Hi Everyone. This is a question for all of you that have started your own chocolate shop.
I am the owner of Forte Chocolates in WA. Currently, we do about 50/50 wholesale to retail and make 200-250k a year. Retail comes from various shows and farmer's markets. All of our chocolates are hand made (including hand tempering) in our production kitchen (nearby in town) and we have won many national and even some international awards. We go through about 5 tons of chocolate per year. Things are good :-D
Demand has required me to think about opening a retail storefront of my own. Our production kitchen is very hard to find (in a commercial park with only a small sign) and yet people still find a way. We turned a small 14x18 room into a "showroom" space and we are did about $2k per month in retail walk-in's last year. These are people that spent 20 to 30 mins finding us and become repeat clients. We also do a few impromptu "tours" of our kitchen. But this is making production harder as timing of making sensitive products can be spoiled when someone walks in. There are only 3 of us producing. For this reason, I am looking to open a retail only location selling our hand made luxury chocolates, hot chocolate, and a few of my favorite bean to bar makers. We would also sell a few chocolate specific books and tools. We plan to also teach chocolate tasting classes on weeknights. This new location would be downtown with great foot-traffic, tourist interest, and on the main strip.
The spot I found was previously a coffee shop so it already is plumbed and has lots of outlets and power. We have met with a contractor and the estimate is reasonable to finish the space. We have a good following and the rent is also reasonable (under $1k per month). I have met with the chamber of commerce and I am also involved with the local economic development council, but this would be the first and only artisan chocolate shop in the area so they have not been of much help.
The problem is I don't want to ruin the good thing that I have now. We are making a profit, have positive cash flow, and revenue is growing significantly each year. This new expansion would take most of my reserves and could risk my current business.
I am ok with the risk if I could get some revenue numbers to base a plan off of. But I can't seem to find out is how much revenue a small (400 sft) retail location would do (or any size for that matter). I would have to make about $4k a month to break even with 1 full time and 1 part time employee (or 3 part timers). I also don't know what I should expect in terms of hours and seasonal ups and downs other than from my showroom.
I would be grateful if any of you shop owners could tell me what your approx revenues were the first year. Was this above or below your plan and what did you base your numbers off of when deciding to open a retail store. Also what problems did you encounter that you can warn me about. We can do this privately too if you are more comfortable.
Thanks in advance for any help you can give me! Cheers ~Karen
There are so many ways to approach answering this question it's hard to begin.
Brad had some very good advice in the thread on coming up with a name for a new chocolate business and it call comes down to doing your homework, then doing some more. The main reason you're not finding the information you are looking for is that the information does not exist. There is no place to find numbers for how much revenue a small retail location "should" do. I am not surprised that the CoC and other local business resources can't help because they have no experience in this area.
Concept and execution are hugely important but not as important as understanding your market and giving them what they want.
Also - being precise: Is that $4k/month gross receipts or gross profits? On the one hand it would be tempting to conclude that you don't do anything and you can rake in $2k/month on incidental walk-in business in a hard-to-find location. Doubling that in a real retail location should be a no-brainer. But is it a brainer. In part because running a retail business is different from running a production business.
I do know that you can't take an "If I open it, they will come" attitude toward the shop. You need to think of the shop as one element of a campaign to grow your business and you need to decide what success means for you.
In my experience, business plans tend to be self-fulfilling prophecies. If you don't have high expectations going in, you won't achieve much. If the shop is going to be an engine of growth for you, think about what it might take to double sales and gross revenue. What does that mean? What will that take? Are you committed to doing it? Decide what the goal is then make the plan to reach the goal. You already have established a brand and a reputation so there's a solid foundation to build on.
But do your homework. What does the community want and need? Chances are it's not a place to buy obscure $10 chocolate bars - or at least not enough of them to keep the lights on and the doors open. Look around and see what's missing in the community that you can incorporate into your plan. The better prepared you are in this respect, the better your chances of achieving success - however you define it. But I would not go into this with low expectations - or that's all you may achieve.
Thanks! Yes I agree that having an attitude of "build it and they will come" never works. If it did, then I would have signed the lease already. The brand recognition and connections I have now will only carry me so far. I am going into this as if it is a new business, as a retail shop is something I have not done before.
I will definitely look at the thread you mentioned. I have read many posts from Brad and he always makes some great points. Thanks Brad!
The $4k a month break even is gross sales, not profits. This includes the lease, utilities, product cost, payroll, taxes, and licenses. It does not include any marketing efforts. We would continue to do the events/shows that serve as a marketing vehicle for the company, though we would direct people to our retail shop instead of to our kitchen. Any show fees and costs are already paid for by my current business model.
