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Adventures in Starting a Chocolate Business

Chocolate

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#181 tammylc

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Posted 23 February 2008 - 04:52 PM

I sort of started this thread, way a long time ago, but haven't been very good about posting updates re. the progress of my business. Mostly I've been continuing doing what I've always been doing - direct to consumer sales around holidays, plus the occasional special order. My mailing list and customer base is bigger now, however, so I'm doing more volume. Christmas was much bigger than expected, which was both a blessing and a curse, as then I had to make all those chocolates! But I used the proceeds of that sale to invest in more molds and to stock up on chocolate. A bigger melter is next on my to-buy list, I think, but they are just so expensive! If anyone sees a used 6-kilo melter for sale anywhere, please let me know. Aside from on small loan of working capital, I've been financing this on a cash-only basis, and not buying anything on credit.

I'm trying to figure out what's next. This has been a great hobby business, but I need to decide if I want it to be my full time job, because that will require a whole different level of commitment and sales. Direct retail sales without a storefront will only take me so far.

The next obvious step is wholesale, and I've taken some tentative steps in that direction, putting boxes into one store for Christmas and another for Valentine's Day. And I'm in the midst or beginnings of conversations with a few others. I may have some opportunity to do bulk chocolates for places that would sell them by the piece. For anyone who's done that - any recommendations on transport/ storage boxes or thoughts on how that's best handled? Some of those locations might require shipping, so shipping friendly thoughts also appreciated!

Really, I'd appreciate hearing anyone's ideas on taking it to the next level!

Tammy's Tastings

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#182 amdellutri

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Posted 23 February 2008 - 05:39 PM

Thanks on the cocoa pod mold.

I was going to ask about how many of each as well. I was planning on starting with 4 of each, moving to 6, 8 and then 10. I was thinking it also depends on how many gavities you get with each mold, 20, 24, 36, etc. and how many you need on hand.

#183 patris

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Posted 24 February 2008 - 06:04 AM

Tammy,

I've been monitoring this thread with keen interest, as we're really in the same place as you at the moment. Our businesses have a lot in common - side businesses that we're financing on a cash basis, trying to figure out what to do next.

In our case, we may be approaching an inflection point that will force a decision soon - our newspaper's food writer interviewed us last week for a feature story that will run on Wednesday (eeeeeee!). Up till now, our sales have been seasonal and direct-to-consumer, but the circle has expanded each time we go out and we're starting to get some inquiries from small shops. I suspect demand may go way up starting this week!

All this to say I'm happy to post the process and progress of any major decision-making we do over the next several weeks.

In terms of how to package bulk pieces, what about layering them in Cambro food pans or some such - you'd have to get them back from the shop you're selling to, but there's no risk of smushing/crushing like you'd have with a cardboard box. Plus, regular visits to the shop will tell you a bit about how they store and handle your stuff.

And a question for you as we approach the idea of selling product for resale - what's your markup percentage? I have no idea what's sensible - 50%, 100%.....?
Patty

#184 Desiderio

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Posted 24 February 2008 - 09:03 AM

I am in the same spot as well.
I have found my state department of Agriculture very very helpfull.They have links and publications ( free ) to help small business deal with their marketing strategy and pricing, I also registred for a workshop ( for a $ 35.00 meals included , all day ) on how to market your products etc. and the opportunity to connect with many other small business in the food field.Also I have applied for the Colorado Proud ,wich is a Colorado department of Agriculture organization.
I do reinvest evry penny I make into the business and I didnt get any loan or credit for now , I want to see how it goes in the next year or so then I will decide what to do on the results basis I think.
Its very exiting and scary at the same time, when you realize that isnt a hobby anymore :wacko: .
Partecipating at local fares is one of my goal for this year, I am already into one in May and I am overwelmed at the idea of making so much of everything ( and I will have to take few days of work as well :shock: )but exited to see my name in their list ( it feels like a kid going to play with the adults :laugh: )

Good Luck to all the new business :smile:
This thread is very hekpfull , I will try to update with my progress as well.
Vanessa

#185 tammylc

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Posted 24 February 2008 - 11:25 AM

How many pieces do you have to make for your fair in May, Vanessa? I know when I've done things like that, it's so hard to know exactly how much to bring!

