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The small business owner has a gelato product that is persistently rated #1 in every Magazine and zagat rating.
The ingredients are imported from Italy, freshly made every day, produced by an Argentinian chef who has been producing the product for years, produces cakes and even to-die-for smoothies and malts.
The place is absolutely packed. The store inside design is a replica of something you would see in St marks in Venice.
The problem is due to some poor cost management...rent costs that have gone up ....extremely high expense overhead ...and the packed crowds are not bringing in sufficient revenues to balance costs of space and costs of compliance with regulations, interest on borrowings, etc
Due to price elasticity, there is no hope for raising the price of the product as this will reduce marginal revenue by reducing quantity demanded more than the revenue per quantity sold
The business is turning in high crowds but behind the scenes, operating at a loss
What are viable options to protect the owners of this business from inevitable bankruptcy if the business is unsellable?
In a nutshell, you are looking at a novelty store with a huge loyal customer base and a financial disaster all in one.
Another of your fictitious business stories. The answer is this business doesn't need or deserve protection of any kind. It should be allowed to fail if that is how it turns out.
There are no options, but bankruptcy. Gelato melts, and as fast as your customers eat it. These franchises - promoted as a road to riches - are a fraud.
No it's doing well it's just a cost containment problem. It's a fine product... Nothing failing here is due to direct product costs. The problem is the cost of running the space and that bank interest
There are no options, but bankruptcy. Gelato melts, and as fast as your customers eat it. These franchises - promoted as a road to riches - are a fraud.
It's not a franchise. It's a single family-owned store
There is absolutely no reason whatsoever to import ingredients for gelato from Italy. Ingredient costs could be reduced by 75% right there, by usng domestic products as ingredients. There is nothing in gelato that is so complicated that special ingredients must be paid for.
Another of your fictitious business stories. The answer is this business doesn't need or deserve protection of any kind. It should be allowed to fail if that is how it turns out.
Not asking for business protection. Asking for recommended courses of actions the business owners should consider to minimize loses.
Location: East of Seattle since 1992, 615' Elevation, Zone 8b - originally from SF Bay Area
44,585 posts, read 81,225,683 times
Reputation: 57823
I closed my business when the economy took a toll on my customers and at the same time the landlord wanted to raise the rent 30% due to "rumors" of a redevelopment project coming to the area that never happened. Since my lease was up I moved it to my home, and delivering still cost way less than the rent would have been. Obviously that wouldn't work for a Gelato business, but if it were me, when the lease expired I would invest in a food truck with freezers and run it that way.
Much less overhead after the truck is paid for, and they can go where the customers are to take advantage of crowds.
The small business owner has a gelato product that is persistently rated #1 in every Magazine and zagat rating.
The ingredients are imported from Italy, freshly made every day, produced by an Argentinian chef who has been producing the product for years, produces cakes and even to-die-for smoothies and malts.
The place is absolutely packed. The store inside design is a replica of something you would see in St marks in Venice.
The problem is due to some poor cost management...rent costs that have gone up ....extremely high expense overhead ...and the packed crowds are not bringing in sufficient revenues to balance costs of space and costs of compliance with regulations, interest on borrowings, etc
Due to price elasticity, there is no hope for raising the price of the product as this will reduce marginal revenue by reducing quantity demanded more than the revenue per quantity sold
The business is turning in high crowds but behind the scenes, operating at a loss
What are viable options to protect the owners of this business from inevitable bankruptcy if the business is unsellable?
In a nutshell, you are looking at a novelty store with a huge loyal customer base and a financial disaster all in one.
If this were my business I would..... cut overhead by reducing labor costs, relocate business to a cheaper store front and seek out local, less expensive (but equally good) ingredients.
I would also expand my line to include other items such as sandwiches which I could sell to the catering market (catering business meetings, events, seminars, etc.) Since they already have a business license and food license this shouldn't be too difficult.
The objective is to bring overhead DOWN and increase revenue.
20yrsinBranson
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