The Lease Is Signed and Shipped

After chasing everybody down and getting all of the required witnesses and notaries to do their job, we finally signed the lease with the mall. I drove over to our local Kinkos and dropped the large FedEx box into the slot. I don't know if it was that I was staring at the sun for a while or the fact that I knew that I had just entered into a very large commitment, but my head was spinning.

Initial Concept Drawings

I've started working with Eric, the designer, on the store concept drawings for the first Chippery unit in Wellington Green. Friday afternoon I got the first draft of Eric's proposal (pictured below). I have to say that after taking a look at the existing space, I think we're going to have to do more work than I originally envisioned in order to get the right experience for our customers.



This design is nice in that it wont cost us much money in leasehold improvements, but it also doesn't look like much has changed from the existing tenant. I'm afraid that we would be seen as a temporary tenant. I think we'll have to remove the conter starting at the left end of the store and ending at the middle column. We can then display the raw potatoes, yucca, plantains and other vegetables in the three foot section at the far left. This space would be covered by glazing from floor to ceiling. After discussing it with Jim, I think the best space for the cooker is as close to the lease line as possible between the first and second columns. There's a structural column inside the store that may make this difficult, but if it's possible, it would make a huge impact. The cooker would have to be placed so that it's facing the inside of the store so that the chips would then cascade off of the machine to the right (when viewed from the outside of the store). The would land in a chip tree display right by the middle column. There would have to be a counter after the middle column to house the chip theater and a cash/order station. The far right hand side would still be a merchandising space that customers could walk into. There would be glazing from the right demising wall to the third column and shelving space along that wall for merchandising.



When viewed in plan mode, the cooker would be placed between the first and second columns from the top. The wall directly behind this space would have a work surface for bagging and maybe several chip tree displays to hold finished product. This layout would leave enough room for storing cases of potatoes along the top wall and would also let me have a refrigerator in the back-of-house area.

Clip-n-Seal

I first read about these ingenious little contraptions several months ago on IDFuel and thought that it would make a great impulse item to place right by the cash wrap at our store. Well, today I called them up to see if this was possible. Not only is it possible, but they have sold branded versions of the clips to other customers in the past.

Slow Review Cycle

Well, we've negotiated all the terms for the lease and have in essence agreed to pretty much everything, but when we got the lease form back there were a few things we needed changed. We received the "final" lease form on Monday and we replied with our comments on Tuesday. Unfortunately, we haven't received the real final version yet so we're still lease-less.

On another note, we're supposedly getting the first drafts of the store design from the guys in Canada on Thursday morning. I have a conf. call scheduled with the designer for tonight at 8:30 to guide him through the space as it stands now. I hope they turn those drawings around fast, because we're down to 38 days to go until our August 1st deadline. The landlord still has to approve the design and issue the kickout letter to the current tenant. Once that letter is out, the tenant will have 30 days to exit the space. This gives me 8 days to get the design approved and still meet my deadline.

Pricing a Premium Product

The subject of pricing has come up several times in the last month or so and today, Rob the BusinessPundit had a post (pointing to an article on CFO.com) that discusses the pitfalls encountered when pricing new products.

Here's my situation... Our (projected) most popular item will be the "quick fix" bag which holds about 2.5 oz of potato chips. These are what I consider a premium product because they're cooked within minutes of when a customer orders them and they are seasoned directly in front of the customer. We use only the best ingredients and non-hydrogyneted oils to ensure that they are indeed the best chips our customers have ever eaten.

The market price for a 2 or 2.5 oz bag of mass-produced chips is approximately $0.99. These chips have been in a bag for an undeterminable amount of time and can contain all sorts of preservatives and/or cooked in less-than-healthy oils. How do you quantify the premium to charge for our freshly prepared chips? I'd also like to point out that our 2.5 oz bag will more than likely be overfilled on average. Would a price of $1.49 be too high? How about $1.89? I would like to keep the average sale for a bag of chips, a small container of dip and a soft drink to be at or under $5.00. I would really like to get some feedback from the two or three of you that read these posts routinely.

Mall Lease Negotiations

Yesterday I sat in a conference room at the mall with Jim, our real estate consultant, and Al, the mall leasing manager, and we had Kim, our attorney, and Tom, their attorney, on the phone. All in all, everything went very smoothly. They gave on many points and we had to come to some compromises on a few terms but things went very well. Very well, that is, until we got to the deal breaker!

Unfortunately, I don't feel comfortable publishing the details of the lease so it will have to suffice to say that it was a clause in the guarantee whereby we would be severly limiting our defenses. Alex would not sign the lease or the guarantee if this was in there therefore I wouldn't sign either. I got Tom to start working on the updated lease and promised to have Alex discuss this with Kim to come up with some sort of compromise.

