Naiveté, Luck and Focus: Nothing in the business was easy

Suzi Croft (S) and Manar Al Jayouchi (M) set up Appetite (www.appetite.com), a packaged sandwiches and salads company, in 2005. They have established 1762 a gourmet deli (www.1762.ae).

How did Appetite start?

M: Starting a business was not on the agenda. Things conspired. I was made redundant in 2003. A friend asked me, ‘what are you planning to do now that you’ve been without a job for a while?’ I replied, ‘We can do something in food, maybe a Bagel house. It may be a good idea because it is unique.’ He spontaneously replied, ‘Let’s do it.’ We had Dh150,000 saved up. My friend invested another Dh150,000. The deal was simple. We had to do it. The plan was for Suzi and me to manage it and he would be a silent partner. However, after research, bagels were not feasible at the time, so we decided to do sandwiches and supply stores like Enoc. We set up a catering company and that was the start of Appetite.

S: I love trying new recipes, cooking, and food. In 2005 we sensed a gap in the market for good high quality sandwiches. At the time, sandwiches at gas stations and supermarkets tasted alike; one couldn’t tell if the paste was tuna, chicken, or cheese. Whereas every street corner in London has great sandwich deli shops.

Did you think you could make a business out of sandwiches?

S: Yes, but we were very naïve. We put everything into the business. I gave up my job two months before we started. We had a six- month-old baby. We didn’t have a car and hadn’t sorted out our finances. Everything looked very uncertain that first year.

Why naïve, not confidence?

M: I think it was super naïve. We had no safety net. Once we paid the first rent cheque we needed to make it happen. Our entire confidence was in the image of a sandwich in Suzi’s mind and Excel projections. Business looks easy with Excel and forecasts. Projections of a new business are expectations, not what will or does happen. The reality was very different. We started with capital of Dh300,ooo s. We estimated setting up the kitchen with Dh180,000 and still have Dh120,000 to work for three to four months. We finished the project at Dh260,000. We thought Dh40,ooo will last for three months. It finished in three days. We were very tight on money over the first year. Our partner put in additional Dh70,ooo.

Where did you get the knowledge to design the kitchen?

M: I read, networked with people, and incrementally acquired knowledge. I met a designer who agreed to make a layout and get the kitchen HACCP certified. He charged us Dh6,000, serious money for a startup.

How did you decide the products to make?

S: Salads and Sandwiches were the main focus. I used to work in London for many years and I wanted to recreate all my favourites that were not available in Dubai. We did a lot of testing with friends!

M: We decided to create products for a person on the run — a business person or an executive. We have over 300 different products, but our customer focus is the same. We picked a customer segment, focused on them, and have not shifted.

Did the products change, from as planned before start and as accepted by the market?

S: There were a lot of lower quality products in the market. We were not going to compete in that space and always knew we wanted to produce high quality gourmet sandwiches and salads. An interesting conversation happened after start-up. A caller said, ‘I love your product, and need 2,000 sandwiches every day.’ He continued, ‘They have to be cheaper. I want to pay Dh2.’ I responded ‘They are priced at Dh10-12. ‘I can’t do it. My packaging and bread cost is more than that.’ He persisted, ‘Then use different bread, packaging, and filling.’ I told the caller, ‘Then you are not going to get the sandwich you tasted.’ We have been asked to do many things along the way and have always declined when it did not match our vision. We are doing what we specialise in, of a certain quality, and are going to stick to this standard and quality.

Did you plan before you started?

M: We had a general idea of what to expect.

S: Nothing was straightforward. No one supports you when you start up. You have no standing in the market. You need small quantities, not bulk. No one wants to give you credit. No one even delivers to you. I used to drive to suppliers to pick supplies. Now the suppliers chase us for business, but it took a long time to get there!

M: Logistics were a nightmare. We couldn’t afford to buy a van. We thought, ‘We can rent a van. How difficult can that be?’ It was very difficult. Finding a driver was a nightmare. Juggling cash flow was another constant challenge. We prioritised paying salaries and suppliers. Suzi and I did not draw a salary from the business because there was nothing to draw.

S: I started taking a minimal salary after one year. We still haven’t reached the salary we made as professionals.

Startup challenges?

M: Once at 6 am I discovered that the delivery van had sunk into the ground. We needed a crane to get the van working. We had two delivery cars. Market demand required the cars to work 17 hours a day. And one day the two cars had crashed into each other at a red light. For a startup unexpected events can be disorienting. One feels vulnerable because there are no extra resources to handle these situations.

S: The startup stretched us. We were keeping 14-15 hour days. We had to complement each other. This continued for three to five years. We worked Fridays. I took a Friday holiday after one year. Manar took a Friday off after three years.

Something easier than you expected?

