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Daniel Kuhlman creates the business structure for Tastes Wine Bar & Bistro
This is perhaps the easiest of each step in the Create Concept phase. However, some people tend to go a little bit overboard so it deserves a mention. At this phase of the business development, most people hire an attorney to advise, form and configure the LLC or the Corporation. Since I was creating a larger type enterprise, I used the Corporate structure. I was not forming a partnership so there was no need for an extensive LLC operating agreement with appropriate partner extraction strategies. After all, the key to an LLC operating agreement is extracting yourself from a bad decision about who you went in to business with. Therefore, I opted not to engage an expensive attorney at this point. Instead, I used the Colorado Secretary of State website and for $10 formed a corporation. Too easy. I also researched corporate by-laws and the other requirements for later development.
For the food & beverage operations, the other critical corp vs LLC decision was the liquor license. In the state of Colorado, a corporation must be represented by an attorney for the hearing. If you are LLC, it is not necessary. However, the cost of the attorney to attend the hearing was less than the potential costs for changing the structure later to accommodate later franchising growth.
With the Concept Creation phase complete, it is now time to move on to the business Planning phase.
Daniel Kuhlman writes the Tastes Wine Bar & Bistro business plan
The business plan for Tastes Wine Bar & Bistro was more than a consolidation of the business case and the validation. The purpose of the plan under normal circumstances is to generate a document for the purposes of developing concept acceptance for investors and financing. In this case, The first project was going to be self-financed. However, I used this opportunity as one more go/no-go decision point. So many entrepreneurs, especially in the food & beverage segment, dive in without really understanding the financials and return on their investment. Many people complain that they don’t make enough money doing their own business. But, had they simply gone out and worked at McDonald’s (insert your favorite food chain here) and stuck it out for the same amount of time, they would have been regional managers with a superior income. This opportunity cost rarely gets factored in to the decision making process.
The business case had a rough order of magnitude budget of =/- 25%. The business plan attempted to get this closer to +/-10%. The plan also more clearly and completely identified risks and assumptions. During this phase, our board of advisors (not directors) was created to help with reality checks.
Daniel Kuhlman’s Tastes Wine Bar Bistro Business Plan 2006
One more opportunity to expose the idea for validation was submitting it to a local business plan competition. There was even prize money involved. $10,000 to the top 6 finishers. More importantly the feedback from the judges and other contestants (if you let others read it, it’s okay in most cases, they’re too busy doing their own thing to steal yours). In this case, the competition was at the University of Colorado, Denver, Bard Center of Entrepreneurship. They also housed an incubator and held classes. I used the opportunity to brush up on my financial skills, where I thought I was weakest, by taking their course, Finance for Entrepreneurs. While I had covered much of the same information as an MBA student at Carnegie Mellon University, the class put it in terms immediately applicable to my start-up. After all, I was putting my own money at risk and I wanted to cover all my bases.
There were also free opportunities with the City of Denver to help develop the concept. Their office of economic development, while not focused on small businesses, was helpful. They housed the offices of SCORE and the SBDC or the Small Business Development Corporation. The latter would become instrumental in helping me along the way as my company grew.
Next I talk about forming the business as a Legal Entity.
Go back to Daniel Kuhlman Tastes Project Site
Daniel Kuhlman validates the Tastes Wine Bar & Bistro concept
Validating the Tastes Wine Bar & Bistro concept was based on the business case identifying an existing unmet market need. At that point, the Denver Metro area had six wine bars scattered throughout the 2.5 million population of the area with no real concentration in any one area. National recognition of the concept was just ramping up. We formed a team of volunteers (easily done) who would travel with us to visit each establishment. This team’s feedback, and my observations including head counts, were critical elements in ultimately developing the business plan.
Additional market research was conducted using census and association data. As the concept also involved franchising, additional data was gathered on existing concepts and franchising association information. There were two wine bar franchises at the time, both in the US Southeast. Both were full kitchen concepts and so not really valid for comparison purposes. Therefore, approximate models were identified. Starbucks most closely resembled the model we wanted to create. The small footprint and limited service features lent themselves readily to reproduction at low costs. If wine bar specific operating processes could be developed to support a different menu, the concept could be a winner.
Additionally, exit strategies were explored at this point to make sure that there was realistic expectation for a return of invested capital. Numerous larger chain operations with full service operations had smaller footprint concepts in their portfolios, but perhaps not limited service concepts. I determined that given the right profitability of the chain, it could be marketed after a critical mass had been reached.
Next step was to develop the Business Plan
Go back to Daniel Kuhlman Tastes Project site
Daniel Kuhlman creates the Tastes Wine Bar & Bistro concept
Creating Tastes Wine Bar & Bistro was as much an exercise in passion as it was in business model design. For those of you with a passion for wine, you will know what I am talking about. If you’re not a wine aficionado, think of your passion and imagine monetizing that in a business. The prospect is exciting, isn’t it?
Had I merely conjured the idea of opening a wine bar and said, “Okay, let’s go”, I would have been doing myself a great disservice. That is exactly what most small business owners do. Validating the idea and ensuring that this was the best use of my capital and time was mandatory. There were at least three other top contending business models on my drawing table. Not just other food and beverage concepts but, tech, retail and outsourced manufacturing marketing. Each of those ideas could have generated a return. Each of them were eliminated at various points along the way with no-go decisions. What remained was a limited service, small footprint, wine bar that was reproducible from a franchising perspective and met an identified market need.
At this point, the business case was established as a guide for further development including general menu, rough order of magnitude budgeting, conceptual design elements. It was too early for a full business plan but it had passed the first phase.
At this point in the development, I had the following elements in place.
- A general idea of the concept including menu guidelines: International vs country specific wines, small plate vs full plate.
- Number of shifts I wanted to be open. I chose evening and Saturday/Sunday brunch. (Please don’t try to open for three shifts/day. You’ll burn out faster than a supernova)
- The approximate number of tables required to make the concept work for the number of staff and the right sized space.
- General location, at least for the first operating unit. It had to be close to home to manage efficiently. I also determined that future expansion was going to be located in the metro area and not in secondary markets located too far to maintain quality control.
- Number of shifts I would work and days per week to be open.
- The amount of personal funds available to the venture.
- Amount of funds required to lease or buy property. Amount of funds required for the restaurant build. Contingency and emergency funds.
The business case also identified:
- Preferred business structure.
- High level risks to evaluate more extensively.
- Management experience and training gaps.
Personal considerations at this point include:
- Other job opportunities and opportunity cost
- Would this project progress my career in the direction I wanted it to go?
- How will this affect my family life?
Now it’s on to the next step Concept Validation
Go back to Daniel Kuhlman Tastes Project site
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Daniel Kuhlman on creating a multi-unit wine bar 