Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
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
Bank interest? On what? You did not mention a loan.
Then the business owners are stupid and didn't figure out all their costs before deciding on pricing. That means they didn't come up with a business plan, which a bank will require. So technically this never happened because they wouldn't have been loaned any money.
Then the business owners are stupid and didn't figure out all their costs before deciding on pricing. That means they didn't come up with a business plan, which a bank will require. So technically this never happened because they wouldn't have been loaned any money.
The owners are physicians (wives of physicians). It did happen.
1) There was a business plan. First year there were above expected sales. Profits were seasonal and offset slower months of the year. Second year was good too but not as strong as year 1. Expenses rose every year
2) first year rent was lower
3) both owners assumed joint and several assumed liability for all debts
4) houses (both with mortgages all paid in full) were put up as collateral
5) physicians cosigned, both with handsome 6-figure incomes
The owners are physicians (wives of physicians). It did happen.
1) There was a business plan. First year there were above expected sales. Profits were seasonal and offset slower months of the year. Second year was good too but not as strong as year 1. Expenses rose every year
2) first year rent was lower
3) both owners assumed joint and several assumed liability for all debts
4) houses (both with mortgages all paid in full) were put up as collateral
5) physicians cosigned, both with handsome 6-figure incomes
Loan term of 20 years was negotiated and signed
Ok, then their husbands were stupid for bankrolling the effort of two desperate housewives who had no experience in the food industry.
This happens in the food industry even when the entrepreneurs involved are pros. It is an extremely volatile industry. The way most food businesses survive is simply having access to large amounts of capital or credit to get through the rough patches.
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
1) Find cheaper acceptable ingredients. Does everything need to be flown in daily? What about weekly or every 3rd day? Can somethings be bought in the US/ locally for cheaper?
2) Get a cheaper space and a less expensive space to maintain
3) in the cheaper space, make getting gelato to the customer faster (more throughput)
4) advertise other services (cakes, pastries, to-go tubs of gelato...)
The majority of small businesses will fail within 2 years from being started. They fail, because the people that started the business are not experienced business people. They started the business, because they had a dream and did not know how to make a business plan that left them with a profit.
There are only a few paths to follow.
1: Raise prices to the point they make a profit. You said this is impossible to do, so lets rule this out.
2: Cut costs of ingredients, etc. This may or may not be possible.
3: Cut labor costs, to the point they make a profit. This may or may not be possible.
4: Increase the volume of business. However if they are losing money on every serving, it may just increase the loss.
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.
You have no clue about the restaurant business.
Every single day good restaurants that make an excellent product, with extremely loyal followings go out of business.
The absolute, most perfectly run restaurant anywhere operates on a profit of $.05 on the $1.00.
The people who run this gelato business aren't running their business at an optimum.
3) both owners assumed joint and several assumed liability for all debts
Rookie mistake in the restaurant business. No one in their right mind would open an ice cream shop with their house as collateral and then personally guarantee. This is why you form LLCs.
FWIW, my husband has been in the business for 35 years has owned managed and sold about a hundred restaurants.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