S: Our growth has surprised me. I, with a salesperson, started making sales call to offices. We knocked on doors, showed and sampled our products, passed our little menu, and asked them to call us with orders. People started recommending us to their friends. Soon we needed a second sales person and this snowballed. We had 25 sales persons within a year. We have grown entirely on word-of-mouth recommendations. We never budgeted for marketing, advertising, and promotions. Maybe it is a testament to the product. Nothing else in the business was easy. We have managed the challenges because customer acceptance happened in natural way giving us a lot of confidence.

How did the business developed?

M: Spinneys and Carrefour initially rejected us because of the price. Enoc liked our sandwich quality. The commercial aspect of the deal was a losing proposition. We decided to go-ahead. We did well with them in terms of volume and distribution. We did not have money to promote our products but there was no better promotion than to be visible at 40 gas stations. We are now in Spinneys.

Was there a time when you felt it was not going to work?

M: I have felt it every day, for the past eight years. We worked through the uncertainty.

S: Manar kept me going. There have been many occasions, when facing challenges, when I have reflected whether ‘it’ is worth it. It has taken a lot of commitment in hours, blood, sweat, and tears to continue. I could have easily given up in the first two years.

How did your pricing develop?

S: We are not always good at knowing our food costs. I approach food development from the idea of what we want to create, not the bottom line. We make the product and ask people what they would pay for it. We assess and price it.

Key milestones?

S: Moving from Qusais to Al Quoz was a big step. Our growth had stalled. We couldn’t supply customers. We diluted 20 per cent of the company to build our current facility in Al Quoz.

Next three to four years?

M: Three years ago our net margin was small 3-4 per cent. All the money was being reinvested. This was draining us. We had to make our margin more sensible. We decided to go into our own retail. We came up with a new concept ‘1762’ — a deli serving sandwiches and salads.

S: 1762 is what we do but in a deli environment. I come along recipes and developed ideas of doing them in a Deli shop. Opportunities need careful assessment. When a company reaches a certain size, you can go off on a tangent. We got it right with 1762 deli!

M: 1762 has started well. We break even. 1762 started on ‘leap’ of faith. But we had to take a few steps to ‘jump’ further. Again luck was on our side.

DIFC was the perfect location for the idea but they don’t accept anyone walking in. We decided to establish a location to showcase the idea in Jebel Ali. We finished the design and a friend coaxed us to visit DIFC. I printed a few colour sheets, combined them, and did the presentation. They sensed our commitment and gave us a location.

How have you changed as persons in eight years?

S: I think reality hit us when we started Appetite. I have toughened up. I am passionate about the business and love my work but it has been a struggle. I am a little tired, and a bit worn out. Then again, I tell myself. It is not like we just did Appetite. We did that and then we did 1762.

M: But as persons behind the business, we are more humble because we understand that things are not as they seem.

As entrepreneurs we are never ‘away’ from the business. Our mind is always working with business in the background. We are observing and learning. 1762 is an example of that. We developed the idea by looking around the world. We looked at 20-30 different outlets in terms of design and food. We saw different things, learnt, and created the concept.

S: It is always ideas, ideas, and ideas.

Where was the seed of entrepreneurship in you?

S: People talk about ideas they want to do. But not many people implement their ideas. Implementation is triggered by the ‘need’ to do it.

M: Let us call it the X factor. It lies dormant. The X factor was evoked when I lost my job. Some people cave in, others put up a defense mechanism, and some just confront and manage it. I wanted to do something. Not working was not an option once we started. I think the need, was much stronger.

Has your management style evolved?

M: We have learnt that choosing and managing people committed and passionate about what you are doing is very hard. This is the biggest challenge we have ever faced.

We were particular that we will not run 1762 the way we run Appetite. We had to have to have a proper team; specialists doing what they are good at. An entrepreneur needs to a hire a committed team and create an environment for the commitment to be expressed. If you don’t get this right, it will be challenging to succeed.

Do you think you will have regular hours and a GM running the business?

S: That will be nice. I don’t think that will work, realistically. I don’t want to do these hours forever. It is going to get better. It has got better and the salary is getting better. We are getting there. It has taken a long time. I think we have gone on with it for so long but I am always saying that the type of person we want in 1762 is someone who can do what matters for us and allow us to concentrate more on the new business instead of being just so hands-on day-to-day. We would like to sit back, reflect a little, and grow the business by concentrating on ‘angles’ that we really need to. We are getting to a stage where we can do that. I wouldn’t necessarily say we will sit back and take it easy.

M: We are very passionate about Appetite. I still cannot see how we can convert this passion into a corporate entity. Once we become corporate, we take a lot of passion out and bring in procedures and compromises. Appetite is about food and food is about passion, it is not about industrialisation. We do have a big production line. We consider it almost an industry, but still control the ingredients and quality we want and this is the way we want to do it. We do it manually and it is handmade, with a lot of love. But can this be transferred to commercial setup? We are still artisan even though the volume is quite high. I think this is the challenge that is going to face Suzi and me because we cannot continue this way. We are still young; we have many years to do different things. But we cannot do 12 hours a day, 7 days a week. We are trying to find that happy balance.