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early mornin' smokin' 04-12-2013 12:05 PM

Making Bacon
 
So i'm contemplating partnering up with a local butcher. Making all varieties of high quality bacon (pork, beef, duck, lamb) I'm going to start an LLC and do this correctly. My company will provide the smoker, cure and supplies to make the bacon, his company will provide the meat and point of sale, packaging, and distribution. All agreements will be handled by a lawyer and clearly spelled out.

I want to do this correctly. He's already got a commercial kitchen and storefront. I would be bringing in the knowledge of bacon making, equipment, and we'd also smoke other meats for the store. All profits being split.

What does everyone think. Would like to operate like this for a while, than depending on business and demand, move into my own brick and mortar business.

erandolph 04-12-2013 12:57 PM

If you are dealing with a lawyer then hopefully he/she has made it known that a butcher permits/inspections fall under the jurisdiction of the dept of agriculture and smoking meats/selling finished products falls under the scope of the department of health. I should say at least in NY it does. While the laws and requirements are mostly the same there are some differences. Make sure you have both bases covered.

Business plan is a bit confusing you are setting up an llc but going to split profits. is the butcher going to be a member of this LLC? If yes then are the profits being split evenly? I'd think the butcher has more skin in the game and would require a much larger portion of the profits. kudos to you if not. If setting up the LLC and the butcher is not a member then it gets murky. He will have to carry the cost of the product and you carry the cost of the service to smoke it. The sale will go through the butcher so you will have to invoice him for your service otherwise the sale will generate phantom income for him. An even bigger issue is you state you hope to open your own brick and mortar business. Who has ownership of the bacon/smoked goods. The butcher could argue it is him as you could as well. Spending much needed start up capital for legal fees will be painful.

If you are really thinking of having your own place then you need to work on your idea now and avoid potential future headaches. If you have a tight bond with the butcher this would be my recommendation. He sells the raw product to you at wholesale. You work your magic and sell it back to him on consignment or as any vendor would. This price would be less than retail so he can mark it up and make a few bucks. If he gets pork belly for $2/lb you smoke and sell it back to him at $5.50 lb, he then in turn sells it retail for $8lb. You will have to take a little haircut as goodwill to him to allow you to use his kitchen, packaging, etc. This allows you to get your feet wet with little exposure but more importantly you have full control over your product, brand and future. Might think it is pie in the sky thinking but what if you sell 1,000lb's of smoked items and want to take your product elsewhere. You think the butcher is going to let you walk if you are partners. zero chance without compensation.

early mornin' smokin' 04-12-2013 01:18 PM

we do have a tight bond, and would like to keep it that way.

So in your eyes, my best bet. Set up my own LLC, buy the belly direct from the butcher, resell it to him on consignment at 5.50-6/lb, and he resells it. My LLC has money coming in and going out, and i'll be the sole proprietor.

I'm great at smoking stuff, but the business side of thing has my head spinning. I want to do this the right way, so everyone is happy.

Teamfour 04-12-2013 01:58 PM

Quote:

Originally Posted by early mornin' smokin' (Post 2445484)
we do have a tight bond, and would like to keep it that way.

So in your eyes, my best bet. Set up my own LLC, buy the belly direct from the butcher, resell it to him on consignment at 5.50-6/lb, and he resells it. My LLC has money coming in and going out, and i'll be the sole proprietor.

I'm great at smoking stuff, but the business side of thing has my head spinning. I want to do this the right way, so everyone is happy.

As erandolph suggested, this is the way to do it. Tight bonds never take the place of a solid business arrangement.

erandolph 04-12-2013 03:21 PM

you are correct. keeping everything separate will be best for your friendship and your future business. This is your brand your business and possibly your future, not time for a partner unless financially needed. Trick will be to put the spin on this to make it worthwhile for the butcher. What's in it for him. The ability to offer a new product with zero work, zero learning curve, zero involvement or equipment purchasing on his end.

Keeping business separate will also allow you to market your brand to other purveyors/stores/deli's to get your product on their shelf or in their kitchen.

Just please stay out of the Hudson Valley, we too make bacon and I have no time to deal with a new competitor. Good luck.


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