When I received the final rejection from Chase I knew I had to act fast to obtain our additional financing. At the time we had conference called the lease to death and the landlord was preparing documents for execution. I called on a few bankers I had spoken with earlier in the Summer and asked them to tell it to me strait. They confessed that despite the guarantee perks from the SBA they had ceased nearly all small business lending. Even established and fully collateralize ventures failed to get through, much less a start-up. My general contractor roommate, trying to get his third townhouse up in the booming Washington Ave. corridor, confirmed the rumors. It seemed my only choice was to seek equity investors.
Then I discovered Acción Texas, the local branch of a global micro lender specializing in start-ups and other high risk organizations. There was one key problem to pursuing a loan through Acción: their maximum amount was less than half of what we had originally intended to borrow. It’s okay, I convinced myself. I can go another year without a salary. Disposable income is overrated. I have enough fat on my hips and shoes in my closet to last several more years without discretionary spending (seriously, I spend all my money on food). [Read more →]

Our story begins early in the summer when I blogged about a magical “pot of gold” at the end of the recessionary rainbow – a recently passed SBA legislation that would make our debt financing cheaper and easier. I chose a banker that seemed not only competent but supportive of our concept. This is fairly rare in commercial banking where “new” ideas are associated with wild risk. “All new food businesses should be franchises of proven concepts,” says Mr. Bank.
Now, I am not an enthusiastic fan of Chase bank. Aside from preferring to support local businesses, their deep passion for outsourcing each link of their vast global business has left me on the verge of violence far too many times. However, I did remember that the heritage Bank One guys I had worked with in credit were genuinely awesome and proud, old-school Texans. As with everything, Texas had it’s own culture.
With this in mind, we submitted our SBA loan application through Chase. My progressive banker was sure that we would have no trouble getting approved given our rock-star business plan, meticulously foretasted financials and 50% capital investment. Through the throngs of paperwork that we faithfully provided, we were assured that it was only a matter of time before we were handed a check at a fair interest ate. The time passed slowly but we were kept thoroughly entertained by our lease negotiations and drafting plans (read that story).. Unfortunately, as that time passed, my chosen banker was promoted to a management position in San Antonio. I was punished for my ability to pick a good banker! [Read more →]