After several conversations and some research on Alex's part, we found that the clause was enforceable. Alex and I discussed it and I let her know that unless they were willing to change the language to something she would be comfortable with, that we would walk away from this mall and pursue one of the contingency plans we had set in place for just such an incident. At one point during her conversations, she actually had to tell Tom that it was over and we were going to move on but in the end, they were able to update the language to something that we could live with.

The negotiations that had transpired on the previous day were not nearly as exciting. Since I have very little experience with these precedings, I let Jim handle the majority of the business terms and jumped in where there was something that had to be clarified. I'm very happy with the outcome and I greatly appreciate all the work that Jim has put into this project. It's the best money that I've spent.

First Round of Comments Away

It's taken us (Attorney, wife, consultant and self) approximately two weeks to digest the details of the 67-legal-sized-page lease package from the mall's leasing company. Today we replied with a 10-page document detailing all of the terms we needed changed. To be fair, the lease isn't the entire 67 pages. It's broken up as follows:

• Cover page (1 page)


• Table of Contents (2 pages)


• Data Sheet (2 pages) - This is a sheet that details the business terms for the lease such as minimum rent, allowed use, radius, promotional fees, etc.


• Acknowledgements (2 pages)


• Standard Form (31 pages) - The real meat of the lease. Here is where they list the ways they can screw you.


• Construction Requirements (11 pages) - These are the main requirements for building out the space.


• Utility Requirements (3 pages) - These are the power, plumbing and other utility requirements for building out the space.


• Design Drawing Requirements (2 pages) - These are the requirements for the space design drawings.


• HVAC Requirements (2 pages) - These are the heating and central air conditioning requirements.


• Guarantee (9 pages) - The terms of the guarantee for the lease. Three pages per guarantee per guarantor.

Our comments, which were just on the main business points of the lease, not simply inserting "reasonably" here and there, were a total of 9 pages. We've sent them to the mall's attorney so now we have to sit and wait for a response.

Design Package Is Here

The Taubman Design Package for the WG space got here today. It's basically two CD's filled with the as-built drawings, the design criteria and the drawings for all prior tenants. It seems that the first tenant for our space was a place called CinnZeo. Not much has changed since their original design. Looks like the current tenant just changed the name on the bulkhead.

The next step for us is to provide these plans to the guys that will be doing our design. I have some Ideas for the space, but I don't want to incur too much costs to renovate so I may be forced to not change too much either.

On Sampling

Since I'm planning to use sampling as my main marketing tool, I thought this quote from a completely unrelated article in Brand Autopsy was relevant:

Brand Autopsy:

If you are going to sample a product, make sure the sample tastes good. Samples that taste good will manage to enhance the marketing performance of the product you are selling.

I Pitched Tim Draper

The truth of the matter is that old ideas die hard. When I read that Tim Draper was asking for people to pitch their billion-dollar idea on Always On, I couldn't help but write about ScribeCenter.

For those that don't know, ScribeCenter is was a digital dictation and transcription management solution for attorneys. It took up a whole lot of my waking hours for a period of almost two years. I brought together a group of four other individuals to perform the coding, architecture design, and corporate operations. I also built a pretty strong advisory network composed of people in the industry. We even had a fully functional prototype (except for the actual audio capture portion). ...So what was the problem? Unfortunately, it was the wrong four people. Things ended up imploding when the developers and architect were laid off from their full time positions.

ScribeCenter served as a great learning experience. I was sad the day that I dissolved the company and I still think it has legs. Who knows, maybe I'll get a call from Tim.

Low-Carb Potato

Chad Hutchinson, a University of Florida researcher, is working on a project that will bring a low carbohydrate potato to the market by next year's harvest.

staugustine.com Local News: "Low-carb Tater"

Chad Hutchinson of the University of Florida is in charge of the low-carb potato project. He said for the past four years he's been growing potatoes from the Netherlands in Hastings that have 30 percent fewer carbs than standard baking potatoes. He said the potato is not genetically enhanced in any way, and it's a European gourmet potato that's known for its taste.

The best thing about this is that the farms participating in this project are right here in Florida. I contacted Chad to discuss the possibility of chipping these potatoes in our stores. He said that these are not traditionally suited for commercial chipping because of their high water content and low gravity. After explaining that they wouldn't be mass produced but would be processed in a much smaller scale, he agreed that we could experiment with these to see how it worked.

Chad was also very helpful in explaining the potato market here in Florida. He says that there is a line called the "Sebago" that is similar to the Atlantic (apparently a traditional chipping potato) that has great flavor even if it's not the best candidate for large-scale chipping operations. This line is available for 5-6 months in Florida and can also be sourced in Maine for the remainder of the year. After I mentioned that we will be using Snowden and Norwiss potatoes, he advised that Snowden can be bitter at times depending on where it's harvested.

