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Globe and Mail Update Published on Monday, Apr. 24, 2006 1:13PM EDT Last updated on Sunday, Apr. 05, 2009 3:23AM EDT
BUSINESS PLAN: Leslieville Cheese Market and Fine Foods
TABLE OF CONTENTS
The Neighbourhood: Queen Street East Evolves
Market Segments and Target Market
Competitive Products and Services
The Leslieville Cheese Market will be situated in the heart of the new Leslieville Village. Recognizing the transformation of this section of Queen Street East before it has fully materialized means we reap the financial benefits of low rent and little competition.
The financials tell the story of a modest revenue model that grows steadily and builds neighborhood loyalty. With a focus on low-cost startup, the need for investors is minimized. Investors will be paid principal and interest on loans from Day 1. Dividends are planned from the fourth year.
One Thursday night in January, Lori and I were walking around our neighbourhood. We stopped at a trendy-looking new restaurant called Pop, near the corner of Queen Street East and Broadview—not to eat, just to peruse the menu and, eventually, to chat with the owners about their business and the continual changes in our neighborhood. During this conversation, Lori identified the need for a cheese shop—not the first thing that comes to mind when you think of hot new retail prospects, right? But the restaurateurs loved it—they wanted a shop closer than the St. Lawrence Market where they could buy good cheese.
We walked further and started to take serious note of storefronts on Queen Street East, from a retail perspective. Lori was right about a cheese shop, and the neighborhood. Amid the not-so-well-kept funky retro furniture stores, a host of new storefronts have cropped up. In fact, many key blocks have had more than 50% of available space taken up with clean, desirable, new retail storefronts—including small art galleries, independent clothing designers, a new upscale bridal boutique, several home shops, one or two florists, a Wine Rack, and a bunch of funky new eateries and pubs. Not Queen West, but Queen East—a little less esoteric and a little bit more grounded in daily life.
"I'll be your first customer." That's the response I get when I tell people our plan. Cheese retailing is not a glamorous idea. Joel, the local accountant at Queen and Logan, suggested during our first conversation that the Leslieville Cheese Market would be a labour of love, building a clientele and loyalty over a span of years. His suspicion was confirmed when I produced the financials.
What could possibly counteract low profit margins on cheese? Extremely low startup costs. What comprises the bread and butter? A loyal clientele who live or work in the neighbourhood, busy weekend walk-in traffic and regular business with local restaurants. From where do we skim the cream in this venture? Catering and special orders. The film and recording industries are booming in this area, especially with the announcement of the new studio planned for the port region — with 180,000 jobs and billions of dollars to follow.
This neighborhood is exploding. The city is renovating this stretch of Queen Street, including putting in new trees and neighborhood-specific street signs, announcing the arrival of "Leslieville" and "Riverside." The sidewalks were busy last summer. This summer they'll be overflowing from busy brunch spots on a Saturday afternoon. Cheese-loving customers are moving to the neighborhood. A cheese shop is needed. Give the customers what they want, send them away happy, and loyalty will follow.
This is an opportunity for you to participate in contributing something at street level. All of the retailers in Leslieville are cheering for us. The hours of sincere advice and encouragement that I have already received from local merchants cannot be quantified.
I am dedicated to maintaining a high standard of products and services. I intend to make cheese and related foods and gift items made locally, at reasonable prices. From the moment customers enter the Cheese Market, they will feel confident that we can provide the information, advice and service they need. I intend to be the face people put to the name "Leslieville Cheese Market." Part of their loyalty to the Cheese Market will derive from personalized service.
The opening date of Leslieville Cheese Market is in June 2006. We expect to become profitable within one year and to pay our investor's loan back within five years. One of the keys to our success is our strategy to obtain a retail space that allows for a quick, economical opening, and future expandability.
Are you familiar with the section of Queen Street East between Broadview and Leslie? If you haven't seen it since last summer, you may be surprised. If you haven't seen it for five years, you won't recognize it at all.
The local socio-demographic is evolving. What used to be a primarily white and extremely low SES population is shifting to families who can afford to buy a house and renovate. In order to do this, they need to have confidence in their surroundings. At some point in the last few years, critical mass" has been attained: quality, middle-class people with comfortable finances have arrived and settled. These types of people seek out the "village" atmosphere, which includes one-on-one personalized service and products that may cost a little more, but are worth their hard-earned money.