The Downtown District required a lease in order to review grant applications. They made an exception in the initial review of our concept since the application was preliminary. They made a further exception and allowed us to submit a “Letter of Intent” (LOI) in lieu of the draft lease as we struggled to obtain one from the landlord.
The landlord had grown privy to the potential grant and was now calling the program coordinator to assess the potential amount and whether it could substitute for tenant improvement allowances. Obviously the answer was no, but it delayed the process. We had been pulling the teeth necessary to obtain that LOI for two weeks already and when my last meeting before the planned presentation to the Board arrived, we were all worried that the lease would delay the application review yet another month.
As we said our goodbyes I stopped to check my email just before walking out the door. There it was, sitting neatly in my inbox.
All I had to do now as make a presentation convincing the Board of our concept’s functionally and financial feasibility; something I’ve done so many times over the past few years that it has become as natural as riding a bicycle. Those presentations had seldom been about my ideas or ones that I believed in at all, so this would be a treat.
The plan was to make a 10 minute presentation to the Board and have a brief Q&A session just before their lunch meeting. Shortly before my presentation I was introduced to the board members as they began to enter the room. Immediately I knew who my skeptic was – the woman who had supplied the rest of the Board with all of the negative press and was not in favor of giving us the grant. There was an obvious inherent dislike in her demeanor and it was apparent that my appearance as a young woman did little to appease her disfavor. I was a bit shocked at her initial personal questions even prior to the onset of the presentation, though they did little to prepare me for the shock of the questions that would be asked in the Q&A. <!–more–>
When I mentioned to a few of the board members in the room that I had just, that morning, arrived back in town after a meeting with my partner and that my business partner was also my mother, the woman interjected to imply that my family was our funding source. I immediately assured her that the partner had just become involved in the project to assist in operations, provide an alternate source of liquidity and would not be making an initial equity injection into the start-up. I wanted to make it clear to the board that the equity injection shown in the financials was my own and that I was not asking them to invest any more in this business than I was already willing to invest myself.
The presentation went smoothly. I ran through a few colorful slides showing the proposed layout of the kitchens and describing how these kitchens have empowered entrepreneurs across the country over the past decade. I gave an overview of our operational model, proving its success through references to similar kitchens operating in San Francisco, New York and Austin. The Q&A began.
Her first point was to ask how I could prove that not a single incubator kitchen project had failed, pointing to the articles she’d found on the Boston kitchen. In order to address the concerns raised in her research, I had added a number of articles to the appendix of the our business plan explaining what had happened to the Boston kitchen and also telling the stories of many other similar kitchens. The amount of positive press in existence greatly outnumbers the more pessimistic articles. The updated articles I included provided new information showing that the Boston kitchen set for failure had actually been saved at the last minute by a private task-force spearheaded by the Mayor himself. Her displeasure in having been outsmarted in her first “question” set the tone for the remainder of our interaction.
The battle then moved to the area of operational concerns, where it would remain for quite some time. Rather than ask a question, as is the norm for a Q&A session, the model here was actually for the woman to point out a potential problem in our business model and then have me address it. As this was not a court room, I could not object, and I politely addressed her concerns before the Board.
It must be noted that many kitchens employee a large staff and process individual applications by hand. This is often done to ensure that the applicant meets program requirements to comply with grant funding. As this is not an issue in our case, we devised a system to completely automate reservations and will be booking only through our website. Although this is explained in great detail with a process-flow diagram in our business plan, our friendly interrogator had either not read this portion, chosen to ignore it, or simply did not understand it.
Subsequently, I had to spend a good 20 minutes attempting to explain why we did not plan on hiring an office manager to take care of bookings and sales and how this process could be entirely automated. The main objection to this was “why do the other kitchens need a larger staff then?” The answer was simply that these were non-profit programs that go far beyond simple kitchen rentals. I walked her through a few case studies on kitchens that are successfully run by a single manager where that manager also ran a full-time catering business out of the same kitchen. The explanations were in vain and we eventually went back to her making the same points made at the beginning of the discussion. An efficient and well-planned approach that dealt with operational problems before they started was dismissed by this woman.
That would be the point when other members interjected and facilitated one or two of the other parties being able to get a word in and actually a ask a question.
Each of these questions raised valid concerns and I was happy to address them. I understand that a new business model requires a different approach then just another restaurant or store. After all, I’d graduated with a degree in Entrepreneurship! Many of the questions from the other Board members allowed them to better understand the financial projections and my managerial background.
The session went back and forth like this for over an HOUR. Then, just when the rest of the Board was sufficiently astounded by the nature of the questioning, she put forth the most preposterous one of them all. I give her that – this woman will not cease to outdo herself! “In your list of risks you say that since you are the single founder and manager that Kitchen Incubator may not be able to operate if something should happen to you. How should we feel about that risk?”
Really? You are asking me to address the potential risk of my death? “Well, I certainly do not plan on dying any time in the near future,” I started. The Board members laughed. This “single-manager” clause is standard in prospectus language and is merely added in to the list of risks for liability protection. I tried to explain that this is standard language and inherent to any small business, which, despite adequate insurance protection and other precautions, will always suffer should anything prohibit its leader from running the business. I explained how this is especially pertinent in the restaurant business where a chef is essentially, irreplaceable. “However,” I noted, “this is accepted in the industry and hardly makes a business dependent on a single personality such as Robert Del Grande’s ventures, a prohibitively risky concept.”
It seemed then that the other Board members were simply laughing at the question. A few of them, I am sure, had actually fallen asleep. The Head of the Grant Committee made her final and at last, successful attempt to wrap up the meeting and I was set free.
What continued after that was a heated debate over my application and an exchange of emails that, once made privy to them, left me rather dumbfounded. In the end, the Lady Anti-Entrepreneurship, despite having declared that she would never agree to my receiving the grant, decided to cave. Perhaps a trusted source had pointed out that she looked rather ridiculous, arms crossed in anger and stomping her feet wildly. I am under the impression she was quite used to throwing temper tantrums to get her way, this being one of those qualities so evident in any person no matter how they age. Her last words in the argument against my application were my “dismissal of sole-hands on difficulties” and “tendency to see harsh realities through a rosy glass.” Apparently, the optimism, hard work and passion so inherent in entrepreneurship were entirely new concepts to her. I highlighted these quotes because I want all of you KitchenInc start-ups to remember those words clearly. Other people will probably tell you the same thing- NEVER believe them!