As a side note, check out this image of a blue potato grown right here in Florida. Chad says that the staugustine.com article mistakenly used this image for the low-carb potato. The real low-carb potato has a yellowish color. Regardless, can you see yourself snacking on a bucket full of these babies!

I was very happy to have picked up the phone to track Chad down. He seems to be a fountain of potato knowledge and I'm sure he'll be a great resource in the future.

Trivia on a chip

Procter & Gamble announced that it will be printing trivia questions, designs and other fun facts on the face of its Pringles potato chips. I think that's brilliant! I already find myself turning over the caps of all of the Snapple drinks to see what Fun Fact lay underneath.

Business Day: "Trivial pursuit - on a chip"

The Cincinnati, Ohio consumer products giant said it was using a "revolutionary" technology for the designs, which will include fun facts and animal designs as well as questions and answers from the Trivial Pursuit game.

"This technology is the first of its kind in the US to be used on food," the company said in a statement.

"The technology uses food coloring and doesn't alter the delicious taste of this popular snack."

The company is teaming up with Hasbro, which makes the Trivial Pursuit game, and will use 2,400 trivia questions and answers from six different Trivial Pursuit Junior categories randomly printed on the potato crisps.

I'm Not Alone

Apparently the spot that Food Network ran on the Chippery has been responsible for more than just my response to the company. I just stumbled accross this article from the Detroit News that describes the Michigan's licensee's story. Here are a couple of good quotes from the article.

Firm's fresh method rolls out the chips (Detroit News):

Since March, Chips to Order LLC has supplied fresh chips to a half-dozen parties and distributes 1,000 bags a week to 14 convenience stores. The chip-making equipment Burnstein uses is not much bigger than oven ranges found in most restaurants.

“It’s a healthier, fresher chip,” said Burnstein, a former Web site owner. “With today’s society, that’s what people are looking for. There are people who will always want a 99 cents bag of chips, but there are plenty of others who want a fresh bag of chips that are made within 24 hours.”

Right now, the chip-making operations are at Maxwell’s Carry Out & Catering in Farmington Hills, where Burnstein goes through about 3,000 pounds of potatoes every week filling orders.

Joel Freeman used to sell 30 bags of Frito Lay chips a week at Maxwell’s. He now sells 120 bags a week of Chippery chips, which he introduced just three weeks ago, he said.

“People come in just for the chips,” said Freeman, who is a franchisee.

It's nice to see a positive response even if it's in a different setting or venue. At this point, it's great reading that others are taking the plunge into this relatively new business.

Low-Carb Losing Steam

This whole explosion of low-carb foods has seriously worried me with respect to how the Chippery will be received. This may not be good news for Atkins lovers, but finally, some good news (for me at least)!

Low-Carb Losing Steam (washingtonpost.com - free registration required):

The nation's appetite for low-carbohydrate foods seems bottomless, judging by the many low-carb products showing up in supermarkets and the new menu items at restaurants and fast-food chains. And when Krispy Kreme Doughnuts Inc. recently announced slowing sales, it put part of the blame on low-carb diets.

Yet the mood at a recent Washington conference on the business was bleak. Sales of low-carb products have fallen sharply at independent and health food stores, and some longtime industry insiders say a shakeout has begun.

I always reasoned that there are plenty of places that aren't offering low-carb foods that seem to be doing very well. This at least calms me down a little. I may still end up offering a low-carb bagel chip that can be seasoned to order if it ends up tasting good and is well received as a special.

via carb wire

Mall Lease is In

I just received our first view of the mall's lease document via email from the landlord's attorney. Quite a hefty document. This thing weighs in at a whopping 65 pages with a couple of other pages thrown in an additional file as attachments to the lease. The majority of the business terms are in a "Data Sheet" that's just two pages long.

I obviously haven't read through the whole thing yet, but I've already found a couple of issues that we're going to have to work on. The first is that the Commencement date was moved to November 1st from October 1st. It gives us more time, but it's not what I planned. Hopefully, I'll go through the rest of the document by tonight and confer with Jim to see what we can do.

Trans-fat-free French fries

Is this a sign of things to come. The fast food industry may soon be rolling out trans-fat-free fries from Slimplot Foods. This may be a good thing in that it will raise consumer's awareness of the benefits of staying away from foods cooked in oils containing trans fats. Chippery uses non-hydrogenated oils to cook the chips in.

