Food

Many people in the frozen dessert industry – particularly the independent operators – struggle with not just a seasonal cycle, but managing the inherent growth potential of their current operation and structure of that growth. For example, should a thriving retail business stay in a vertical market and attempt wholesaling, or would franchising be a better opportunity? Should you diversify across market segments, perhaps increasing the product line to another food group, such as hotdogs, sandwiches or grilled foods? Should you co-brand?

Would increasing the mobile catering part of the business make more sense?
If you answered “yes” to any of these questions, then the next question should be “what business structure should I evolve into to effect this type of growth?” By business structure I don’t mean whether or not you should be an LLC or a “C” Corporation – I’m assuming all that is in place already – but more whether or not you should have separate Strategic Business Units (SBUs). An SBU can be a separate legal entity (Corporation or LLC) or a wholly-owned subsidiary of your current entity.

Having separate SBU’s for different aspects of your business allows you to track profit and loss much easier, and allocate funds/budgets much more effectively. Additionally, you can try different marketing or sales techniques in one SBU without affecting the other too seriously – particularly if your branding is different.

Create a mobile catering SBU.
Assume you’re “ABC Ice Cream Store” that’s operating a fixed-base retail business. If you create an SBU that’s “ABC Ice Cream Catering” you can track the P&L of the catering arm of your business to determine the best marketing techniques etc. without affecting the sales of the store – unless you specifically plan to and want to. While everybody’s in business to make money, you could choose to make your mobile catering operation a cost center, rather than a profit center by allowing it to work on a break-even basis or even at a loss as part of a strategic marketing plan. The returns would have to be driven back to another business unit – and this can be very lucrative. For example, suppose you had an opportunity to place an ice cream cart at a State Fair. Generally, there is a fee to participate, and coupled with employee costs to run the cart this could be significant.