During my initial research I compiled a spreadsheet of all the shared-use kitchens that I could find. This was in the fall of 2007 before the near dozen websites listing such kitchens had popped up. I broke down the list into kitchens that are run as private businesses (that list was very small then) and those that were formed as non-profits. Problems in the non-profit model were obvious. The sources of grant funding available limited these kitchens to tailoring their services to special interest groups such as minorities, low income groups or agricultural areas. While I understand the need for such programs, I feel that investing the $300K minimum required to open a fully-equipped commercial kitchen is not something that is particularly difficult only for socially “disadvantaged” groups, it is difficult for everyone!
From the first moment I decided to go through with the project, I knew that I was going to do something that would be accessible to anyone and everyone with no red tape and an easily navigable process. I swore to myself that grant funding was simply out of the question.
This was strengthened by further research on how a few of these kitchens are being run. I found a number of articles on a kitchen in the Boston run as a non-profit that was struggling and about to close down. The mismanagement of the organization was painfully obvious – a staff of five had been hired at “comfortable” salaries to do daily tasks that a computer should have handled, the kitchen was not advertised, had a hidden website missing ontact information, the program required a mountain of paperwork and interviews to gain access to the kitchen, there were no private work spaces and the spaces were being rented on an honor system where people marked usage on a white board and were billed for reported use. Although the Mayor and a few local organizations did eventually join forces to save the kitchen, they hired a new manager with a business background to address their problems.
Stories such as that of the Boston kitchen left me reluctant to consider a non-profit model. I wanted to keep the organization as clean and efficient as possible without outside investors. That’s why it is a bit strange that I somehow ended up spending over a month on obtaining a small grant! [Read more →]

I had the brilliant idea of trying to have a brilliant idea during the worst possible time in the last 50 years to have a brilliant idea. This is normal for me: chose to quite my job during a time when everyone was holding onto their jobs for dear life and decide to start a business during the biggest lending contraction the world has ever seen. Never mind that this business also happened to be in industry blacklisted by the current economy. Just mention the word “kitchen” to a bank and the doors are immediately shut. Even better when you have the word kitchen in the very name of your business!
Kitchen Incubator was a quick launch for me. I was new to Houston, fresh from the New York City restaurant scene and looking for a pastry internship. As I perused the ads on Craigslist and local forums, a trend appeared – people in Houston, in Texas in general, were desperately searching for kitchen rental space. A bit of googling later and I stumbled up The Kitchen Space, a shared-use kitchen in Austin that was just starting construction. I found Kitchen Chicago, a successful shared kitchen that was started by a former investment banker like me! Several hours of google later I had dug up a list of at least 20 such kitchens in existence or in the works across the country.
A potential business that would combine my passion for the food industry with my background in business development was far too alluring. I was hooked. I threw up the website and the survey. I filed for LLC in Texas and submitted all of the business and tax forms. All in a day’s work. Then I began to work on the business plan… [Read more →]

After I’d finished our lengthy business plan complete with financial modeling as detailed as your typical million dollar merger, I thought the lengthiest part of the start-up was over. Soon I discovered, as most entrepreneurs during their first start-up often do, I was wrong. When I tell people that I’m starting a business in this economic climate, they assume that the most difficult part of the process is obtaining financing. Not true. Financing is fairly clear cut: you meet with every banker in the city that will actually answer your phone calls, give it your best shot and maybe two or three will tell you there is hope. It’s quite simple. Far more complicated, is deciding where you want to put your business.
The website survey and an ongoing e-mail dialog made it very clear where clients would like to see this business go: the Galleria, Katy, Sugarland, Clear Lake, the Woodlands…you get the point. So it was obvious that we need to keep it centrally located with easy highway access. Maybe we can’t be in Katy and Sugarland at the same time, but we can most certainly be accessible from those places. This narrowed things down a great deal as inner-loop real estate is far harder to come by and most of it lay far outside our budget. [Read more →]

Hello! Thank you for your interest in Kitchen Incubator, “A Center for Culinary Entrepreneurship” in Houston, TX.

Here you will find all of the latest updates on Kitchen Incubator as we progress towards opening our shared-use kitchens and café, along with helpful links, pertinent resources and articles and access to our new community of culinary entrepreneurs.