Patris - I have no idea what's sensible either, when it comes to wholesale pricing. I've been told that most retailers will want 40-50% off retail, but I can't discount that much. My discount is about 32%.

I came up with numbers pretty much off the top of my head, but just recently I've been sitting down and doing some really detailed analysis of what it costs for me to make a box of chocolates, and as it turned out, my wholesale price seems about perfect for the moment - just enough to cover my costs and my guesstimated value of labor+overhead.

Vanessa mentioned joining Colorado Proud. I've been wondering about joining the Chamber of Commerce, or a local organization called "Think Local First" that's for locally owned businesses. Has anyone joined these kinds of organizations, and found them to be worth the cost?

Tammy's Tastings

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#186 gfron1

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Posted 24 February 2008 - 11:51 AM

From the retailer end - I shoot for being able to keystone (double) my wholesale price. That's the goal, but not a deal killer if I can't do it. For example, if you wholesaled a 9-pack truffle box for $9.95 - I would want to sell it for $19.95. If I don't think I can get that much, then I ask how much - maybe only $14.95. Is $5 enough profit for me? In my town - yes. In a big city, maybe not. I also have to compare it to similar products - are you in line with others even if your perceived quality is higher? From my end, I think like my customers - if I'm not able to talk about your product adequately, then I may not be able to sell the quality and thus the higher price.

For example, I am about to add two new chocolate bars to my shelf. Both should retail in the $7-10 range. That's a lot for the average customer. But, I know I can sell them based on my knowledge of the product, and I know that the quality will not disappoint the customer.

Truffles are an indulgence for most of my customers (they can justify chocolate bars as health food). So, every time I've tried to sell them they sit like dogs on my shelf. I currently only stock Fran's which wholesale at a point where I can only get 35%. I'm fine with that because I need some type of truffles on my shelf. But, as a result I don't offer them much of my valuable shelf space.

I hope that's helpful - just trying to let you into this retailer's mind.

Chef, Curious Kumquat, Silver City, NM


#187 patris

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Posted 24 February 2008 - 12:05 PM

That's enormously helpful, Rob. I spent this morning doing a detailed cost analysis of each of our products, and I'm realizing that as we're structured right now (renting a kitchen, working in single batches and buying ingredients mostly at the grocery store), wholesaling at 50% of retail would mean we'd actually lose money. Lots of thinking to do!

One of my very favorite things about this forum (where I have not spent nearly enough time lately!) is how generous you all are with your thoughts and experience.
Patty

#188 gfron1

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Posted 24 February 2008 - 12:24 PM

Patty - go the other direction. Don't worry about me (aka all retailers/your wholesale customers). Figure out your cost per piece (materials, operating, packaging, etc.). That's your break-even. Now we can talk wholesale. If your cost per piece is $1 based on your anticipated production quantity, then you know that if this is a hobby, then you can sell it to me at $1.25. But, if you want to eventually make a living, did you factor your salary into the cost? My Fran's (who has name value) truffles come to me at $1 per and they are fairly small in size - which is the size I prefer. So if little artisenal you comes to me at the same wholesale price, I wouldn't balk - I can sell the story easier than the name, but I am going to spend some time asking my employees what they think. But, Fran's has volume on its side, so are you close to her price point? Also, are you factoring in sample programs - makes a huge difference in my ability to sell - even if its your damaged goods.

Chef, Curious Kumquat, Silver City, NM


#189 mrose

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Posted 24 February 2008 - 12:51 PM

How many pieces do you have to make for your fair in May, Vanessa? I know when I've done things like that, it's so hard to know exactly how much to bring!

