Food Startups Can Be Risky Business: Incubator kitchen might improve the odds

Judged by the level of national recognition for Grand Traverse area’s vibrant food scene, it might seem that the restaurant, food truck and catering here is sated. That appears not to be the case, at least in the minds of many entrepreneurial-minded chefs who are eager to start new food businesses.

Some might say that spirit of adventure is fueled by an unwise optimism since the odds of success are not great. Approximately 60 percent of all restaurants fail within the first three years, and it’s not uncommon to see an opening – and closing – within a six-month period.

Why do food startups fail? Many reasons are cited for the high failure rate. But one possible reason seems to stand out above the rest: Many, possibly the majority, of food start-ups are undercapitalized from the get-go.

It takes time to build a sustainable restaurant, food truck, catering or food product business. And that, in turn, requires money,  in many cases lots more of than even otherwise savvy entrepreneurs have on hand. There are ways, though, to improve the odds.

Ryan Wells, a longtime property manager and entrepreneur on the Traverse City scene, thinks he can help reduce one major cost during what he calls the “crawl, walk, then run” phase of starting a food business.

For a monthly fee of $400, chefs of all sorts (and training levels) can use Center City Kitchen, a fully equipped and licensed commercial kitchen located in a small business park owned by Leasewell Inc., the property management company started by his parents, Rod and June Wells.

His idea is simple. And he’s not the first to think of it. But given his passion – call it his mission – to help food startups succeed, his incubator kitchen, which is open 24/7, just might make the difference for some promising new Grand Traverse area chefs.

How Center City Kitchen Works

It’s an informal setting. Chefs and their helpers can come and go at all hours. Each has access to storage, refrigerators, commercial electric ovens, a proofer (a warming chamber for breads and sweets), prep tables, induction cooktops and three-compartment sinks. Clients sign an initial three-month contract. There is a schedule, but Wells takes a flexible approach.

The main purpose of Center City Kitchen is to serve as an incubator where chefs can prepare food, try out new dishes and sharpen their cooking skills – and do it with a minimum of expense.

“We think it’s a cool opportunity for a startup,” said Wells, who owns the business with his wife, Meagan. “The chefs come here and call Center City Kitchen their own. They write one check, and that covers utilities, trash pickup, everything.

“A lot of incubator kitchens make you pay by the hour. I always feel that pressures the chef. Then they have to pack up all their stuff and leave.”

So far, the Wells’ facility, which opened six months ago at 767 Duell Rd. near the intersection of Garfield and South Airport Roads, has attracted chefs like Greg Hart, who operates the food truck Cordwood BBQ. Hart also caters special events and has landed a sought-after location at Little Fleet this Spring. There are other caterers, a candy maker (Sea Foam Candy Co.), a two-person beverage company (Polyculture Kombucha) and a few already well-established clients like Bayside Gatherings (a caterer) and Seafood Driven, an Ann Arbor-based food truck that’s entered the Grand Traverse market.

Identifying with the Dream

As a serial entrepreneur himself, Wells can identify with chefs who have a dream. That explains the emphasis on Center City Kitchen as a business incubator.

“It’s the spice of life to do things – even projects that scare you,” he said. “It’s good to try something new. You never know which ones will be winners.”

He shares his understanding of the business challenge ahead, and wants to help his clients beat the odds.

“I tell them that even if you qualify for a startup loan, your recipes are spot on and your marketing is brilliant, you have a very short window of opportunity. You have to establish a clientele, and that can take three and sometimes even five years.”

“In the start, you probably won’t have time or money to buy ingredients in bulk, even though that would minimize cost of goods,” he said. “So it’s all about looking at the big picture and finding a balance. You have to answer a lot of questions at the same time: How much can you pay for labor, rent, inventory, equipment, furniture, for example.”

As he points out, the less start-up money that’s on hand to absorb those initial costs, the more pressure and the greater the risk of failure.

The Vision

Wells sees Center City Kitchen as a long-term investment.

“We’re in this for the long haul,” he said. “We want people here to succeed. So we work closely with them, and stay flexible when they need something.”

And Wells, whose previous food experience is limited to waiting tables during his college days, is wise enough to stay out of the way of the chefs who use Center City Kitchen.

“We’re not coaching chefs about how to make their dishes. For that there are culinary schools where they can get all the academic experience they want,” he said. “But when you enter the private sector, it’s sink or swim. We focus on the need for a facility.”

Other Local Food Prep Sites:

Grow Benzie – A non-profit that rents out its 1,500 square-foot commercial kitchen. Used by food truck owners, community non-profits, caterers and local food producers. Rented by the hour.

Grand Traverse Food Innovation Hub – 10 leasable units in a 12,000 square-foot space inside Cherry Capital Food’s warehouse. Used by established food producers who install their own equipment in white box facilities that are pre-approved by the State of Michigan.