Development is happening everywhere. Leslieville has been identified as one of the hottest real estate markets in Toronto. There are dumpsters on front lawns of every side street, as people buy and renovate the beautiful Victorian row houses in the area. High-end condos are being completed now at Eastern and Broadview. The building is a one-minute walk to Queen and Broadview. At least 167 high-end units with sandblasted brick walls, 10-and-and-half-foot ceilings and exposed wood beams are scheduled for imminent completion. More high-end condos are filling the warehouse to the northeast of Queen and Carlaw, scheduled to open in early 2007.
Lori and I bought, renovated, and moved from our previous homes in Riverdale and Queen West to 123 Logan, at Eastern Avenue, in the fall of 2004. Our house cost $240,000 a year and a half ago. With $30,000 in renovations, the house has been valued at $340,000. On January 4, 2005, we purchased the adjoining semi for $190,000 and renovated from the bare studs. Since the inside of the house is now completely new, the valuation is actually greater than our house. The increases are 25% and 17%, respectively, over one year, and an indication of the money people are willing to spend locally that they weren't a few years ago.
Moreover, we have been ecstatic to witness the demolition of 20-some dilapidated row houses previously left in disrepair by a slum landlord who is fast retreating from this neighbourhood. Happily, in their place, 18 three-storey brick townhouses (listed at $395,000) have been erected and are being inhabited as I write this. In contrast, there remain quite a few low-income families who have owned their houses for a long time. Real estate has made them wealthy. There is one rooming house left on our street. When the owner of that house realizes the difference between the potential sale price and the house's monthly revenue, it will be on the market.
Our street is only one example of 100 local streets in different phases of the same development cycle.
Several factors have contributed to changes in the market. The economy remains strong in Toronto. People's attitudes have changed to preferring quality and service at food shops. And people who will fit the profile as a Cheese Market customer are steadily populating the area. We are on the cusp of experiencing a significant jump in the population of the area, as several large loft-condo developments are opening in the next days, weeks, and months, bringing thousands of customers to the area. Many of these new residents are habitual "downtown people", and do not own cars. They rely on neighbourhood businesses to feed, clothe, and entertain them. Currently, they will meet a vacuum of food-related specialty retail stores, and will be forced to resort to neighbourhood grocers (and, testifying to the viable market, a variety exists within a few kilometers—Loblaws, Price Chopper, No Frills, and Food Basics). When they want personalized service or specialty items, they will find themselves in somewhat of a no-man's-land: the closest are located to the west at St Lawrence Market, to the east, the Beaches, and to the north, the Danforth.
Even the discount grocery store Price Chopper provides a clean, well-signed, bright, modern shopping experience, with a reasonable deli meats counter and excellent fresh produce. It's interesting to note that despite Price Chopper's consistently lower prices on produce and often profoundly lower prices on groceries, Loblaws has at any time three or four times the number of customers milling about the aisles and checking out at the cashier. These customers are in a financial and social position in society that allows them to decide that they will never cross Leslie street to set foot in Price Chopper.
Gerrard Square, formerly touted by Now Magazine as one of the most depressing places to spend time, has changed its face—it's home to a new Home Depot, Winners and Staples Business Depot.
Market Segments and Target Market
Location
The first and easiest segmentation is by location. It is safe to say that people will not drive past one cheese shop to go to the next one. The largest, most dependable market segment is people who live close by. I have attached a map showing locations of the nearest cheese shops. The population-to-store ratio is clearly extremely high.
Continuing on with segmenting by location, two other groups are significant. "Imports" are people who come from afar to the neighbourhood on a regular basis for some specific reason. "Walk-by traffic" consists of people who have come at random and not on a regular basis. These walk-bys can be converted to imports. They need a reason to come back. A fully developed village can provide brunch spots, cafés, art galleries, retro furniture stores, clothing stores and of course, a cheese shop.
Tizz, on the block at Queen and Logan, is one of the several clothing designers with studios and shops in the neighbourhood. He brought his Yonge-and-Bloor clientele with him, as he could no longer afford the rent. He now pays $1,100. To his surprise and delight, he claims that 50% of his sales are attributable to walk-by traffic.
Next door at BLU hair salon, owner Mike decided on Queen and Logan over Little Italy. His rent is also $1100. Last winter, he suspected that people were shooting heroin in his back alley, but "those people have moved on." He wasn't sure he had made the right choice until the summer, when he recalls "the sidewalks were packed. This place was a mad house."
Moreover, one of the potential Cheese Market retail locations is in plain view of southbound traffic heading for the Lakeshore, the Don Valley Parkway and the Gardiner. Second from the southeast corner, the location is impossible to miss from the traffic lights at Queen and Logan.
