As we began that night’s meeting, Pete picked up his notebook and I watched him print the letters: LTDATATK.
“That’s our first option,” he said.
“What does it mean?” I asked.
“Lock the door and throw away the key,” he responded.
But as soon as he said it we both decided it was a bad idea. Closing the location wasn’t what we wanted at all. It was only six months old and it was too soon to give up on it. No, there had to be other options, and there were, of course.
“We could advertise the restaurant,” Pete said.
However, as we talked about that option we remembered the Jingle Bell Special. If anything, that was proof that we didn’t know how to advertise effectively.
As our discussion continued, and we evaluated various options, we eventually settled on an idea that most people would have said was absolutely crazy.
We were pretty sure the problem was the location, and so we thought we ought to move it. We batted around the idea of finding another shop and relocating. But the more we discussed that strategy, the less we liked it. The shop was losing money. Moving it didn’t make sense. Let’s close it, we said, and just find a new location and start all over again. But that strategy didn’t appeal to us, either. If we closed our first location before we opened a second location, we might never get started again. Now that we knew the challenges of operating a submarine sandwich shop, we might not be as brave the second time.
Our meeting was running late and we thought we had exhausted our options when Pete suggested that we keep the first location and open a second shop. I’m sure that if we had consulted an accountant or a board of directors they would have said Pete’s suggestion was outrageous if not irresponsible. We had not proven that we could operate one successful submarine sandwich shop. And now we wanted to operate two?
Why?
For several reasons it made perfect sense. If we moved the current restaurant we’d have two investments. We’d have the expense of leasehold improvements in the new shop while we abandoned the leasehold improvements we had already paid for in the first shop. And then there was the equipment. It wasn’t worth moving our old equipment, especially if we had to pay to install it a second time. If we had to buy equipment all over again to relocate, then why not buy it for a second shop?
And there was more. A second restaurant would give us the opportunity to experiment and compare results. We could accelerate our learning curve in the business by keeping one restaurant as a control unit for measurement purposes. Plus—and this was a major benefit—two shops in the same market would be like advertising. People in Bridgeport might get the idea that we were so successful we were expanding, and that alone would help sales rise again. We even joked about creating a promotional flyer that said, “Thank you Bridgeport for making us so successful. We’re now opening our second restaurant!” We figured no one would know we weren’t successful because hardly anyone was coming into the restaurant!
The one negative thing about our decision was continuing to carry the burden of the original, unprofitable restaurant. How much would that detract from the success that we might achieve in our second restaurant? It was an unknown, but in the final analysis, we decided the second restaurant was worth the risk. As it turned out, it was one of the best decisions we ever made.
Blessed Be the Vendors
We needed little more than $1,000 to open a shop, and strange as it may seem, money wasn’t an issue when we decided to find a second location. Sales had plummeted in February, but due to the help of our vendors, which I’ll explain in a moment, we were not out of money. We weren’t flush with cash by any means, but I held tight to the purse strings, a practice that helped us then and has helped us many times since.
Since we didn’t have much money to start the business we never allowed ourselves to build up big expenses. We avoided buying anything that required a hefty payment on a weekly or monthly schedule. After paying the rent, the utilities, and a couple of employees, our only expense was the cost of supplies, primarily the paper goods, plus the meat and cheese, vegetables, and bread that we used to make our sandwiches. Of course we also sold soda and chips, and we paid for these products when they were delivered to our shop.
My salary was skimpy and I didn’t collect it all at once. As management, I earned $1.35 an hour, 10 cents over the minimum wage. That worked out to $67.50 for my usual workweek of fifty hours. However, after I quit my job at the hardware store, I calculated that my personal expenses amounted to only $13 weekly. So when we opened the first shop I told Pete that the business should pay me a weekly allowance of $13. Then, when tuition was due at the University of Bridgeport, about $600 a semester at that time, the business would pay that, too.
As part of the routine during our Monday night meetings we subtracted my allowance and any tuition payment from my accumulated earnings and most weeks the business owed me money. This may not sound very attractive to someone who’s thinking about starting a business, but in reality most new business owners can’t collect all of their salary at the time it’s earned. Our microbusiness remained open partly because I was willing to stick with it, to figure out how to make it work better, to work for a low salary, and at the same time delay collecting my salary. There was always the risk, of course, that the money would never be there, but that was part of the gamble in starting a business.
The real reason we didn’t run out of money, however, had less to do with delaying my salary than with the special relationship we developed with our vendors. Every Friday morning I would look at the bills to be paid and, depending on the amount of money in our checkbook, I would decide how much we could afford to pay each vendor. In the early days, we could never pay as much as we owed, which is why bills started piling up. But I always wrote a check for each of the four main vendors. Then, instead of stamping envelopes and mailing the checks, which would seem to be the efficient thing to do, my mom and I visited the suppliers with payment in hand. It was an unusual procedure. Somehow, though, it felt better visiting the suppliers, and it was good that we did because otherwise we would not have been in the position to expand.
It took about two hours for mom and me to visit the vendors, and we got a terrific return on our investment of time. Since they were all small businesses, there was a good chance the owners would be on site when we arrived and we’d have the opportunity to talk with them. We always started with a quick update about our business. Sales were slow this week, the big snowfall hurt us. But overall things are going great. And here, we brought you a check for $100. I don’t think the vendors were particularly interested in our story, but we told it anyway. Then we’d give them some unsolicited feedback about their product. With years of experience handling food, mom was particularly good at this. The bread formula was perfect this week, keep making it that way...Be sure we always get this brand of ham, it’s really high-quality...These paper products didn’t hold up. Can we try something else? Ten minutes and we were finished. However, we had one other critical point of business to handle. We didn’t leave until we placed the next week’s order, which was usually for more than the check we had just given the vendor.
By the time we decided to open a second location, we owed our suppliers several months’ worth of bills, altogether amounting to more than $3,000. It was rare that we owed them less than two months’ worth of invoices on any given Friday. In spite of that, none of the suppliers ever pressured us for money. I can only assume this had something to do with our track record. We never failed to give them at least a small payment every week. We never missed a week, and we were always up front with them. If nothing else, we had earned credibility in the eyes of these suppliers, and consequently they were willing to do more for us. As it was, we financed the construction of our second shop, and even subsequent shops, with the credit supplied by our vendors. Blessed be the vendors!
The Excitement Mounts