Out of the Box idea
Wednesday, November 3, 2010/
Countless successful businesses have sprouted from small-time beginnings, but few will have emerged from such literally tiny origins as Noodle Box.
The convenience food retailer, which now has 81 stores and counting across Australia, begin life in 1996 in a cramped, 29-square-metre outlet on Chapel Street in the inner-Melbourne suburb of Prahran.
The tiny space, which is still going today, was converted from its former use as a sandwich shop after the owners were paid off for around $35,000. Suddenly, David Milne and Josh James had their own operating business.
“That first store didn’t have a coolroom, so we had to jump in the car and get more food by lunchtime when we sold out,” Milne recalls. “That went on for about six to eight months. It’s strange to think that it was so long ago now.
“The next step was a bit more organised. The learning curve was steep, but it was fun after coming from working for other people.”
A good partnership
Noodle Box’s growth has hinged on the complementary partnership between Milne and James. Even in those early days, it was clear that the duo brought different skills to the table.
“Josh enjoyed working in the stores and I like the business side – it’s a very defined partnership,” says Milne. “Josh had done marketing at university and has a catering background. His food knowledge and my concept made a good partnership.
“(But) you learn new things every day. If you asked me what cashflow projections we had in the first three months, I would’ve looked at you with a dumb look on my face.”
The concept of Noodle Box was established a long way from its Chapel Street launching pad. Milne developed the idea while working and living in Denmark as a roadie for bands in the mid-1990s.
“I ended up eating a lot of takeaway food in Denmark, such as salads and Chinese food, out of boxes,” he explains. “I then came back to Australia for Christmas and went via Singapore. I saw all of those open kitchens cooking food and it was mesmerising.
“I really liked the idea of packaging the food in a box and no one was really doing in in Australia. I’d grown up eating Asian food and always enjoyed it. I like the theatre of cooking it and the concept of a small open kitchen was really appealing.
“I thought there was a great opportunity for a business. The general idea of eating food prepared in front of you wasn’t being tapped back then, while it’s quite common now. We hit the market at the right time.”
Acting upon the idea
Upon returning to Australia, Milne teamed up with James and set about building the foundations of the business. It cost $75,000 to launch Noodle Box, with the money raised via sale of cars and some bank finance. Money generated from several side interests, including a couple of Melbourne pubs that were subsequently sold, was also ploughed into the business.
Milne says that Noodle Box was aimed at “younger, more progressive” customers and the business underlined this with its marketing efforts. Club DJs wore Noodle Box T-shirts and the brand had a visible presence at festivals and other events held around Chapel Street and St Kilda, the location of its second store.
The initial plan was for four Noodle Box stores, with Milne and James running two each. However, the business grew to eight outlets by 2000 and the pair decided to take the concept beyond Melbourne.
“My only regret is that we didn’t expand as quickly as we could’ve done,” says Milne. “It’s one thing to have an idea, but the execution is very tough. It’s hard to estimate the workload involved.
“We’ve always been constrained by funding, up to five or six years ago. We didn’t raise private equity funding and it was just the two of us, but we liked tracking along together.
“Having eight stores, we couldn’t be everywhere at once. We had 70 to 80 staff at any one time to manage. We were getting pressure from franchise groups to franchise the model, which we hadn’t thought of before. So we got some advice and put together the pros and cons of franchising the business.”
Milne says that the decision to franchise the business proved a considerable challenge, but one that ultimately paid off.
“We had to put together manuals and systems, which was a harder process than I thought,” he says. “It’s not easy to turn something you’ve done for a few years into something someone else can just pick up. The concept is simple but there’s a lot to it.
“There are always peaks and troughs with franchising. If people want to be a franchisee, they should pick an industry they’re interested in. We want people who are foodies. Some franchises are guilty of taking on people who aren’t suited to the business.”
Getting the ‘village’ feel back
The first Noodle Box franchise was sold within four months, with an average of 12 stores a year added until last year.
Recently, Milne and James have attempted to increase the number of company-owned stores. Milne admits that he wants Noodle Box to “have that village sort of feel again. We did go a bit corporate and we want to get that back. We can do that while being better at what we do.
“We are looking for a better quality franchisee and we’ve toughened up the criteria for taking on a franchise. We’re prepared to slow the business down in order to get the right people.
“We’ve got people with three or four stores and we are working with them to build their businesses.”
So what are David Milne’s tips for start-ups?
Gather knowledge – “Come in with as much financial knowledge as possible. Do courses, read the business press and talk to people who have done it themselves.”
Be passionate – “Find something you’re passionate about and go for it. You have to have a love for the business and the brand.”
Don’t second-guess yourself – “If you have the right idea and are passionate about it, there’s no wrong time to start up. There are opportunities in good times and bad times.”
Don’t let the business rule your life – “Never underestimate the time and work it takes to run a business. It’s important that you have a work-life balance. You’ll work more productively, you’ll enjoy work and life more and it’ll be better for your employees.”