Patris - I have no idea what's sensible either, when it comes to wholesale pricing. I've been told that most retailers will want 40-50% off retail, but I can't discount that much. My discount is about 32%.

I came up with numbers pretty much off the top of my head, but just recently I've been sitting down and doing some really detailed analysis of what it costs for me to make a box of chocolates, and as it turned out, my wholesale price seems about perfect for the moment - just enough to cover my costs and my guesstimated value of labor+overhead.

Vanessa mentioned joining Colorado Proud. I've been wondering about joining the Chamber of Commerce, or a local organization called "Think Local First" that's for locally owned businesses. Has anyone joined these kinds of organizations, and found them to be worth the cost?

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I am a member of the Chamber of Commerce. I joined because you could put a table displaying you"re products before each meeting. I can't attribute any sales from this effort, didn't even sell chocolates 2 days before Valentines Day. But then again I live in Battle Creek. People want prime rib for the cost of a burger on the $ menu.

The Think Local First sounds like it could have promise. I would access the cost in terms of how much sales it would have to generate to cover the cost of joining.

Another option is to check out BNI, it costs $325 a year plus $100 registration fee first year. It also requires a weekly meeting from 7 - 8:30. You can go to a meeting & see how they work. I belong to BNI, I have sold enough chocolate to cost the yearly fee.

I also found that I also have to wholesale at ~65% of the retail price in order to make some $ for my time & efforts. I can offer better pricing if they want truffles delivered in bulk on a tray; with pricing getting better as quantity increases. I also set a treshhold of the number required to sell in this fashion vs. by the box.

I learned that putting chocolates out & getting paid for what sells ("on consignment") is not a good idea. You are taking all the risk and if the seller wants to keystone less profit than they are.
Mark
www.roseconfections.com

#190 patris

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Posted 24 February 2008 - 12:59 PM

Thanks, Rob!

My extensive analysis this morning includes every product we make, and factors in kitchen rental, packaging costs, and labor, and is based on our most recent production (which was highly efficient in terms of the way we used our time and the amount we were able to produce). I came up with a cost of $4.30 per 8-oz. package, which is an average of the cost of the dozen varieties we're doing right now.

Your feedback is really helpful - we're an itty bitty business in an area where locally-made is a huge selling point, and we do have a great story - my business partner and I have known each other for 30 years, her brother is married to my sister so we're practically related, yadda yadda yadda. I think our plan is to come up with a wholesale price we're willing to accept, and take samples and copies of the upcoming article to a small number of local specialty retailers after Easter.

One other question - do we suggest an end retail price? Our direct-to-consumer (up to now, friends, family and work folks) prices are lower than what I think they might retail for, but I don't know if the seller would want input on setting the price or not...
Patty

#191 tammylc

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Posted 24 February 2008 - 01:03 PM

Thanks, Mark, great information! A couple of my neighbors are BNI members, and have spoken very highly of it, so that is something else I'm considering.

I also did the math on bulk, and as you found, I can be more competitive there than in boxes. When you sell bulk, does the customer provide the packaging materials on their end, ie. ballotins, etc, or did they expect you to supply those? Since the big savings to the chocolatier is in packaging, I assume that they are providing?

gfron1 - also incredibly useful! Thank you. And thanks for giving some real numbers - I'm glad to see my prices are in the right ballpark. Can you tell me more about sample programs, and what you expect from your supplier in that regard?

Tammy's Tastings

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#192 mrose

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Posted 24 February 2008 - 01:07 PM

Tammy

When I sell truffles in bulk, I just put hem in candy cups & deliver them in those aluminum cake trays with covers. I also will use some better containers if I know this will be an ongoing customer & they returned with the next delivery
Mark
www.roseconfections.com

#193 gfron1

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Posted 24 February 2008 - 01:10 PM

I always like seeing a recommended price, although I may or may not follow it. I do look very carefully at if my customers can get the same product elsewhere locally or through the internet. My customers are savvy enough to do their research, so if I'm competing against the manufacturer's own sales, or if I have to compete against other retailers, I often opt out.