USA: J.R. Simplot launches trans-fat-free French fries : just-food.com News:

Simplot said it had developed Infinity Fries specifically to address health concerns associated with trans fat, also known as hydrogenated fat. Infinity Fries are made with 100% non-hydrogenated vegetable oil. They also have lower saturated fat than traditional fries

What's Next

So now that the ink is dry on the Chippery license agreement. I have to gear up to open the first unit. The plan is to open up in The Mall at Wellington Green on or before October 1st. Before this can happen, there are a slew of things that have to get done. Here's a short list:

• Negotiate final terms of mall lease


• Store design


• Mall and Health Department Plan Revew


• Permitting


• Demolition


• Construction


• Installation of Fixtures and Equipment


• Hire staff and take care of other administrative tasks


• Training


• Pre-opening marketing and publicity


• Health Department inspection and occupancy certificate


• Grand opening!

Each of these items is a world unto themselves. I'll be expanding on each one in future posts.

Biometric Scans in Restaurant Biz

Small Business Trends writes about an interesting article about smaller restaurants using finger print recognition in their operations.

Update: After trying to go back and read this article again, I found that the Ohio.com site requires you to register your email, name, home address, social security number, first pets name, etc. in order to access their content more than once. Huge annoyance!

The Deal Is Done

As I mentioned previously, Geoff (the President) and Ernie (the CFO) from the Chippery paid me a visit this week in order for us to get to know each other better and get our previously rocky negotiations back on track.

The guys flew into Miami International and drove up to the hotel in Boca on Monday night. I picked them up at 8 AM on Tuesday because Monday was my wedding anniversary. We had breakfast and talked about strategy, company history and our backgrounds until about 10 AM. It seemed clear to me that these guys didn't have a clear understanding of what the company's focus should be. From the beginning, I saw that the company was trying to avoid operating as a full franchisor for a number of reasons. Not the least of which was cost. They now have a full UFOC which I'm half way through digesting but they haven't registered with the numerous states that require registration. In Florida, this isn't much of a problem. The fact that they have a UFOC for review and that they comply with the SEC guidelines for Franchisors allows them to fill in a simple exemption form and pay $100 in order to do business in the state.

A good example of the lack of clarity for the company's future came in when I asked where they saw the company in five years. Geoff started answering while Ernie excused himself for a second. When Ernie got back, I asked him to answer the question and the two answers were 180 degrees apart. This may be because Ernie isn't in the office full time, but I think it's a clear example of how they operate.

After breakfast, I drove us to Wellington to meet with Jim. I drove around the town a bit to show the incredible amount of development that's going on over there and then all the way around The Mall at Wellington Green. The mall is huge, so it's very impressive. It was clear that the guys were awe struck. We walked in through the food court entrance and took some time to look around. Geoff struck up a conversation with the guy behind the counter at Ben & Jerry's. It turns out he was the owner. His spot is perfect for a snack; about 190 sq. ft. and he's doing roughly $300K in gross sales per year. He did say that his first two years were rough. That's understandable, the mall was brand new then.

We made our way over to the soft play area and met with Jim. There we started showing them the spot from a distance because we didn't want the existing tenant to get freaked out. The spot really is very good. This is why it pays to surround yourself with people that can get things done. Without Jim T., the management would never go for what we're doing.

After a bunch of pictures were snapped, we started walking around and parked ourselves in some chairs in one of the side corridors. We started talking over some of the business points that bothered Geoff and Jim went off to see if he could get us a conference room in the management office. When he called to say he got one, we moved the conversation up there. To make a long story short, we negotiated some points, but the terms of the agreement were pretty much what I had submitted to them prior to their trip. We wound things up in the conference room in under an hour and headed to Two Jay's for lunch.

After seeing Jim off, I drove the guys back to their hotel room where Ernie and I sat down to craft the language for the agreement. We brought Geoff in several times and had a few back and fourths until all the terms were documented. This took us up to around 5:00. I ran off to get the document printed and told them I'd be back to pick them up for dinner at around 6:30. I wanted Alex (wife) to take a quick look at the items that had changed but she agreed that they were all ok. I missed the kids during the day. This was pretty much the only time I saw Stephanie and Danny awake during the entire day.

When I got back to the Hotel, Geoff and Ernie were having drinks by the pool. We singed the agreement and had a toast. What a relief!

I drove them by The Town Center Mall in Boca before heading to Mark's Place at Mizner Park. We had a lovely dinner and talked about all sorts of things. I find that many of the business folks I entertain are enthralled by the story about how my family and I came from Cuba. It really seemed that they enjoyed hearing me tell it.

Blogger Relaunched

Congrats to the Blogger crew. They just relaunched a great new interface jam packed with new features, templates and that great new blogger smell! Stopdesign has a great write-up of the entire project

Update: It's only fitting that I choose the Mr. Moto template from the excellent selection of standard-compliant templates that new blogger provides.