My goals are to educate and inspire the next generation of chocolatiers and to make about $15 to 20k gross sales per month within 5 years in the new location. The city residents are not big enough of a market to do this, so I would have to tap into the large tourist population that comes to town. Teaching classes would be a big part of this. So far, the community has been extremely supportive and customers often bring out of town guests to see us. But I have never been one to think that things will always be rosy. I know that I will have to work very hard to make this store a fixture of the community. I am just trying to learn from others so that I can limit my mistakes.
By the way, you are 100% correct on people not wanting (for the most part) obscure chocolate bars or even truffles, no matter how good they taste. Those sales come after you have built a relationship with the customer first. Only after that trust is built will they spend $$ on a pricy item that is new to them. I have been working with and selling Fortunato No4 so I speak from experience. Great chocolate, but hard to sell. Traditional may sound boring, but it translates into dollars much easier than different new wave stuff. (and yes, I make and sell some of that stuff too).
Here are some tips. I hope they help:
1. If you are just a chocolate shop, 30% of your retail revenue is going to come from the 3 days surrounding Valentines, the three days leading up to Mother's Day, a small amount around Easter, and then the Christmas mayhem that starts November 1st and goes to December 24th at 3:00pm. The rest of the year your retail shop's sales will be dismal at best, boosted occasionally by a wedding or party, or some other singular.
2. You are spot on that your bread and butter shouldn't be exotic chocolate flavours. I've said many times over: "Find out what your customers want and then give it to them."
3. Pricing is important for your area. I sell a 92g, 100% porcelana chocolate bar. Amedei sells a 53g porcelana chocolate bar (which I question is 100% porcelana, but that's a topic for another fight! haha!). Their bar retails here in Calgary for $25. All things being equal, my bar (which DOES taste better) should be $50! However Calgary isn't ready for a $50 chocolate bar yet, so I sell it for $12, and promote it as twice the value, for half the price just because I'm a redneck. You can charge more than your competitors (my chocolate is the most expensive in Calgary), but it better stand up to scrutiny and win EVERY time.
4. I have a 150 sq foot booth at a local prominent farmers Market on a trial basis, and it has just surpassed it's 12th month of operations. Gross Sales were $90,000 from that location, and while it's profitable, to me that number is a failure. Viable to me is at least 3 times that number per location. My Inglewood store is 100% retail ( I discount my product for nobody, and do not sell wholesale), and it does about $450,000 per year gross.
5. My third location is in a marquee financial building in our downtown core. I have a tiny little 150 square foot "closet" close to an entrance to another building. There is another very established chocolatier 5 doors down from that location on the same floor (he tried selling me his business last summer, so I know what the numbers are). I opened it on January 21st of this year, and just on word of mouth, that tiny little space is killing him. He's not renewing his lease and will be gone by June. That tiny little location in Bankers Hall is keeping up to my main, established store where all of the chocolate is made, and where customers have been going for 4 years. LOCATION LOCATION LOCATION.
6. FIND OUT WHAT YOUR CUSTOMERS WANT - and this doesn't mean just chocolates and candies. We sell a TON of baked goods at our Bankers Hall location. Why? Office meetings, luncheons, a quick snack in the afternoon - things to boost sales in slow times. People eat brownies ever day? Yup. A box of chocolates? Nope. All of these little things that are not "chocolates" increase sales, keep customers coming back, and keep reminding them we're here so that they remember us in the big margin times of the year.
7. Sit in a restaurant/coffee shop across the street from your store, at least once a week for the first while and watch people. If there's no coffee shop, then sit in your car. Where are they coming from? Where are they going? How many people are walking by? What do they have in their hands? Do they have coffee? What times of day are the busiest? What can you do to pull them off the street? Sit, and watch, and count. By doing this for my Bankers Hall location, I quickly learned that I need to offer coffee, so I'm currently working on a chocolate infused coffee. I'm tired of watching lines and lines of white collar cattle trundle by every morning at 10am on their way to Starbucks for a fix. If we can cull some of those cattle, all the better for us.
8. If you get a store, stop doing farmers markets and trade shows. They aren't profitable, and I don't care how you slice it. Every event and market will only poach people that could go to your store and purchase. One of the reasons my Farmers Market location does poorly is because it's 5 minutes from my main store. Sales in my main store have suffered also as a result, but will return once the market location is closed. Train your customers to go to your store, and not a booth that you have to pay for at a market.
