Deciding When to Expand is Tricky For Food Industry Entrepreneurs
Published on: September 9, 2017
K. Denise Jennings, Memphis Daily News
Memphis historically has been a great place to birth a food business concept. From Perkins to Corky’s to Back Yard Burgers and everything in between, Memphis has seen many successful restaurant concepts expand beyond the city limits.
But in the initial stages of growth, how do business owners know when it’s time to expand and open a new location?
We’ve asked three local food-service entrepreneurs in different stages of expansion about their experiences.
Kelcie Hamm, owner of Wild Beet Salad Co., just opened her second location since launching her fast-food salad store concept in the spring of 2014. The first store opened in Germantown and was an immediate success.
Eric Beaty, vice president of commercial banking at Financial Federal Bank in Memphis and Hamm’s commercial banking partner, said he was a customer of Wild Beet well before Hamm was his banking customer, and he remembers every time he visited the restaurant for lunch there was a line out the door.
“It was clear she had a product with broad appeal that was in demand,” Beaty said.
Hamm, a Memphian who went to college in Manhattan to study fashion and earn a business degree, always had entrepreneurial aspirations. She just never dreamed the boutique she would open would accessorize lettuce instead of clothing.
But Hamm had fallen in love with a salad restaurant during her time in Manhattan, and after returning to Memphis she missed it and realized that maybe Memphians would like it as much as she did.
She borrowed $500,000 in startup costs from her mother to start her first store, originally called Lettuce Eat, in Germantown in April 2014. She since has changed the name to Wild Beet Salad Co. to avoid conflict with a similarly named out-of-town business and opened a second location in East Memphis in December.
“We were at a point where we couldn’t accommodate all of the catering,” Hamm said. “The profit margin was good and it was something that people were asking to be duplicated so I figured why not give it a shot and do it again.”
Hamm said she saw an average of 11 percent growth in 2015, with one month as high as 29 percent. In 2016, growth leveled off at an average of 7 percent, and since the second store has opened they have both seen an average of 7 percent growth per month.
In addition to in-store sales, the buffet salad concept is a popular lunch catering option with nearby businesses and doctors offices.
In Hamm’s best month, she saw a 14 percent profit margin with 45 percent of her business coming from catering. Catering sales are typically about 25 percent of the business, she says.
Hamm has her eye on Downtown and possibly Nashville for further expansion, but says she’ll likely spend the next year making sure that all the fundamentals remain strong at her two Memphis locations.
MEMPopS, another successful Memphis food-service story, was born out of a couple of local restaurant veterans’ desire to have more flexible schedules so they could spend more time with their families.
Chris Taylor, who worked at Central BBQ, and his wife got the idea for a gourmet ice-pop shop from Steel City Pops in Birmingham and decided they’d give it a shot. They began selling MEMPopS from a modified mail truck outside Memphis Made Brewing Co. in the summer of 2015.
The business was so successful that Taylor, who partnered with J.C. Youngblood, a fellow restaurant veteran who would handle the sales side of MEMPopS, opened a permanent store on Ridgeway in East Memphis in March 2016.
“We realized we had the potential for a new business,” Youngblood said. “It was kind of a mobile turned brick-and-mortar idea.”
“We ran the numbers before opening Ridgeway and figured if we could sell 200 popsicles a day we’d be in good shape,” he said. “Within three months we realized we shot way low on that. The demand for everything was amazing.”
MEMPopS’ second permanent location recently opened inside the new Crosstown Concourse, and they’re expanding into “boozie” pops in flavors like pina colada and margarita for social events.
Ironically, with the success of MEMPopS, the partners who thought a popsicle business would be less time-consuming than a traditional restaurant concept often have found themselves working seven days a week and sometimes up to 18-hour days in the early phases of opening of each store.
“You have to be ready to work as much as needed, especially in the infant stages when you’re setting the standards and procedures and setting the bar,” Youngblood said.
Similar to Wild Beet, the catering portion of MEMPopS’ business makes up a large portion of sales.
Youngblood said MEMPopS’ mobile truck continues going to events all around the city, and the connections they make there often parlay into more corporate or event business and even drive more traffic to the permanent locations.
While their original projection for success was to sell 1,400 popsicles a week, “there have been some weeks between the store and events where we’ve sold over 10,000 popsicles,” Youngblood said.
Along with Hamm, Youngblood concedes that some element of creating a successful business is intangible.
“I think if people knew what was going to work, everyone would do it. It requires taking a chance and putting yourself out there – and a lot of times, your savings too.”
The biggest challenge to growing and expanding a food-service business which each of the entrepreneurs we talked with agreed on is having the right people, and enough of them, in place and well-trained.
Hamm said her biggest asset was a general manager that could handle her first store in Germantown while she opened the East Memphis location, and Taylor echoed that sentiment saying, “I probably should have had more staff” when expanding to Crosstown Concourse.
“You forget what it took to get to where you were and you have to kind of start over again when you expand,” he added.
Kelsey Loebel, owner of Confections and Connections, a socially conscious bakery that donates 10 percent of its profits to local charities, is just on the verge of opening her first commercial location, and she realizes that while having a quality product is the most important element of a business, lots of other factors are involved in opening a new venture.
“Opening your own storefront is something scary and it’s a big risk,” Loebel said. “I’ve grown a good following and gotten great feedback and I’ve made sure my financials add up, so the next step is to figure out where it’s going to be and go for it.”
While Loebel has sought professional counsel from her father, a banker at Financial Federal, and from resources like the Tennessee Small Business Development Center and other Memphis restaurateurs, she knows that no matter how much preparation she takes it will be a risk.
“Businesses have been starting from the beginning of time,” Loebel said. “If you have a good product and you’re a good person and you have good customer service, sometimes you have to just go for it and hope it will work out. We sometimes make it more complicated than it is.”
Learn more about Kelcie Hamm’s company Wild Beet Salad Co. and her continued partnership with Financial Federal Bank here.
Learn more about Kelsey Loebel's company Confections & Connections and her relationship with Financial Federal Bank here.