How to start a business successfully, despite the challenges
James Chen and his brother John started a unique community-based business a couple of years ago, called Flushing Food. Although it seems similar in concept to websites like Seamless and GrubHub, it operates in a different way and is focused on a local community. In the truest sense of the word “niche marketing,” they found a community that had a need that wasn’t being met, noticed that no one was filling that need, and jumped in where others feared to tread.
You will read below what makes the business unique, but what is not unique is the struggle of starting a new business. For anyone taking the plunge, it’s important to plan well, keep positive, and be prepared for the worst. If you can juggle those three successfully, things will all work out, as they did for the Chen brothers.
When it came to bootstrapping the business, the brothers were smart. Since they owned a local printing business, they leveraged their existing client base to approach and include a number of restaurants that were already clients of theirs in the new business. BUT as you’ll soon read, even that wasn’t as easy as it sounds…
Here’s our interview:
James, Can you please tell us about what led you to start up Flushing Food?
I have lived in Flushing for almost 30 years and enjoyed all kinds of delicious food. However, traffic in Flushing became worse and worse in the past 10 years. A lot of times, I would have rather be starved than stuck in traffic. About five years ago, I came out with this idea with my brother John: to start a online order and delivery service website. It does not only help customers but also local restaurants which have been suffering for years due to [an] out-of-date business model and increasing competition.
Unlike restaurants in Manhattan, those in Flushing usually didn’t provide delivery service before we started. They can’t afford to hire delivery staffers. Moreover, they don’t have websites, nevertheless [an] online order platform and social media. What is worse is that they don’t accept credit cards.
With the help of FlushingFood.com’s help, local restaurants can now get business online. We also resolve the credit card problem. Customers can pay by credit card now when placing an order through us to those restaurants which don’t accept credit cards themselves. More importantly, we help them to serve customers who love their food but don’t want to be stuck in traffic or waste time to find parking in Flushing.
So what hurdles did you face in starting the business up?
In the beginning, the first year and half, restaurant owners did not really want to talk to our sales representatives. Since I know them personally from my printing business, I tried to schedule as many appointments as possible with them myself. When I finally got to see them, most of time I got the answer, “I will think about it. Thank you!” On average, I pay at least three visits to each restaurant in order to get them signed up. We worked very hard to convince them it would work for them.
Then a lot of restaurant owners felt 18% commission was too high. We made so much effort to let them understand that the orders we bring to them are addition to whatever they are getting on their own. Customers who like to order online or use credit cards may never purchase from them without our service.
In the beginning, there were only 19 restaurants willing to join our network. Most of them were from our printing business.
On the first day we launched the website, we only received five orders. Most of the day, our drivers had nothing to do. It is not encouraging. The orders were all from friends and relatives. It was torturing to see drivers hanging around and not delivering anything. We were losing thousands of dollars because we were paying a team and only got a handful of orders. We got the first real customer (someone we don’t know) in the end of the first week. I called and asked him how he knew about us. And it was from the postcard we sent out. We have been doing mailing campaigns targeting monthly since that.
Three months after we launched, the number of orders grew significantly but not enough for us to hire new drivers. The weather was snowy. On week days, we were ok. However, during the weekends it got extremely busy, so my brother John and I had to jump in. There were days he had to go out and deliver. And I had to answer the phone calls from customers who were angry because their orders arrived late.
Honestly, it was quite different from what we thought about operating a website. Ground operation is actually more complicated than running the website.
As the owner, I wish we can keep every customer happy so they will continue using our service. However, it is “mission impossible” to keep everyone happy. There are hundreds of reasons to cause delays: traffic, internet went down, system error, restaurant delays…But customers don’t really care what happens. They just want their order to arrive on time. Depends on how serious the delay is, sometimes I have to make refunds. I tried to explain to those who complained that I would not be able to solve their problem if I stay on the phone with them.
So how were you able to smooth out those challenges?
We reviewed the numbers daily, weekly, and monthly. When they were not as good as we expected, we made adjustments to our operation and marketing strategies. We have been making all kinds of adjustments everyday: manpower, updating our system, educating restaurants…Now the percentage of delays is lower than 10%.
And long did that slow period last? How are you able to get past that?
The tough time lasted about a year and a half. We did realize we could sign up hundreds of restaurants, but if we can’t generate customers, that did not mean anything. So we went after potential users aggressively. We got a clear picture of our potential customers after months of operation. Besides mailers, we also spent a lot on Google Ads, Google Keywords, and Facebook. Once the customer base was built, we saw clearly the attitude of restaurant owners changed.
It was the second winter after we launched. Things started turning around. The number of orders grew significantly. The business of restaurants was hit hard by the heavy snows. Many of them realized they could not just rely on walk-ins. They also saw their neighbors got a lot of orders from us when our drivers went in and out.
After that winter, we don’t need our sales team to go after the restaurant owners. Restaurant owners have been calling us, and we just need to send people to sign them up. My sales team and myself visited a 20-year-old restaurant, “Spicy and Tasty,” countless times since we started. Then we gave up. That was the only one did not work with us in that block. Two months ago, the owner walked in to our office and asked to join. She has been happy with the result so far.
