If you're running a food business, you might start small but you'll likely have ambitions to grow larger. So if you're going to achieve world domination, there are some things you need to think about when it comes to expanding. We asked Virgin StartUp ambassador Imran Ayoub of De Melo about how to scale up a food business.
Tell us a bit about De Melo and where the business is at right now
Our journey started in the summer of 2015 when De Meló café opened its doors on Linthorpe Road in Middlesbrough. An artisan dessert experience unlike any other in the North East, the popularity of our brand soon increased and has led us to win several awards including Best New Café in Teesside, as well as more recently coming runner up in the BME Business of the Year category. At the same awards I won Business Person of the Year, an achievement I'm very proud of.
At this present point in time, our business is at the growth stage of the business plan (two years ahead of the schedule). At the end of year one we identified that one of our biggest costs was the purchase of ice cream from a national distributor. This allowed us to explore opportunities we could capitalise on, and the result was to begin the production of our own gelato.
What was behind the decision to expand your gelato operation and has it always been the plan?
In our original business plan, there was never any element of production or wholesaling. The plans were/are to go down the franchise model and roll out De Melo as a brand. It was only through our relationship with our cone and wafer suppliers The Greco Bros that we decided to delve into gelato. An Italian family with strong links to some of the best products that can come out of Italy (especially gelato), they convinced us that this is the route to go down. After a lot of research and number-crunching, we realised that, in the long run, this could become a very profitable venture. We were able to bring over Albert Van Groodenbroeck (second in charge at Aromaitalia - Italy's oldest and best gelato flavour house) who works for the Ferrero Rocher family, and develop an authentic Italian gelato recipe. This helped us carve out a niche market, which has become our unique selling point. We started producing at the start of December and are now wholesaling to local businesses with plans to grow this side of the business rapidly in the next 12 months.
What were the considerations when finding your second site? Is it close to the first?
It was really important to find somewhere close to the cafe, in a secure commercial park with low rent and rates. What seemed to be like asking for too much, turned out to be a steal when a small unit came on the market. With a rateable value of 2500 (making it exempt to rates) and the rent of only £300 p/m, I quickly put an offer in and sealed the deal. The unit was in great condition and needed only electric work doing to it. Two weeks on from getting the keys, we were ready to start producing.
How has expanding changed your staffing/team?
Initially there was no change except to cover the time off I needed for the training and the fixing of the unit. It is only in the last two weeks that we have had to employ an additional part timer to cover the orders coming in from local businesses. The more orders we take on to supply the gelato, the more staff I will need. The plans are to create at least three full-time jobs in the next three years.
What has been the biggest hurdle so far?
Juggling the cashflow whilst establishing the wholesale side of the business. It has definitely been a challenge, as we are still growing the business and pushing our gelato as much as we can. With a website and a freezer delivery van three weeks away from being ready, we have only been able to supply neighbouring businesses, which has limited to how much we can make so far. This has definitely created a few sleepless nights, but as always, the strength of our brand and our reputation has kept us afloat through sales in our cafe.
Any other tips?
Plan for the future! I am planning to be at maximum capacity in six months time, so I am looking for options to increase production without affecting sales. I am planning to also increase the delivery radius from 15 miles to 25 depending on volume and scope. It's never a bad thing to be ambitious. So don't be afraid to make noise and approach the big corporations (even if you can't meet their demands). This way you'll show up on their radar and if you do, don't stop shoving your products in their faces until they physically can not ignore you any more. Get their feedback, and ask them what it will take for them stock your product and buy in big volumes. This is exactly what we're doing right now despite the fact that we could never meet their demand. It's food for thought and allows you to plan which direction you could take 12/24 months down the line.
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