An example, we have some locally made jams. Nothing special, but they come in unique flavors. My wholesale is $4.50. I retail at $6 because I can't justify a higher retail. Again, they don't get prime shelf space with that mark-up. I recently saw their product at a competitor for pennies above our cost. Guess what? They're leaving my shelf after this batch.

Just remember that no matter how great you think your chocolates are - shelf space is very competitive. I always need to know that I'll be able to make my money regardless of how great a story or product. Best example of that is that I sell Lindt. I don't care for Lindt bars, but at their price point they fly off the shelves. They are situated just about at eye level - dead center. (That said, I reserve even better placing for my high end bars that I'm going to verbally sell.)

Chef, Curious Kumquat, Silver City, NM


#194 tammylc

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Posted 24 February 2008 - 01:22 PM

One other question - do we suggest an end retail price?  Our direct-to-consumer (up to now, friends, family and work folks) prices are lower than what I think they might retail for, but I don't know if the seller would want input on setting the price or not...

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Patty - I always tell my wholesale clients what my retail selling price is. Some won't want to go higher than that because they don't want to be perceived as marking up beyond what people could buy from me direct. But I know there are other retailers in town who are very happy to add a premium, as I've seen them do it for other items.

I made very sure when I was first pricing my product to charge a price that would be sustainable - ie. not to price myself too low because it was just a "hobby" business, because that makes it really hard to increase prices later!

Tammy's Tastings

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eGullet Foodblogs #1 and #2
Dinner for 40


#195 gfron1

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Posted 24 February 2008 - 01:41 PM

Good point Tammy. Carrying the idea further - pick a price that won't change in six months when your costs go up. End customers hate to see price increases.

Chef, Curious Kumquat, Silver City, NM


#196 Pam R

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Posted 24 February 2008 - 02:35 PM

I also own a retail store, and I just wanted to add that I agree with the things Rob has been saying.

Suggested retail prices are always good to know, but I rarely follow them. They're set by suppliers in another city who 1.don't include my shipping charges in them nor 2. know my customers.

We mark up things differently, depending on what it is. For chocolates, we like a 50% mark up, but some can go higher, and some can't even make 30%. You really do have to make sure you're making enough and let the retailer figure out if it will work for them -- and each retailer will work things out differently.

On another note, we used to specialize in high-end cakes and tortes. We had several restaurants interested in selling them, but we couldn't wholesale them in a way that would make either of us any money, so we didn't do it. The bottom line is that you have to be able to make money.

#197 Desiderio

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Posted 24 February 2008 - 02:57 PM

I have used a guide from the department of agricultur, to market your products and marketing plans ( very usefull ) and I follow their guide to come up with a price per piece ( I have done before but without all the other expenses that I am going to have now) so I think the price was 1.30 per piece, I might need to recalculate that but it seems very high and I am little bit concerned on the selling part.I have seen the average price per lb for artisanal chocolates is between $38 and $42, wich is exactley the price I cam up with before.
The wholesale deal is stressing me out, I have contacted a place that sell mostly local and they buy wholesale, they also have another local company that makes chocolates, her products are slighlty different from mine ( they are the round truffles in a premade shell and she has some of those chocolates made in magnet molds ) so i am trying to see boxes cost and bulk cost.
This is very helpfull , everybody pitching in , thank you so much.
Vanessa

#198 pringle007

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Posted 25 February 2008 - 04:02 PM

