Recently I got interested to explore some side businesses to supplement my income. Some criteria I had were that the stall could be mostly outsourced and I would need to do minimal administrative work to keep it going. I'd like it to eventually be mostly passive, even if that means lower profits from me. I've put down some notes here on my experience with starting an F&B business.

How this came about

I was browsing on Carousell and saw someone selling their hawker business. He gave some details on the numbers and they looked really good, so I was interested to learn more. In the end, I decided to set up a new stall instead, and will pay him a consultancy fee to help me with the setup. I'm currently in the process of setting up the stall, and will update this post with more learnings as the stall progresses.

Steps to starting a stall

1. Find a hawker centre you are interested to start in. I decided to start in a school.
2. Decide on the cuisine you want to sell. This can be based on experience, or in my case, based on need. The canteen required a certain type of cuisine to fill a gap in its offerings, and I was willing to adapt.
3. Get a tenancy agreement. You can sign as yourself and do not need a company/sole proprietorship for it.
4. Apply for the relevant permits with Singapore Food Authority, and pass the relevant food safety courses.
5. Set up the stall.
6. (optional) Hire employees. I'm going to hire them as self-employed for now since I can't really hire without a sole proprietorship, and the work is seasonal (no/little work in school holidays).
7. Start selling.
8. Keep proper accounts to make your life easy when you file your taxes next year.

Cost benefit analysis

The more I thought about it, the more I realised it may make sense, especially if you run the stall yourself without external help.

Benefits of an F&B business

1. You can use your suppliers to shave off costs on your own take-home groceries.
2. It's a 'necessary' business - you are not really creating supply that enables excessive consumerism.
3. Startup costs aren't as high compared to other brick-and-mortar type stalls.
4. Hawker stalls specifically can be quite profitable if you do it right. You can get >100% return on investment in the very best case.
5. Have an alternative to simply having a day job.

Benefits specific to a school

1. Concentrated footfall. The students are basically "trapped" and don't have options nearby. Therefore you don't really have to do much marketing.
2. The crowd is predictable and can be optimised for.
3. The rental for the stall is lower.
4. It is not as subject to economic fluctuations - people will always need to eat. And students attend school regardless of economic conditions (having studied through the 2008 financial crisis and observing my peers)
5. School canteens only operate on Mondays to Fridays until the afternoon, and there are plenty of school holidays and public holidays where there is no foot traffic. This is a benefit as someone who is looking to do this as a side hustle.

The second part on the school benefits is really what sold me on the stall. I wouldn't have to think as much about marketing and audience at all, which simplifies the business somewhat. Also, it is likely that I will be able to generate at least one sale on my first day of opening.

Costs

1. I may need to physically be at the food stall, which makes me unable to be a digital nomad especially if I have to fill in roles for my staff. The commute takes me about an hour one way, which isn't ideal.
2. I will spend a considerable amount of time setting up.
3. Revenue can be uncertain.
4. Revenue isn't maxed out (compared to a stall outside) and staff may not want to work only 8 months out of the year.
5. It takes away time from me upskilling in other work that may be more useful in the long run.

Actual numbers

Fixed costs

There were some fixed costs incurred at the start of the stall. These includes items like licensing fees, getting the food hygiene certification, stamp duty for the tenancy agreement, and other miscellaneous fees. These amount to perhaps $1500.

Besides that, there's also the capital cost. I'm thinking of running a simple concept with secondhand equipment, and pay a consultancy fee of $5,000. This should not cost more than $15,000 total.

Recurring costs

At the particular stall I was looking at, rental (all in all) should cost around 1800 a month. Food ingredients should only be 30% of the cost price. After some consideration, I decided to purchase pre-cooked meat to sell, and only cooking sides and carbohydrates in-house. This would increase my recurring costs, but reduce effort for employees and reduce fixed costs in buying equipment to cook the meat.

Revenue and Profits

As such, if I price each plate of food at about $4 (market rate at the school), I would only need to sell 650 plates a month to break even on rent. That's a rate of 33 plates per day. Make it 44 plates, to account for not making any money during the holidays. On the high end, one could sell about 150-200 plates of food per day. If we assume a rate of 120 plates per day, I should be able to get back my initial investments ~4 months of running this stall, which is a 200% return on investment. (Assuming no sales during the school holidays)

Revenue and Profits - with employees

However, the numbers change if I include employees at around $2200 per month total. In the worst case scenario, it may take me up to a year - or even two years - to break even. Even so, it is still roughly a 50% return on investment, which is decent. I expect it to be better in the years after these initial years, since I'd have paid most of the capital expenses already.

Also, if I hire employees and the business is doing well, my personal hourly rate will be higher than if I don't hire at all. And if the stall does really well, I could explore profit sharing with my employees, too.

Without a consultancy fee

If I had the experience and time to set up this stall from scratch without external help, my costs would reduce too, and it'll make it even more worthwhile for me. But in my case, given that I would rather have something more passive, I'd happily pay the startup fee.

Overcoming fear

There were a couple of doubts I had when I started this stall. These are the main ones, and I also outlined how I overcame them. It's a process of seeing if there are statistics to back up my numbers, and also a backup plan for each fear.

What if I make a loss?

I'll limit my startup costs to be as low as possible so that the loss is not going to be too great. I'll also cut staff and run the stall myself.

What if manpower falls through?

I've tested this by posting a job listing on Carousell to see if anyone was willing to work at the rate and hours I wanted to hire at, and so far the response has been decent. I'll also hire at least 2 people at the start so that they can cover for each other. If both of them aren't available to work on a certain day, I will run the stall myself or grab some friends.

Can I still manage this with another job?

I'll never know if I never try. I have plenty of superfluous commitments I can cut down on to make time for the stall that won't interfere with my job either. Besides, I will pay someone to help me with the stall if I cannot manage it time-wise.

What if it's not worth my effort?

I think it's a fun story to tell. I enjoy exploring something completely different and outside my comfort zone. Even if I don't make money from this, I will pick up important skills on how to manage employees and also a business in general.

I don't have intuition for food.

I naturally do not really enjoy eating, and thus don't really have a sense of what's "tasty" or not "tasty". But this can be an advantage - I will not be attached to any particular recipes and can be more objective in determining whether certain menu items will work or not (based on data).

It goes against my values to sell meat.

I really dislike it when people praise meat for being tasty, as if it were normal to indulge in meat without thinking about the animal that provided it. As a compromise, I'm going to sell a vegan version of my main dishes at a slightly cheaper price to encourage people to consider plant-based options instead.

This is not the most impactful thing I can do.

Counterfactually, the hawker that would have taken my place would almost definitely not have offered vegan options. I'm also hoping this experience will give me skills in the future, such as operations and management skills. Hopefully, it can also create a new stream of income so that I can afford to take more risks with my time, instead of optimising it for money.

People might judge me.

Business is business. If the numbers make sense, I can outsource most of the work, and I can make a profit, then why not? I'm surprised not more people are thinking about this, though there is some luck involved in meeting the right people to do this together with.

Thinking of doing the same?

You can reach out to me to learn more about my experience, and I can link you up to the resources I used for doing this.