We asked instructor Nicolò Patrick Borelli why open more shops. "First of all, more shops allows for higher earnings and greater satisfaction from an entrepreneurial point of view." In addition to this, for Nicolò, a graduate of Bocconi University, gelato artisan, and business instructor at Carpigiani Gelato University, there’s also a reason related to the gelato business: "more shops give the entrepreneur greater protection against changes in the market and a lower vulnerability to strong competition. Consider the case where I own a single shop in Stradella (PV) and next year one of the most famous gelato shop brands opens in the same town. If I’m lucky I’ll only lose around 30% of my business. If things go badly that percentage could be as high as 50%. But if I had three shops, the loss would be spread over three businesses, averaging out to 10% or so per single parlor."
For production, Nicolò's choice was to have only one centralized production facility. "Many players in the market decide to have both centralized production and limited machinery in the individual locales where they finalize product preparation," explained Borelli. "This working method is linked to a precise communication strategy more than to organizational reasons: you want to show the customer that the product is produced fresh every day, frozen directly in the gelato shop." In his case, the communication is based on another kind of idea, although the shops are close to the main production and he would have no particular logistical problems with this method of working. Having centralized production allows for better organization of the various stages. Knowing the number of kilos needed per week in each gelato shop, the various flavors can be produced once a week in the amount needed for all shops instead of making them all every day. This way production time and costs are optimized and product waste is reduced. The risk of contamination would be lower, the number of machine washes would be rationalized differently and more thoroughly, there could be fewer washes during the day, and more time could be spent disassembling internal machine parts such as beaters and scrapers.
Paradigm shift: from gelato artisan to entrepreneur
"Those thinking about expanding their business in the future must reconsider their current logistics and production," Nicolò added. "Logistics" includes shipping, paperwork, labeling, and invoicing. As a gelato shop becomes more structured, opening more outlets and centralizing its production, the gelato professional's type of work also changes, shifting from gelato artisan to manager. Even now, while his business is still small to medium-sized, Borelli notices a change in his work. "My time is devoted to other things than before, such as marketing or managing personnel." Personnel management is a very important part: with multiple outlets, if the entrepreneur doesn’t develop good leadership skills to motivate and manage people they’ll see increased employee turnover, with negative consequences for the business.
There’s also a whole other issue related to balancing finances: Nicolò reminds gelato professionals who want to expand their businesses that they won’t be able to continue "making the best gelato in the world at any cost." Beyond a certain size, the cost structure is such that a perfect balance must be found between the price of the finished gelato and production costs. As the work becomes more layered and the costs increase, the overhead becomes more significant and the food cost must be calculated correctly, without impacting product quality.
Speaking of centralization of production, Nicolò emphasizes that it's important to consider the technological and health aspects of the new business structure. When the amount of gelato produced and stored in freezers is considerable, it’s necessary to make use of efficient technology, which allows the work to be done faster and with fewer errors. The same applies to the use of software to manage the machinery (e.g., precision scales, remotely controllable blast chillers and freezers, etc.) and personnel. On the other hand, with regard to the health aspect, it’s necessary to pay close attention not only to hygiene standards in the production area but also in the vehicles used for transport and the final point of sale.
Nicolò concludes by noting that centralizing production is undoubtedly a process that needs to be studied in detail to find the right model for your business, but that allows for great financial returns.
Comments (1)