Local Enterprise Office about providing you with a mentor who will help you formulate a business plan which will be acceptable to financial lenders.

Good luck with your journey.

Q I will be opening a second café in four weeks' time and want to make sure that the customer experience is equally good on the second site, particularly over the opening weeks. Any suggestions?

A: I remember the opening of one of our new Superquinn branches many decades ago where we made a terrible mistake.

We put big signs up on the hoardings around the shop, giving the day and date of the launch and we invited a celebrity to drum up further interest. The campaign was a roaring success. Thousands of people arrived on the opening day and the traffic in the area ground to a complete stand still.

A success one might say. The opposite was the reality. The shop became overcrowded, the checkout queues extended all the way to the back of the shop as the staff were new and not up to full speed and the car park became a nightmare to get in and out of.

The net result was we were inundated with complaints from furious customers saying they would never return to shop with us again. We had to spend a lot of money over the following four months trying to attract all of these customers back again, as their initial experience had been poor.

Never again did we promote a shop opening in advance and instead preferred to do soft openings. This gave the staff the time to build up speed and confidence and for us to work out any logistical details specific to that site.

Within around 10 days all the customers would have discovered we were busy and we were then able to cope with larger numbers.

My advice to you is to ensure that you bring a core team of people from your existing site to act as a backbone and keep things moving.

Do not promote the opening date and start with a soft opening and gradually withdraw the experienced team as the new site team gain confidence. It can be a costly error to over promote the business in its early days.

Q: I don't have a very big budget for marketing for my retail business. Can you advise on how best to invest this?

A: You will have seen me responding to a similar question in the past where I advocated the best value for money is investment in digital media activity. That advice still stands.

However there are other tools open to you in the more traditional marketing arenas.

There is relatively new terminology in recent years which refers to "disruption marketing".

As the name suggests, the focus is on disrupting or catching the customer's attention as they go about their business. One retailer known to many people, who specialises in this area is Mattress Mick. His philosophy is simple. He reminds customers at every opportunity that his business exists and points them in the direction of his location.

He has enjoyed huge awareness of his brand and retail outlet. I read recently that he used to own a taxi company as well as his mattress shop and when the taxis had come to the end of their life, he had calculated that he would probably get €500 for each vehicle.

He then decided that the cars would be of far greater value to him as mobile billboards with graphic on them promoting his business, then any money he might get for them, if selling them to a garage.

He now moves these three vehicles several times per day to different locations in the areas surrounding his shop thus catching the attention of his customers.

He has had a film made about himself, Stephen Fry tweeting about him and has appeared on many TV and radio shows as he is now regarded as somewhat of a celebrity because of his approach to promoting his business.

The reality is that he could never afford the advertising which would be needed to generate the same level of awareness.

While some of the tools you might use to promote your own business might be sophisticated and focused on online communication, others might be more basic and focused on disrupting the customer on their daily journey.

There is merit in exploring that.

Send your small business questions to himself@feargalquinn.ie

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