Tammy,
In one of your posts you mentioned you may need to do shipping for a few wholesale orders. I have learned you need to keep the weather in nd when trying to ship any kind of chocolate. Its very expensive to ship chocolate once you pass the end of April in these parts (midwest). Its just somethng else to factor in. I know some chocolatiers make such little profit during the summer because the actual cost of shipping is so high that they themselves roll over profit to make shipping seem more reasonable to the customer. I know it can cost $30 to ship a 24 piece box in Junetime temps. Depending on where your shipping to and the amount, it might be alot higher. I shipped a box of chocolates last summer from Ohio to Hawaii. You dont want to know how much that cost to get them there before they could melt!!
"It only hurts if it bites you" - Steve Irwin

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#199 tammylc

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Posted 25 February 2008 - 04:13 PM

Thanks, Pringle007, I do quite a bit of shipping for my retail orders, so I am all too familiar with the weather challenges! Makes me happy that Easter is so early this year. Mother's Day is always tricky though. I had one customer last year who was totally willing to spend more than the cost of the chocolates on the shipping, but I don't expect them all to be that way!

The wholesale shipping I was talking about wouldn't be bad, even in summer, as they are within 1-day Fed Ex ground, so with an insulated box and ice packs it would be fine anyway.

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eGullet Foodblogs #1 and #2
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#200 amdellutri

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Posted 25 February 2008 - 07:06 PM

Is the business for selling chocolates, seasonal, cyclical. Besides February for Valentine's day, how are the other months when you have a retail shop. How does that differ from selling online?

Thanks,
Angela

#201 tammylc

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Posted 26 February 2008 - 12:52 AM

Angela, I currently do most of my production as special sales for holidays. I sell through my website and in a few stores in town, but don't have a retail store of my own. I do a fun "Halloween Candy for Grownups" sale for Halloween. This year I did a special offer on bulk chocolates for Thanksgiving, for people to put out on a tray for dessert. Those were both relatively low volume sales. But then the season heats up, with Christmas, Valentine's Day, Easter and Mother's Day. Mother's Day gets tricky for online, because shipping gets harder/more expensive.

I might do caramels or praline pretzels or marshmallows - something less heat sensitive - for Father's Day this year. If you get into the wedding favor business, I imagine that can keep you going through the summer.

Christmas is the biggie. Valentine's Day, most people are going to buy one box for their one Valentine. Christmas, they'll buy multiple boxes to give out as gifts, and that's the time of year for corporate gifts, etc, as well.

Tammy's Tastings

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eGullet Foodblogs #1 and #2
Dinner for 40


#202 amdellutri

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Posted 26 February 2008 - 06:26 PM

Great information to know. Thanks for the response.

#203 patris

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Posted 01 March 2008 - 09:05 AM

Well, the Puff Girls were featured in the Buffalo News this week... Here's a link to the article (it'll only be valid until March 10th or so).

We've gotten incredible response - close to 100 e-mails so far, the orders have started to come in, and 3 inquiries from shops wanting to sell them - one of which seems to want to resell in their own packaging.

This has raised an interesting question for me, though: what are the advantages and disadvantages of selling bulk product to someone who will then package and sell under their name? My gut reaction is that I want my brand out there, and I don't want anyone else's brand on my product. Others of you may have a different perspective... I'd love to hear other viewpoints on this.
Patty

#204 Kerry Beal

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Posted 01 March 2008 - 09:16 AM

Well, the Puff Girls were featured in the Buffalo News this week... Here's a link to the article (it'll only be valid until March 10th or so).

We've gotten incredible response - close to 100 e-mails so far, the orders have started to come in, and 3 inquiries from shops wanting to sell them - one of which seems to want to resell in their own packaging.

This has raised an interesting question for me, though: what are the advantages and disadvantages of selling bulk product to someone who will then package and sell under their name?  My gut reaction is that I want my brand out there, and I don't want anyone else's brand on my product.  Others of you may have a different perspective... I'd love to hear other viewpoints on this.

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Great article. I've saved it as a PDF file so my copy won't expire.

Why not a bacon marshmallow - a bit of smoked salt in there - what's not to love?

