Can an industry with small margins be Fastlane?

[Jrm_72]

Hi all,

I have not long finished reading TMF , and am very early stages of my fastlane journey. I am doing a lot of learning and courses, and trying to decide what business to start.

One of my favourite ideas is an easy, convenient, super tasty lunch store, with the idea to franchise once I have a few locations.

Pluses I see are - unlimited leverage (everyone needs to eat everyday), medium barriers to entry, wont be dependent on me working and making food all day forever, huge potential to expand. And I can start small, just doing it at weekends at farmers markets etc to test the product.

However, biggest cons I see are a lot of competition (although main rivals like Greggs and Pret are garbage IMHO), dying high street (with lots of commuters working from home now), and biggest of all, small margins per sale. I would need to consistently shift tons of product to make profit, pay staff etc, and that's the biggest thing holding me back.

So can something with small margins be fastlane? Or is it too hard to scale?

Any thoughts much appreciated. I am very new to this space but keen to learn fast.

 

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[Leo Hartas]

I don't think food is necessarily low margin at all. Food can be massive, just look at the examples you gave. Years ago I think I read the story of Pret and how they started small and scaled.

Instead of fixed locations a food van that drives around neighbourhoods where people are working from home during the week, then at events at the weekend. (I just watched the inspirational movie, 'Chef' Definitely recommend.) Bit like an ice cream van. Could add cycling 'outriders' who buzz around serving streets surrounding the van's position. This could be better than Deliveroo as the cycling distances from the van would be much shorter. With good branding the van itself is a mobile advert. Could tie into an app that gives notifications of the van's gps, along with menu, ordering and ultimately a food prep timing system on the van for a superfresh menu. It would take some upfront cost for the van, or you could hire one, or test small from a car.

btw. I know nothing about the food industry but thinking of all those homeworkers. I find it a pain to stop work to prep food. Reckon it's omelette again today!

 

[nickalden]

f&b have really high profit margins, up to 70%

 

[Kevin88660]

Hi all,

I have not long finished reading TMF , and am very early stages of my fastlane journey. I am doing a lot of learning and courses, and trying to decide what business to start.

One of my favourite ideas is an easy, convenient, super tasty lunch store, with the idea to franchise once I have a few locations.

Pluses I see are - unlimited leverage (everyone needs to eat everyday), medium barriers to entry, wont be dependent on me working and making food all day forever, huge potential to expand. And I can start small, just doing it at weekends at farmers markets etc to test the product.

However, biggest cons I see are a lot of competition (although main rivals like Greggs and Pret are garbage IMHO), dying high street (with lots of commuters working from home now), and biggest of all, small margins per sale. I would need to consistently shift tons of product to make profit, pay staff etc, and that's the biggest thing holding me back.

So can something with small margins be fastlane? Or is it too hard to scale?

Any thoughts much appreciated. I am very new to this space but keen to learn fast.

Food Business is rarely low gross margin.

I am not sure if it is easy to scale.

 

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[Peter Kay]

I don't think food is necessarily low margin at all. Food can be massive, just look at the examples you gave. Years ago I think I read the story of Pret and how they started small and scaled.

Instead of fixed locations a food van that drives around neighbourhoods where people are working from home during the week, then at events at the weekend. (I just watched the inspirational movie, 'Chef' Definitely recommend.) Bit like an ice cream van. Could add cycling 'outriders' who buzz around serving streets surrounding the van's position. This could be better than Deliveroo as the cycling distances from the van would be much shorter. With good branding the van itself is a mobile advert. Could tie into an app that gives notifications of the van's gps, along with menu, ordering and ultimately a food prep timing system on the van for a superfresh menu. It would take some upfront cost for the van, or you could hire one, or test small from a car.

btw. I know nothing about the food industry but thinking of all those homeworkers. I find it a pain to stop work to prep food. Reckon it's omelette again today!

Good insight about the food industry

 

[Jrm_72]

Food Business is rarely low gross margin.

I am not sure if it is easy to scale.

Thanks for the reply - sorry just checking do you mean rarely or really?