9. I am the King of classes. In the past 4 years I have personally hosted over 340 chocolate/wine events in my Inglewood store, and have been hired to talk about chocolate all over Western Canada. 2500 people have paid $40 per person to hear me speak in my shop. At least that same amount have heard me talk at various seminars. The most lucrative events are the "truffle making" evenings. I charge $100 per person to, over two evenings, learn to make their own truffles. Each person makes their own centers, dips them, rolls them, and wraps them. Each person leaves with 60 truffles and a big smile. The profit is insane. I could easily sell 3 per month. As it is we host an average of 6 wine/chocolate events per month (Make about $300 profit per event) and are usually sold out a month in advance. Drop the tradeshows and do events! People PAY to become your customers and if they have fun will be your biggest advocate!!!
That should be a good start.
Great advice! Yes a great start. I will spend a few days watching and counting people that walk by the proposed location. That should be very informative :).
Farmer's Markets - Yes, I agree with stopping the farmer's markets (saturday mornings) as they don't drive sales to the showroom. I have been doing them for 6 years now and while they were a great tool to get the locals to hear/try us, they have lost their power. I am also sick of all the weather related problems as these are all outdoor under a canopy type markets, We have regulars for sure, but most have come to us or call when the market is out of season. I have tracked new customers and added revenue for the past year from each of the 2 markets, and have found no reason to continue doing them.
By the way, was the 90k just in Saturdays or was it a permeant market that went all week?
Shows - The retail shows that I am referring to are usually in Seattle (about 1 hour south of us) as these shows put us in the Seattle chocolate scene and we get the media attention that comes with it. Mount Vernon is a tourist town so I will likely need to continue doing a few of these shows each year for a while (only the most profitable ones of coarse). The majority of people who spend time looking for us are those getting our of the city for a day and wanted something special to do. We then make their experience as magical as possible (even allowing them to pour their own bars) which creates great word of mouth for us and drives repeat sales to our Seattle retailers.
Coffee - We are considering doing coffee as the location was previously a coffee place for the past 8 years.
Brownies - I love brownies but I was thinking that they would conflict the luxury chocolate image. hmmm, now I am trying to make an argument for having them… I would also have to get an oven which I am not sure if that is a good idea since making brownies is not what I am known for. Opinions? What price point and size do you sell? Are they made with $$ artisan chocolate or cheaper chocolate?
Classes - I have taught a lot of classes over the years, but my production kitchen is small and not the best for this. I used to teach in home chocolate classes for $200 for up to 4 people for a 2.5 hour class, but I did not always feel safe so I stopped. Now I mostly teach for the local college (the chocolate classes) in my facility and a few private classes. I love teaching! I would do more, but it we can't produce when we have a class... The new space will solve that for me. Teaching private classes is definitely part of the business plan! The typical class member (excluding the college students) will come back into our showroom several times or refer someone else and they spend and average of $35 after the class. Very profitable indeed :-D. Wine pairing classes will be a bit difficult in Wa state now that the liquor laws have changed…
Pricing - Pricing has been a bit of a struggle for us because we are at the high end of the spectrum. Our 100g bars are $10 retail and our 45g bars are $6 (these sell great when we do 4 for $20). Our 6 pc box of award winning Sea Salt Caramels is $20 retail. The rest of my retail prices can be seen on my website at www.fortechocolates.com. We see a strange thing in our showroom, there are 3 sets of people who come in. 1 set will ask the prices and recoil a bit when they hear them. This group either walks out or buys a truffle or something for $10 or less. We rarely see these folks again. The 2nd group rarely asks us for our prices and buys a couple of items, typically the boxed items for gifts. They buy on average $35 to $150 and come back often enough for us to know their names (4 to 10 times a year). The third group are the people coming in for their favorite treat and they don't plan on sharing. They spend $15 to $65 each visit and come in once or more a month. The 2nd and the 3rd group generate about the same revenue overall. What we don't have is people coming in daily or even weekly for a quick item. I would like to have this traffic as well. I think that our location has a big bearing on that, but it could be because we don't have that brownie type item that they crave. I think that some of the 1st group could be swayed into coming back if we did.
Cross marketing - do you do cross marketing with other local business (like offer a discount to those who show a ticket stub from the theater down the street if the theater puts your logo in the program) type of thing?
Thanks again for all of your insight!
Shows: Your time is worth money. Calculate your time at $100 per hour starting with the minute you leave town, and by the time you get set up in Seattle and before you even sell a single confection you will have lost money. If markets were worth it, the big players would be in them. Markets are great for hobbyists, or as an inexpensive way to test new products. That's it.