I know what you mean about other people getting their brand on your product. I'd probably be uncomfortable with that. Maybe if you make a particular flavour just for them, or perhaps you get them to put 'made by Puff Girls' somewhere on the packaging?

#205 JTravel

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Posted 02 March 2008 - 07:54 AM

Well, the Puff Girls were featured in the Buffalo News this week... Here's a link to the article (it'll only be valid until March 10th or so).


Great article, and thanks for the tip on saving in PDF...what a neat trick. Best of luck in your venture.

This whole discussion has been fascinating to me.....and I'm not into chocolate making or a business. But if the public knew how much work goes into making such good things they would pay willingly.....maybe they do anyway.

With all the regulations I can see why people buy franchises, they get lots of guidance on how things are done.

J in Rochester

#206 mrose

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Posted 08 March 2008 - 02:07 PM

I am going to be moving to Providence by summer. I would like to start my chocolate business up again after getting settled. One of the issues I will have is that Garrison Chocolates (Andrew Shotts) is based in Providence. Has anyone started a business or have a business where there is someone of this calibur in the area? If so, what were yor experiences? Any pitfalls or any advice?
Mark
www.roseconfections.com

#207 Kerry Beal

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Posted 08 March 2008 - 03:16 PM

I am going to be moving to Providence by summer. I would like to start my chocolate business up again after getting settled. One of the issues I will have is that Garrison Chocolates (Andrew Shotts) is based in Providence. Has anyone started a business or have a business where there is someone of this calibur in the area? If so, what were yor experiences? Any pitfalls or any advice?

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I think having someone of that caliber in the area will help your business. People will already be aware of the price for good chocolate so you won't have that hurdle to overcome.

#208 John DePaula

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Posted 08 March 2008 - 04:40 PM

I am going to be moving to Providence by summer. I would like to start my chocolate business up again after getting settled. One of the issues I will have is that Garrison Chocolates (Andrew Shotts) is based in Providence. Has anyone started a business or have a business where there is someone of this calibur in the area? If so, what were yor experiences? Any pitfalls or any advice?

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I think having someone of that caliber in the area will help your business. People will already be aware of the price for good chocolate so you won't have that hurdle to overcome.

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I agree, there can definitely be a synergistic effect. Both of you will have different styles and different specialties.
John DePaula
DePaula Confections
Hand-crafted artisanal chocolates & gourmet confections - …Because Pleasure Matters…
--------------------
When asked “What are the secrets of good cooking? Escoffier replied, “There are three: butter, butter and butter.”

#209 prairiegirl

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Posted 08 March 2008 - 09:29 PM

I face the same challenges Mark. I have Bernard Callebaut to compete with. Recently I did a 2200 piece job for a company. They did a blind taste test with mine and Bernards, and I came out on top. Another company had a plate of my chocolate and a plate of Bernard Callebauts, and Bernards was still sitting when mine were all gone!! As long as I can prove that I am better than the industry lead, I will win!. It will take time. You can say "If you like Andrew's, you're going to love mine"!! Good luck.

#210 Mary F

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Posted 08 March 2008 - 09:47 PM

patris- congrats on the article! Love the name Puff girls!

mrose- I live about a mile from one (of two) of Fran's stores. While I dont have a storefront, I have been able to make it work being in the same town. A few of my accounts have previously used her. I made sure I had a different style or product to offer.
There are several other chocolatiers in the area and it seems that it does pave the way for the higher end confections. I know it is competition, but each chocolatier offers such a different product in the end the client is going to go with what they like.
Have faith in your product, I have seen the pictures they are gorgeous! When I was asked to make a salted caramel (just like Fran's), I told the client they should go to Fran's for the real deal if thats what they want..but then went into the descriptions of what I offer. Maybe that individual went to Fran's to get their salted caramel fix, but I also sold her some boxes for corporate gifting for Valentines day.





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