Paul was a 32-year-old Stanford graduate with a degree in Engineering. He had a good-paying job at one of the large tech companies. He felt that the time had come for him to go out on his own and open the “business of his dreams.” He seemed quite passionate about what he wanted to do.
Paul’s passion was French pastry. He opened Paul’s Patisserie in a larger suburban strip mall. The mall was anchored on one end by a national chain drug store and on the other by a branch of a large bank. In between was a gym, a yoga studio, a cell phone store, among 2 dozen other merchants, and in an alcove, 2 doctors’ offices and a dentist.
There was plenty of parking and easy access from the main road. The mall was expected to have a lot of people in and out all day.
Paul’s initial approach had been to convince a lot of those people to take home some éclairs for dessert. A year later his focus had changed.
Paul’s storefront was deep and narrow. He signed his lease in December 2021 when empty storefronts were not that hard to find. He spent January building out the space and installing the ovens and other equipment. There was a counter with display cases along one wall, 6 two-top tables along the other with 2 four-tops along the wall in front of the kitchen; 20 seats in all.
Paul did a soft opening in early February as soon as the ovens became functional and started pumping out pastries. Once he started producing pastries he put them to good use.
The official opening was on he first of March. April and every month after that have been profitable. Here is why.
Paul’s business plan had anticipated that sales in the store would be driven by people who wanted to bring some pastry home for dinner, primarily a take-out business. It turned out that his eat-in crowd sustained the business and created a blueprint for growth.
As soon as he was officially open Paul took a tray of small pastries to the bank. He introduced himself to the manager and left the pastries for the bank employees.
He also left a dozen coupons inviting the bank employees, and the employees at every other business up and down the mall, to stop by for a free coffee. If they did, he would not charge them for any pastries that they took and send them back to their stores with more to entice their co-workers to visit.
About the Coffee
The pivotal business decision Paul made revolved around the coffee he wanted to serve with the pastries. If he had focused on his take-out business he might have followed Starbucks’ model of multiple offerings and multiple sizes.
If you order coffee after dinner in a restaurant, you get the coffee they serve. That is the model Paul chose and that made all the difference.
Paul’s Patisserie serves one coffee only, a deep French roast acquired from a local coffee roaster. If you don’t like your coffee black, you can have one or two dollops of freshly whipped cream on top. A second cup is included in the price, $3.50 per order.
The coffee is served in a large hefty mug. Outgoing orders are served in a substantial paper cup that holds exactly two mugs of coffee for the same price. One size fits all.
There was no formal menu but a sign suggested that people order a warm croissant, apple tart, muffin, biscuit or just two slices of a warm baguette, served with butter and jam. Each was available for an additional $3.00.
The success of the entire business rested upon Paul’s ability to sell these $6.50 coffee and croissant breakfasts by encouraging people to eat in. A single sitting (20 orders) every day would bring in almost $4000 per month. Turning his 20 tables over twice a day, with a $6.50 ticket, would bring in almost $100,000 in gross sales per year.
The cream and butter were sourced from a local dairy. The jams came from a local cottage business. The bread flour, cake flour, and other ingredients came from a local restaurant supplier and occasionally Costco. It was as simple a supply chain as you can imagine.
About the bread
There is no more ubiquitous product in the marketplace than a loaf of bread. Paul would place 2 dozen baguettes in a basket on a table near the front door with a little bucket. Customers could just step in the door, put $1 dollar in the bucket, take a baguette, and go. Most days every baguette was sold.
Coupons and signs
In addition to the employees at the strip mall, there were 3 small office buildings adjacent to it. Paul introduced himself and dropped off some pastries and coupons to every office. He built his initial clientele from a group of people who worked in the neighborhood every day. Many of these people might have bought a cup of coffee somewhere else each morning before they met Paul.
Paul printed the coupons himself using a laser printer. He personalized them with a message that identified them, like: “Hi Paul welcome to the neighborhood. I work at the bank. How about a cup of coffee?” Everyone who came in was invited to sign a guest book where Paul captured their name, employer, and e-mail address.
If you came into the store with a coupon in your hand, Paul would hand you a half dozen new coupons to hand out with the instruction to “tell your friends that I would like to buy them a cup of coffee, too.”
Paul called these people his close friends. He would frequently send them e-mails that said: “Trying a new recipe for cherry pie this week. Please stop by and try a slice of pie on the house and tell me what you think.”
In the first 3 months, Paul personally placed almost 800 coupons into the hands of people. There was also the cost of about 500 dozen pastries and cookies that were passed out in the process.
Paul’s simple and efficient advertising campaign generated a base of loyal clientele, many of whom became daily customers.
Bakers and pastry chefs get up very early in the morning. Paul did his baking early and began to let customers in at about 7:30 AM. By noon he was ready to turn the daily operation over to his partner, Paula.
There was already a steady stream of people stopping in to take out a cup of coffee or to purchase some dessert for dinner. People started ordering birthday cakes and buying pies to take along when invited to someone else’s house for dinner.
Paula followed Paul’s path by encouraging people to come and eat in with a promotion she called “Tea for 2 for $10. Bring a friend and schmooze.”
She served the tea English style, steeped in a pot. She offered a small plate of assorted confections. For an extra $2 you could upgrade to a slice of fresh pie, served with a healthy dollop of whipped cream.
She advertised this with a sign in the window targeting the women who walked by. The sign had a picture of a woman, looking exasperated, with her palm to her forehead. The caption read: “It’s 3 PM. I deserve a slice of cherry pie today”. Paula even put on a 60-minute loop of Edith Piaf from 2 PM to 4 PM which she said tied the customer experience together.
As Paul had done in the morning, Paula built a clientele that would allow her to fill every seat, once daily. If you are following the math, you can see how the sustainable cash flow is building up.
Starting in early November, Paul sent out e-mails suggesting to people who were having Thanksgiving dinner at someone else’s home to “bring them one of our pies and you will get invited back next year.” Quite a few people did, and all of those sales were profitable. As importantly they introduced his pies to a lot of new potential customers.
My favorite promotion was for Valentine’s Day. Paul had purchased several extra bushels of fresh cherries when they ripened in the fall. He cleaned them and stored them in gallon jugs filled with good bourbon Whiskey.
In February, he dipped them in rich chocolate and sold them by the dozen in heart-shaped boxes. He only produced 200 boxes but they sold out. He promised himself to make 500 boxes next year.
Paul’s overall plan was to offer at least one promotion every quarter. He wanted to periodically add a few thousand dollars to his cash flow and profits to compensate for those days when, inexplicably, no one showed up and sales were below normal.
There is a lot to unpack in this case study of a small business. That includes everything from location, production, sourcing, pricing and mark-ups, cash flow, advertising and promotion.
Every small business owner wants to succeed and make a good profit. The overall lesson here is to keep it simple. Become profitable and sustain cash flow and build from there. The core products here are bread and coffee. The éclairs and fancy pastries are an add-on.
The most important lesson here relates to the whipped cream and the ceramic mugs. You can buy a cup of coffee in thousands of locations accompanied by those little single-serving packages of milk. The cost of serving fresh whipped cream was marginal compared to the impression it made and the message it sent to the customers.
As far as small businesses go, nothing fails as often as restaurants and food service enterprises. It is easy to see how Paul and Paula could replicate this into a second or third location and build into a brand and franchises.
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