Brownies vs. Luxury: Over the past 4 years I have built a reputation of producing THE best chocolate confections locally - even beating out Bernard Callebaut, a man who built his business into 22 stores, and is the grandson of Eugeneus Callebaut himself. I track every single transaction down to the millisecond and penny, and after putting 70,000 transactions through my stores, I can tell you definitively that pretentious "luxury" chocolate has it's place but doesn't pay your bills every month. The average customer walks through the doors of a chocolate shop on impulse. They will spend about $20 and are in the mood to sate' their sweet tooth right then and there or maybe buy something for a dinner party that evening, or a colleague who's moving on. They don't want to spend a lot of money.
Chocolate is no different than any other industry. Women wear the fancy diamond necklaces for gala events, but inexpensive jewelry during the week to complement their outfits. Guys drive their honda accord to work and take out the Ferrari on the weekends. People who can afford luxury items still appreciate and consume value priced items on a daily basis just like everybody else does. Stop alienating your lower income/"value priced customers, and you will double your business.
Discounts: I was on your website and looked at your prices. I also know exactly what it costs to make chocolates, and what packaging costs are. Please don't take this the wrong way, but I find your prices outrageous. $20 for six 9 gram molded chocolates???? Really??? I can definitely see why you need to cross promote with discounts. Truth be told, Choklat doesn't cross promote, and NEVER offers a discount. Our prices are reasonable, our quality is beyond reproach, and we provide value. That same $20 spent for a pretentious box of 6 caramels in your shop would get a half a pound of fresh hand made truffles from one of my stores (and by "fresh" I mean, made right then and there, on the spot, specifically to the customer's specifications). That's FOUR times the amount of a confection that's fresher than yours for the same price and with no discount. Local merchants are happy to promote us to their customers because they know their customer is going to be taken care of, and not price-gouged.
You asked for my opinion, so here it is: Whether your want it to come through or not, your website, products, packaging, and pricing come across as pretentious, yet as a person wanting to grow her business you don't.
Again, please don't take my comments as harsh or confrontational. They are just the pragmatic views/rants of a guy who has hit his head too many times riding his dirt bikes. :-)
I love the passion that you have. It is nice to converse with someone that has the same passion for what they do as I do. Don't worry, I take everything that is said to heart wether I agree with it or not, because in my business experience it is better to be frank and to the point so that you can learn, make decisions, and move on to the next issue. PS dirt bikes sound like a blast but I have not yet had the chance to try it :-D
Yes, business is about (to me at least) doing what you love, making the community a better place, and about making a profit. Profit is not a dirty word.
The reason that we decided to be in the luxury market and charge the prices that we do is because I insist on using great chocolate, making micro batches for freshness and quality, and producing everything by hand, including hand tempering, poring, dipping, packaging etc. We even fold all of the tissue and hand wrap every bar. Yes, I understand that there is more economical way to do everything that we do, but my staff and I really enjoy the results and process of doing everything by hand. Our customers support this and appreciate the commitment to our craft and support us with paying the crafted by hand prices. By the way, all of the truffles and caramels that you see on my website are hand cut with a knife (not molded), we do not even use a guitar. We do use molds for our bars.
I love your idea of a Masters Collection for limited times of the year. You are also spot on with the B2B gifts. They always love the items that have more packaging and they are very into the awards stuff. I do love winning awards, but they are mostly validation that we are on the right path both in quality and flavors. Not very one will agree with this, but to each his/her own. Besides, I love the challenge of competing with my peers.
My staff and I have heavily debated what we call the brownie issue and have decided that you are correct in saying that we are unintentionally alienating some potential clients. If we open the shop, we will be carrying daily treats like brownies, turtles, and nut clusters. We may even carry chocolate cupcakes. Coffee is still not decided...
Over that past few days, I have been counting cars and watching people like you suggested. Very insightful. I also pulled the traffic numbers (car counts) for the street and the official visitors numbers for the area. I also talked to many of the neighboring businesses and asked for their observations and monthly revenue. It is surprising what you find out when you just ask :-D
Thank you again for all of the tips and experience that you have shared Brad (and others who have contacted me directly too). I will continue to do my homework, but I am leaning towards opening the shop. I do hope that people will continue to post their experiences and business models as data is very hard to come by for this industry. I know that I deeply appreciate the knowledge and support, and I assume others will too. It may just be a pipe dream, but I would love it if we could put an end to all of the secrets that have plagued the chocolate industry for so long!