 

[Kevin88660]

Thanks for the reply - sorry just checking do you mean rarely or really?

Rarely. Usually gross margin is good.

 

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[Jrm_72]

I don't think food is necessarily low margin at all. Food can be massive, just look at the examples you gave. Years ago I think I read the story of Pret and how they started small and scaled.

Instead of fixed locations a food van that drives around neighbourhoods where people are working from home during the week, then at events at the weekend. (I just watched the inspirational movie, 'Chef' Definitely recommend.) Bit like an ice cream van. Could add cycling 'outriders' who buzz around serving streets surrounding the van's position. This could be better than Deliveroo as the cycling distances from the van would be much shorter. With good branding the van itself is a mobile advert. Could tie into an app that gives notifications of the van's gps, along with menu, ordering and ultimately a food prep timing system on the van for a superfresh menu. It would take some upfront cost for the van, or you could hire one, or test small from a car.

btw. I know nothing about the food industry but thinking of all those homeworkers. I find it a pain to stop work to prep food. Reckon it's omelette again today!

Chef is a fantastic movie, love it! There is a youtube series called "Binging with Babish" where he recreates food from tv and film. He even had Jon Favreau on to do some Chef cooking and Jon gave him the carving fork from the movie.

Really appreciate your input and ideas here, very valuable. Think my first task is to test whether people would pay for the food I make. At least this can be done with fairly low commitment at a market or event. My parents have a cafe that they lease so it might be something I can try out there too

 

[Jrm_72]

Rarely. Usually gross margin is good.

Ah I see, I was a little confused with coupling that with it being tricky to scale, so thanks for clarifying. I guess what I mean is, when I'm looking at selling variants of a low value product (basically grilled cheese with dipping sauce), there is a limit to what people will pay for it (even if I will be using quality ingredients and marketing on taste first), which is what I thought would create low margins when you factor in £10 an hour min wage in UK for staff.

 

[Leo Hartas]

Chef is a fantastic movie, love it! There is a youtube series called "Binging with Babish" where he recreates food from tv and film. He even had Jon Favreau on to do some Chef cooking and Jon gave him the carving fork from the movie.

Really appreciate your input and ideas here, very valuable. Think my first task is to test whether people would pay for the food I make. At least this can be done with fairly low commitment at a market or event. My parents have a cafe that they lease so it might be something I can try out there too

I never watch films more than once, except the odd classic, but Chef, I want to watch 10x. I really enjoy stories about business startups whatever the industry.

Sounds like you've already got good ideas to test your business. You can start doing the maths too. Cost of a stand at the market. Borrow cooking gear. Cost of ingredients, etc. I used to enjoy 'role playing' a business idea. Basically simulate the business on paper trying to think of of every variable you can and put them on dice rolls. That way you can get feel for possible profit margins. A cooking D&D with hungry goblins lol! I guess the toughest variable with food is the risk of wastage. You buy a 100 loaves of bread only to find the weather turns and hardly any customers pass your stand.

However! I used to live in a tiny hamlet. A couple in the hamlet built a wood fired bread oven in their garden and started baking sourdough bread and buns to sell in the area. The business went well. Then they had informal folksy pizza nights in their garden. Over a year this went bonkers. You had to book weeks in advance and this hamlet was in the middle of nowhere, almost impossible to find even with GPS. Only had a compost toilet. They then started selling courses on how to do it. It took about 5-6 years but they were able to comfortably retire.

 

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[Balkins]

Food Business is rarely low gross margin.

I am not sure if it is easy to scale.

Intense Labor and Management Issuses. Not to mention customer satisfaction can be tricky. One screw up, and you're reputation suffers...

I'd say, look to the Franchise Chains for a success model. The new chains here are
-Chipoltes
-Burger fi
-Checkers (although not new, very profitable op)

Good luck

 

[Odysseus M Jones]

My parents have a cafe that they lease so it might be something I can try out there too

Start here.
You have a ready made business that complies with all the regulations, SFBB/HAACCP (Google them), insurance, fire, first aid, corporate structure, tax, payroll, payment systems, banking...