Socioeconomic Status
Beyond segmenting by location, the socioeconomic demographic of cheese buyers is very broad. People of all ages love cheese, but only people of a certain age buy cheese. High school students are out. University students might want to buy cheese, but with the exception of special occasions, student loans come first. An impulse purchase at the Cheese Market after brunch on a Sunday requires employment and financial security. In terms of age, there's no limit — old people love cheese!
People in this segment are homogeneous in their middle class food needs: quality meats, produce, cheese, and other dairy including eggs. These items are purchased locally at supermarkets and specialty stores, and cooked at home many nights of the week.
A stable market is the local restaurant business, and we plan to provide them with what they need and desire - their requested staple cheeses and special orders.
Another very important target market is the huge film industry. Catering all year and especially at Christmas, paid for by corporate accounts, will play a large part in the success of the Cheese Market.
Product Positioning (creating an image in people's minds about what the product is)
Although the name "Leslieville Cheese Market and Fine Foods" may imply otherwise, the shop is not envisioned to be a "high-end" shop, but rather, a shop more or less affordable to the middle-class people who live and work in this and nearby neighbourhoods.
Marketing cheese does not require teaching the consumer what cheese is or how to use it. 'Positioning' literally requires little more than stacking cheese in an attractive way. The real product is hands-on, friendly neighborhood service and advice. The customer who appreciates 7-year-old cheddar will want to try 5-year-old Italian Asiago. Our target market doesn't need to be taught about cheese, they need — they want — to be taught about better cheese. The atmosphere on the outside and upon walking through the door will be that of a modern, up-to-date store, with oldfashioned, one-on-one service. However, as a promotional tactic, there is nothing wrong about hosting a "cheese appreciation night" on site.
Customer buying decisions
Location will be a huge factor in the customer's buying decision. Customers might make a special trip to the Leslieville Cheese Market if they need a specific item. However, many customers will be drawn to the block at Queen and Logan for other reasons. Please see the attached map of the block with a diagram of existing stores. The four fine restaurants have a busy weekend brunch. The brunch crowd hits its peak at around 1pm. Before and after that time, on a beautiful spring day, people will be wandering down the block.
Primary competitors: There are surprisingly few cheese shops in Toronto. The Toronto Yellow Pages lists 24 shops across Metropolitan Toronto. Alex Farms is the most successful example of specialty cheese shops. They have just opened their eighth location, this time in the Beaches, 3.5 km from Queen and Logan. The closest cheese shop is the Alex Farm Products at Chester and Danforth, 2.4 km away. In addition to driving time, parking is difficult, usually involving scouting for places on side streets near Danforth.
Here's a map of the cheese shops across Toronto. 
More often in Toronto, delicatessens with meat and cheese can be found. Meat On The Beach, A butcher at 1860 Queen Street East at Woodbine, sells fresh meats, deli meats and cheeses, and small, prepackaged cheese items. The cheese that they tend to sell at the deli counter is more suited to sandwiches—like sliced Canadian provolone, mozzarella, and swiss. Specialized cheeses are not common at the average deli. Interestingly, as a cheese gets older and better, it becomes dryer and crumbles. A good quality Italian provolone cannot be sliced with a deli cheese slicer. Therefore, delis tend to sell cheaper, lower quality Canadian sandwich cheeses.
Competitive products and services
A personal, interactive experience. Alex Farms has lost its personal touch. The Paint Depot, beside what will be Starbucks, has had the same three employees for the last few years. I go there to buy paint because I trust their advice, not just their ability to punch prices into a cash register.
Easy parking. Side streets are relatively empty during business hours. Parking along Queen is cheap and available. Tizz claims that most of his customers park in the Shoppers Drug Mart parking lot.
Cheaper catering—cheese trays for no more than the cost of the cheese. Competitors include caterers who sell a tray of cheddar cubes for $48. We will engage in a heavy marketing campaign in the fall to capture the Christmas catering market, with "cheese trays for no more than the cost of the cheese." Of course, the cheese will be high-end, higher-margin cheese. The loss leader would be the labor and disposable plates. Labour would be reasonable, and none of the cheese would be cubed (just cut into wedges). Any cheese aficionado would be appalled to see cubed cheese.
Farm-fresh dairy butter: My first day at the St. Lawrence Market, I saw the huge blocks of butter and wondered who would buy butter at a cheese shop. It was $5.49 per pound—not outrageous, but at the high end of what any supermarket would charge. My question was soon answered, as we sold an amazing amount of butter. After all, it is "farm fresh," cut from the block to order. The margins on butter are high, and people should be encouraged to include it with the rest of their purchase.