Congratulations on that. You must have been gratified that the one holdout finally joined your network along with the others. So are you able to keep all the restaurants in your network satisfied?
Yes, we see restaurant owners as our partners. The logic is simple. When they do well, we do well. A lot of times we don’t just help them to get orders online, we sit down with them and discuss their operation and marketing strategy. We also use our own social media to promote our partner restaurants. Most of them don’t really have time to create or manage their own ones. I believe once there are enough high quality restaurants/service providers in our area we will be able to attract customers who are willing to spend a reasonable amount of money to get better food and service. And this is happening. You can now see more and more chain restaurants from Asia coming to Flushing.
Luckily, customers who tried our service found it so convenient, and restaurants who joined us were also happy about the number of orders we brought to them. They all helped us to spread the word. Now there are more than 120 restaurants on Flushingfood.com, and we receive and deliver 250-300 orders daily.
How were you able to go from five orders to 300 orders? What steps did you take to increase the numbers?
Advertisement online (Google Keywords, Facebook, etc). We send out a lot of postcards and mailers to our targeted customers. Believe it or not, the transitional direct mail marketing still works. We also sponsor many local events to get our name out.
That’s interesting. If you are a local business, being visible in the community is a great idea. And when it came to hiring, what challenges did you face?
It is not easy to find reliable drivers. In order to provide better service, we pay our drivers full salaries. Therefore, they don’t have to argue with customers for tips. If you ever order for delivery, you would understand the dilemma of how much you should tip the drivers. You don’t want to tip them too much, since the meal may already be expensive. In the meantime, you don’t want to tip too little in order to prevent an awkward situation that drivers come back and complain you don’t tip enough. We charge customers an 18% processing fee, and they don’t have to tip drivers. We have several drivers who have been working with us since the beginning because this may be the most stable delivery job they can find in New York City.
Did you face a challenge in finding your potential customers?
Yes, There are a lot of new immigrants in Flushing. Many of them don’t care about the quality of services and goods as long as they can pay less for it. This brings many businesses into price competition and ends up that no one makes money. It may be hard to change their mind in the short term. But I believe there are also many customers (young professionals, tourists, and people from Manhattan) who are willing to pay a reasonable amount of money for better food and service. These are the people that we do business with. Competing only on price can lead you nowhere.
What about the costs of starting up the business?
We put in at least $200K for equipment and software development in the beginning. There were five drivers who got paid full salaries. My brother John and I did not take any salary from the company for the first two years, and we both put in most of our time on Flushing Food. For this part, it is hard to estimate. It is safe to say that we put in at least a half of a million before the website turned a profit. I see it as investment, not loss, though. Moreover, the numbers of orders every day and partner restaurants have both been growing since its beginning. So I have always been optimistic.
That’s a pretty large investment. Wasn’t this risky for you to invest so much money into something speculative?
We already expected that this journey would not be easy. I always believe if any business is easy and profitable, someone else would already have done it. Even you are the first one, someone will copy your idea pretty soon. This is a business that I know other people will not be able to imitate easily. We have the printing business as the resource of income, so we were not afraid that Flushing Food was not turning a profit any time soon. As of now, I still get a notification when every order comes in. I follow the numbers closely so we can make necessary adjustments immediately.
It took us a while to put together the current team. We have hired numerous consultants for marketing and operational purposes. Most of them did not work out. Many of them gave a nice presentation but could not deliver real results. I finally realized in our case, we don’t need people who know (or claim to know) a lot. We need people who are smart and are willing to figure out ways to solve problems with the rest of the team.
Did you find that there was any competition for the business?
There were two other online order and delivery websites that came to Queens in 2015. Luckily things did not work out for them, and they left very soon.
What are some of the most important things that you have learned on your journey?
We need many different talents on our team. Everyone is good at something, and you have to identify the talents you need most and do everything you can to get them on board.
I have my limitations. I have many ideas, but I need a team with all kinds of talents: marketing, software, management…, to help me to execute.
So now what are the successes that you have had with Flushing Food?
We generate 250-300 orders for local restaurants every day. We have a lot more restaurants than Seamless and Grubhub in Flushing because we provide the service restaurants really need. Our orders come as far as Bayside, Rego Park, and Forest Hills. Restaurants could hardly get business from people who work or live in these neighborhoods before. Now they can, with the help of FlushingFood.com.
So what is next for you?
We opened a sister website called OnDelivery.com in Manhattan. We have also been expanding the service area of FlushingFood.com. We have been talking to several potential investors, and as soon as the new capital comes we will start our service in other cities.
And how can people reach you?
email@example.com and (718) 460-7858.
What’s interesting about James’ story is that he was already doing printing work for the initial base of restaurants that he signed up, but without persistence, even having the relationships in place didn’t seem to help much.
Persistence was the key in getting the company started, and then not giving up after a rough start.
As we explained in the beginning of this story, they found a niche in a local community–a need that wasn’t being filled–and they filled it. And now, they’re expanding. And with that, Flushing Food is a fine example of a local success story…When you have your initial hiccups, as any new business does, but remain positive and patient, that is the crucial ingredient in building a successful business.
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