I'm glad I could help. The whole reason I got into this business was to unveil a lot of the secrets you allude to. There is enough room in this business for everybody (as long as you stay out of Calgary! LMAO).
Be careful about offering coffee in your shop. It is VERY aromatic, and chocolate LOVES to absorb odors from its environment. Any chocolate sitting on your shelves will very quickly become coffee flavoured. I have been experimenting with that for a couple of years now just to see what I can get away with, and the results haven't been good. I would LOVE to offer coffee service, but have resigned myself to offering one variety of real time grind/steep chocolate infused coffee, and let coffee shops do the rest. The smell is incredibly overpowering when we make even one cup.
Hi Karen, we have a 900sf space and have been open for a year and sell about 10k-16k per month with the exception of the holidays, Dec was 68k in retail sales. One thing we didn't consider was payroll taxes, in CA it's about 7k per employee per year so keep that in mind. I know smaller shops that are about the size of shop you are looking into and they are bringing about 100k in gross sales, 1 employee. But they nor we have the permit to do coffee which can change a lot of things because people will buy coffee daily. I agree you should think about the baked goods. We do bon bons and baked goods here. We have repeat customers for baked goods, 2-5 days of the week repeat and they come in for the chocolates for special occasions only. You can buy a small counter top oven for this. It is up to you if you want to use the same chocolate; if you are buying bulk it may be cheaper than buying smaller amounts of a less quality chocolate. Hope this helps. I think you should do it. It seems you have a following already and I would suggest doing classes in that new shop to help with revenue.
-Casa De Chocolates
Thank you for your support! Wow Dec looks to be huge for you. Are you finding that 30% of your sales come from Dec, Valentines, and easter like Brad mentioned or is it mostly Dec? Yes payroll taxes are a pain and very expensive. We learned that the heard way too. Hind sight is always 20-20.
It looks like baked goods are paying the bills for the rest of the year for you. In Wa, I have seen most chocolate shops selling ice cream, yogurt, or gelato instead of baked goods. Some are wine and chocolate. It is rare to find a chocolate only shop. I can only name one that I know of in 200 miles of me.
Are there any chocolate only shops that are doing well? I would love to hear from you. I do intend on enhancing my chocolate line by doing a few baked goods instead of the selling the cold stuff as I want to differentiate from my competitors, but I am still curious.
For the most part the only people I know that have been successful with ONLY chocolate are in extremely high trafficked areas. Micheal Rechiutti does chocolate only but he is in the Ferry Building which is the number one tourist stop in SF and 2. he just opened Chocolate Lab where he makes desserts and other non chocolate items. I think Cocoa Bella is chocolate only but they are in the most popular mall in SF. Our best bean to bar makers in SF (Dandelion and Tcho) sell other items; hot/cold drinks, books, desserts and coffee. When Scharffen Berger was around they sold desserts, books and tshirts. La Maison, Jacques Torres, FIKA all have hot/cold drinks and some desserts. I am not sure if I am being helpful; successful is also a vague term; I am not sure if they are profitable if that is the measure of success you are asking. ONLY chocolate and seemingly successful: Richart, Teuscher, Christopher Elbow, Alegio.
I've been looking at this post and the replies and am kind of curious if anyone is willing to share their net numbers. I would think that gross numbers don't really paint a clear picture...
Gross numbers show the sales that you can generate with what you have. It is determined by such things as size, number of locations, employees, location, pricing strategy, marketing, etc. Net numbers are a whole other ball game. A new company can be doing very well, but have negative net numbers for a few years as they are investing back into their business. Net numbers for older companies give a better picture (only when compared to gross revenue) for how well a business is being run over time. This is why I asked for gross revenues for the first year. Net is completely dependent on the skill of the business person (and the economic environment, though this is debatable), finical goals, and the stage of business that the company is in.
But since you asked, my gross profit last year was just 4.7%. This is at the end of year 3 (after building the kitchen) and the goal was to turn a profit. If we were to open the shop, our net would likely be negative again for a year (hopefully less) as I like to pay off debt as soon as possible. Our gross sales rather would be closer to $360k if my estimates are correct. If we do not open the store, our net would be positive (and higher than last year), but gross sales would be lower. Keep in mind that the type of accounting that you use will change your net numbers a bit too. I use the Cash method (as most new/small businesses do) but more established/larger business use the accrual method as it can better match revenues to expenses for the month/year which can greatly effect your net. It gets complicated quickly, but I hope this helps.