It happens at every holiday gathering: some well-meaning family member tells us to start a business. They try our jams, our soups, our salad dressings, our hot sauces, and they say, “When are you going to start bottling this? You could make a fortune!”
These people have good intentions. They love us, they are enthusiastic about our cooking — and they believe that a winning recipe is all it takes to become the next sriracha.
“The Food Network makes food sound like it’s sexy and glamorous, and it’s actually the complete opposite,” says Hassel Aviles. The founder of the Toronto Underground Market, a food event and entrepreneurial incubator that existed from 2011 to 2014 and gave rise to many successful businesses (including Fidel Gastro, Seven Lives Tacos, Bombay Street Food, and La Carnita), she’s seen the difference between a good product and a good business plan. The product is not irrelevant, she tells me — but it’s far less important than marketing, distribution, capital investment, and cost control.
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“It’s not sexy,” she says.
The last time my wife’s parents were in town, I sent them back home to Winnipeg with little jars of salsa macha (made with peanuts, sesame, and arbol chilies) and salsa negra (morita chilies and — shhh — sugar). Late one night, not long after, I got an email from my father-in-law, who insisted that I start producing these sauces commercially.
We’d have to call the business “Corey Mintz Presents Alex Stupack’s Salsas,” I told him, since I’d gotten the recipes from that chef’s book (having made only minor alterations). But he was adamant. So why shouldn’t I start selling salsas?
“There’s no money in the food game unless you’re in it for the long run,” Aviles says. “Unless you want to scale and franchise and build, you’re going to have one product that’s not going to be enough. With something like a hot sauce, it’s all numbers. It becomes a co-packing/distributor conversation — not a hot-sauce conversation.”
What every entrepreneur needs, says Aviles, is the right combination of product knowledge, drive, and naïveté about what’s actually involved. Because if they understood how unlikely success was, they’d be scared off.
“Successful food and beverage entrepreneurs,” she says, “they’re all in love with the idea, and they can’t stop thinking about it. They obsess over it. You have to really want it. Not because you want to be famous, not because you want 10,000 followers on Instagram. But because this is all you can think about, and it makes you so giddy and excited, like you’re falling in love or you’re a kid again. This is not for a hobby. This has to be because there’s nothing else you’d rather be doing.”
But beyond that insatiable desire — the feeling that you won’t be happy until you scratch your itch — you need money.
Bobbi Miner, a hospitality consultant with JRoss Hospitality Recruiters, says that for this type of business, you should expect to work 70 to 80 hours a week for about five years before you manage to turn a profit.
“Your challenge in manufacturing is your labour component,” says Miner, who notes that, beyond simple wages, there’s WSIB, vacation pay, benefits, and EI. “And if you’re not paying yourself, you’re also potentially losing that money that you could be earning elsewhere.”
When you’re just setting up a table at the local farmers’ market or church bake sale, it’s okay that you’re selling something made in your home kitchen. But to sell commercially in Ontario, you need a professional production kitchen that’s passed inspection from local health officials.
Even if you partner with a co-packer (outsourcing the packaging, labelling, and wrapping), manufacturing equipment is very expensive. Add to that marketing costs, legal fees for trademarks and patents, and even fees to get preferred placement on supermarket shelves.
Without investors, expect to sink serious funds into an undertaking like this: “A quarter of a million dollars is a very modest amount of money” in this business, Miner says.
If you’re selling hot sauce for $5 a bottle, that’s 50,000 bottles before you break even.
So when your Uncle Jerry tastes your jam or salsa and insists that you turn your hobby into a business (probably adding, “I’ll be your first customer”), you tell him that you’re flattered — but that you won’t produce one jar till he’s put in a pre-order for 50,000 units.