You have equipment, facilities, supply chain...

Most importantly, you have paying customers you can market to.

If you can't convince your parents (who are in catering, know their customers and should know what sells) to give your ideas a shot, how will you convince anyone else?

 

[Johnny boy]

You don’t really know the margins yet.

If you search for “margins of a lawn care business” it comes up and says “5-20%”. I guess I missed the memo. It’s around 50% for us!

Your problem is a lack of asymmetric returns. With a brick and mortar store you are limited. If you hustle your a$$ off and have perfect marketing you may increase revenue by 20%, but with a different business you can work your a$$ off and increase revenue by 9000% percent.

With that said, I still think you should do it. A slim margin business is better than a zero margin non-business. And it’ll teach you so much in the process that it’ll lubricate your next business ideas with real skills and experience.

 

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[hexelbyte]

You don’t really know the margins yet.

If you search for “margins of a lawn care business” it comes up and says “5-20%”. I guess I missed the memo. It’s around 50% for us!

Your problem is a lack of asymmetric returns. With a brick and mortar store you are limited. If you hustle your a$$ off and have perfect marketing you may increase revenue by 20%, but with a different business you can work your a$$ off and increase revenue by 9000% percent.

With that said, I still think you should do it. A slim margin business is better than a zero margin non-business. And it’ll teach you so much in the process that it’ll lubricate your next business ideas with real skills and experience.

I think the reason why your search results whether it be "margins of a lawn care business" or "investment returns" are because of survivorship bias and skewed data.

Do you think people have a higher chance of voicing their positive or negative experience?
Ex: Bad Yelp review? Angry reddit post?

In this case the ones showing up on the search engine are the "failures" and "gave-ups".
The successful don't usually waste their time recording their success but instead focus on their success.

Also people value negative experiences than positive thoughts.
The best example is look at any of MJ DeMarco's books on Amazon.
Notice the "Most Helpful" reviews are the negative ones.

TLDR: Don't rely on blanket searches because of survivorship bias.

 

[Jrm_72]

Start here.
You have a ready made business that complies with all the regulations, SFBB/HAACCP (Google them), insurance, fire, first aid, corporate structure, tax, payroll, payment systems, banking...

You have equipment, facilities, supply chain...

Most importantly, you have paying customers you can market to.

If you can't convince your parents (who are in catering, know their customers and should know what sells) to give your ideas a shot, how will you convince anyone else?

I should clarify, my parents own the physical building, and a person pays rent to them to run a cafe in the space. But still, the point stands, its a friendly contact that might be willing to let me do a couple of specials to test out?

 

[Jrm_72]

You don’t really know the margins yet.

If you search for “margins of a lawn care business” it comes up and says “5-20%”. I guess I missed the memo. It’s around 50% for us!

Your problem is a lack of asymmetric returns. With a brick and mortar store you are limited. If you hustle your a$$ off and have perfect marketing you may increase revenue by 20%, but with a different business you can work your a$$ off and increase revenue by 9000% percent.

With that said, I still think you should do it. A slim margin business is better than a zero margin non-business. And it’ll teach you so much in the process that it’ll lubricate your next business ideas with real skills and experience.

You've hit nail on the head. I'm nearly 38, divorced with 2 sons under 7. I've got the time day to day being a part-time Dad (particularly as their Mum has decided to move three counties away for no other reason than spite but that's another story) but not time in the sense of years to mess up. I also need to earn at a min level to meet my responsibilities to my boys. Ultimately I want to be retired on 8 figures in ten years. I need to hit a home run out of the bat. But then the chances of that are practically zero, and I know it's important to fail fast. Catch 22! A lot of my learning has been on blockchain at the moment, as I am convinced it's a dot-com boom waiting to happen, but I have a real knowledge gap to close to make that a goer. But if I could make that work, that's a 9000%er for sure.

I absolutely agree that a slim-margin business is better than what I have now, which is a job I can't stand and a life not being lived!

 

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