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Case Study:

Sophie\'s Cuban Cusine


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This is the first in an occasional series on how new concepts grow their business.

Sofia Luna’s parents emigrated from Peru to New York City in 1985 with dreams of opening a restaurant. Luna and her three siblings arrived five years later, and after nearly 10 years of working in Manhattan stores and factories to earn the necessary capital, the Lunas found a site, a chef, a concept and, finally, success. But it hasn’t been a completely smooth journey.

 

Sofia Luna, Sophie's president, left, with her first franchisees, Patrica and Tom Mahabir.

They settled on a Cuban concept rather than a Peruvian one because they thought it would be more marketable, says Luna, company president. The family recruited Cuban chef Eduardo Morgado and opened Sophie’s Cuban Cuisine in a small space near the World Trade Center in 1998. During the next three years, three additional Lower Manhattan restaurants were opened.

Sophie’s was started on a shoestring and originally only served lunch, but within months they had lines out the door, says Jeff Kolton, principal with Franchise Market Ventures, a franchise consultancy that helped set up the franchise program.

Outsourcing key parts to franchise consultants, from the legal work to the documents to the marketing, has given the chain a strong brand to franchise outside its original urban market.

“Three years ago it looked like a neighborhood restaurant, now it looks like a professionally run chain,” Kolton says. The staff has bought into it—they actually want to come to work—and Luna promotes from within. The most impressive change, however, Kolton says, is in Luna, herself. Through the process, she has “evolved from a shy, behind-the-scenes (principal) to a strong, well-respected CEO.” “She gets it,” Kolton says.

Being located in New York City, the chain had some early struggles. Given their proximity to the World Trade Center, two of the restaurants were damaged after 9/11 and had to close. The surviving restaurants each initially lost about half their business, but stayed open, Luna says. The first year post-9/11 was a struggle, she adds, but once people began coming back to the area customer counts and sales surpassed pre-9/11 levels.

By August 2005, Sophie’s opened two new locations, ranging in size from 18,000 to 35,000 square feet. The original restaurant was about 1,000 square feet, and had seating for 26 customers.

Sophie’s Cuban Cuisine

Initial investment: $365,000 to $611,000

Franchise fee: $25,000

Royalty: 5 percent

Ad fund: 2 percent

One reason the chain was able to survive, according to Kolton, is that they “knew how to make money.” They went into off-street locations where the rents were lower, but in areas where they could still attract the numbers needed to make a profit. New openings were self-financed.

And, the food was good. Sophie’s menu features traditional Cuban items such as a fried sweet plantain appetizer; mashed potatoes stuffed with beef stew; a fried pork, sweet potato and onion sandwich; and shrimp in garlic sauce. “One of the things that I hear a lot from our customers is that the only places they eat good food are their mom’s house and our restaurant, so that’s a high compliment,” she says. The average ticket is about $10.

Ethnic food is on trend, and the beauty of Cuban food, Kolton says, is that the kitchen can produce a variety of different plates using a limited number of ingredients.

Sophie’s began offering franchises at the end of October 2006, and signed its first franchisees, Patricia and Tom Mahabir, a month later. Luna says she is looking for franchisees who will maintain the “family feel” of Sophie’s—from knowing the regulars and what they order to having holiday parties for all employees and their families.

Luna plans to first focus on franchising in Manhattan, before expanding along the East Coast.

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