Low-fat yogurt made right here, our specialty!: at home I make Fresh Balkan Yogurt every couple of weeks. It's unbelievably simple. Milk is the material. At the Cheese Market the markup would be 700%, and let's face it, it's a unique and healthy offering.
Fresh Herbs by Daniel: A brilliant offering, these herbs are still living in planters. That means an extremely low spoil-return rate. Otherwise, keeping fresh herbs would be difficult.
Urban Fare Catering Frozen Gourmet Entrees: These beautiful meals are produced daily in Toronto. This is a great opportunity to provide a one-stop shopping experience for our customers, particularly on their way home from work.
Ace Bakery baguettes: A well-known brand of specialty breads in Toronto.
Bonjour Brioche (a local and loved bakery/café) baked goods or Dufflet pastries (widely respected and loved in Toronto).
Fine Foods: These items compliment the sale of cheese. You can't sell cheese without crackers. Plus, we'll feature shelves of non-perishable fine foods like olive oil, vinegar, pickles, etc.
Olive Bar: A serve-yourself olive bar with gourmet olives from around the world.
The Greek Feta Barrel: You can actually buy feta in a wood barrel, packed like that in Greece. The top has to be sawn open with a handsaw.
Coffee: A small selection of Illy coffee, the finest we know of.
Food-related gift items: All the usual and unusual cheese knives and boards, chopping blocks, coffee mugs, oil and vinegar dispensers, party ware and easy gifts.
The neighbourhood is lacking our services. We will not be setting up shop with the intent to compete against existing cheese retailers.
A great opportunity that we can capitalize on with fast action is the slated construction of Starbucks on the same block. This is rumoured but not publicly confirmed. I phoned the selling agent and asked him to confirm this. Chris Kelos at Coldwell Banker Case Realty confirmed that a numbered company in Vancouver bought the first three storefronts at the north east corner of Queen and Logan. They are a property management company owned by Starbucks, and as Chris says, "They have every intention of opening a Starbucks location by summer, 2006." One landlord that I have been speaking to is not aware of this. A shop owner has heard about Starbucks and welcomes them, but doesn't believe it to be more than a rumor. When this fact is confirmed, landlords will be asking hundreds of dollars more for their retail properties. The window of opportunity for the lower rent will be short, but there's still some time to take advantage of the situation.
A great threat is competition in the immediate vicinity. Geographic examination shows that new cheese retailers don't establish themselves too close to other cheese retailers. Except in the obvious cases of St. Lawrence and Kensington Markets, where they establish themselves as close as possible to the others, to draw people to the market knowing that they will have a great variety of choices. Establishment of the storefront as soon as possible will deter other cheese mongers.
Michael is an amateur chef and food lover. For the past seven years, he has been taking part-time culinary arts courses at George Brown College in Toronto. His last course was a Cheese Appreciation class. This is not a coincidence.
Michael has managed two other small businesses, including a small newspaper in Ottawa and an agency for fine-art illustration. Last year, he spent six months completely gutting and renovating a house. He is currently very pleased to not only find a way to get out from behind the computer as a database programmer for small-business websites, but also to discover a vocation.
Michael's expertise lies in his pragmatic, brass-tacks approach to pretty much everything, combined with his already extensive knowledge of cheese and a passion for food. He is a warm and welcoming person who takes great pleasure in the opportunity to work with customers one-on-one on a daily basis.
Michael will be the full-time manager of the Leslieville Cheese Market. His responsibilities will include administration, marketing and advertising. To start, he will have occasional part-time help in off hours so that he can take care of admin duties and startup activities like acquiring fixtures. Part-time employees will be hired and managed by Michael as needed. Michael will hire a bookkeeper, if only for his sanity.
The co-owner/investment partner of the Leslieville Cheese Market will be a silent partner, but will no doubt have a great interest in the success of the business and will most likely spend a great deal of time at the shop during the setup time and the first few months of operation.
In addition to employing Michael as manager and employing occasional part-time help on an ongoing basis, increases in revenue will signal a need for extra help. Either the existing part-time employee will be brought on full-time, or another part-time employee will be hired. Hiring will be Michael's responsibility.
Grand-opening reception in June
Covering the neighbourhood with flyers and coupons
Free samples, every time, whether you ask for one or not. It makes the shopping experience fun and memorable, builds a relationship with the customer, and almost always guarantees a sale
Cheese nights with local restaurants
Cheese appreciation nights at a nominal fee
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