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Soup's On!

It started with the Soup Nazi. Now it's one of America's hottest restaurant concepts.
November 1, 1997
URL: http://www.entrepreneur.com/article/14814

Summers in New York are usually hot and steamy. But for once, this winter is expected to be hot and steamy, too--in the soup restaurant business, that is. During the past two years, a host of newcomers to the restaurant business have been racing to make soup "the next big thing." Their motto: "We want to be the next Starbucks." Yeah, well, who doesn't? The thing is, one of these folks just might do it.

The self-proclaimed leader of the pack is Daily Soup, with eight locations in New York City and another 10 expected to open on the East Coast early next year. "We always had multiple locations in mind when we started this," says Bob Spiegel, 36, who--along with partners Carla Ruben, 35, and Peter Siegel, 29--opened the first Daily Soup in November 1995.

That same month, something fortuitous occurred. A Thursday night "Must-See TV" lineup included a "Seinfeld" episode featuring a soup vendor who served up caustic curses with his cups of steamy ambrosia, earning him the moniker "Soup Nazi." That single episode, loosely based on Al Yeganeh, a real New York City soup seller for more than a decade, left Yeganeh stewing but inspired several wannabe "soupreneurs."

"The Seinfeld show was a major impetus for the expansion of the soup restaurant market," says Andrew Schnipper, co-owner of Hale & Hearty Soups, who says his soup business was already underway when the show aired. Now, with four New York City locations, he says, "If that show hadn't aired, we'd be one of the only ones selling soup."

With a concept for a soup business already in the works, Pak Melwani, 48, says the Seinfeld show was serendipitous. In what he calls a "spoof of a spoof," Melwani and co-founders Kumar Hathiramani, 38, and Surinder Aggarwal, 49, opened the doors at Soup Nutsy in 1996, featuring a caricature of a soup chef on its menus and serving up attitude with the dishes. The restaurant is no spoof now. In fact, it has attracted the interest of franchising investors like Boston Chicken Inc. founder George Naddaff, and plans are in the works to franchise the concept.

Entrepreneurs interested in getting into the market had better hustle while it's still young. And you'd better know how to fly by the seat of your pants. Interested in industry failure rates? Costs of doing business? You won't have luck researching the soup restaurant market. It's so new, the National Restaurant Association has yet to come up with any statistics on the industry.

From Soup to Nuts

Soup--it's the ultimate comfort food. Suffering from the sniffles? Feeling blue? Mom would inevitably make you a bowl of chicken soup to cure your ills. Throughout history, soup has had a place on the world's tables. So how did such an age-old staple become a hot new trend?

"I see it as similar to what happened with the coffee market, where people wanted something more upscale," says Schnipper, 30, who owns the 2-year-old Hale & Hearty with brother Jonathan, 31, and Douglas Boxer, 25.

More upscale is exactly what consumers are getting. Try Thai chilled melon with peanut; Jamaican goat curry; and cold soups like gazpacho and scallop ceviche. And there are always stand-bys like mulligatawny, matzoh ball and split pea for traditionalists.

Coming up with these soups and stews didn't come easy for any of the new soup vendors. Perfecting recipes is part of why it took the Daily Soup group a year and a half to open its first restaurant. Even though Spiegel had been a chef for 17 years, making soup in such large quantities required a healthy dose of taste-testing and a thorough knowledge of chemistry.

The experimentation is paying off, however. Soup entrepreneurs are boasting long lines--even during the summer--of hungry New Yorkers willing to fork over $4 to $8 for a 12-ounce bowl of soup. Hale & Hearty's Schnipper says he serves as many as 500 bowls of soup a day at each of his locations during the winter. At many of the new spots, a bowl of broth also comes with extras: a hunk of bread, a piece of fruit and sometimes a homemade cookie.

But don't let the idea of a one-product restaurant fool you--the profit margins may not be as high as you think. Making 10 to 15 different soups every day can require hundreds of ingredients, and many of those get tossed out after the stocks are made. How does Daily Soup combat the profit margin problem? Says Spiegel, "We're selling a lot of soup."

The Heat Is On

Recipes aren't the only things the new soup marketers are updating for the '90s: Soup selling has taken a high-tech turn. Fax orders, phone orders and deliveries are common at the fledgling soup restaurants. Daily Soup has taken the process one step further by taking orders via the Internet. New Yorkers can log on to the site (http://www.dailysoup.com ), make their selection from the menu, choose one of the five locations, hit enter, and lunch is on the way. Spiegel says Daily Soup makes about 50 deliveries per restaurant per day for orders placed on the Web. Now if only they could deliver to St. Paul, Minnesota, on a 40-below day.

That may not be far off for the Daily Soup team. Spiegel and company are already taking another cue from the savvy marketers at Starbucks: wholesaling their products to gourmet specialty stores and introducing a mail order arm. So far, the firm is delivering soups to New York City gourmet shops such as Balducci's and Dean & Deluca.

At most soup restaurants, expansion through additional locations is the number-one priority. "In the short term, we're trying to capture the New York market. In the long term, we're trying to capture the tri-state area and eventually, the nation," says Hale & Hearty's Schnipper.

The franchising route could prove a tasty alternative for entrepreneurs who can't find investors to fund the high cost of opening company-owned soup restaurants. Like many other food-based ventures, the costs of opening a single soup restaurant can boil up to nearly $300,000. Schnipper says Hale & Hearty's central kitchen, where they prep the soups for all their locations, set them back nearly $500,000.

Store design may be costly, but it plays a huge part in creating a company's overall image. Some of the new soup vendors are adopting a crisp, clean industrial look. But the image at Hale & Hearty is much like its name sounds: warm and comforting. A glass wall filled with lentils, red beans, chickpeas and an assortment of other legumes adds color to the stores, which mainly feature earth tones. "You've got to remember, soup is a low-tech, earthy product, and that's the look we're going for," says Schnipper.

Earthy or minimalist, exotic flavors or traditional fare, friendly service or tough love--so far, many of the formulas seem to be working. Let's look at the 1997 revenue projections for some of the key souperstars: Daily Soup's five eateries are expected to hit the $7 million mark, Soup Nutsy's single take-out-only location is looking at the $1 million range, and Hale & Hearty's four restaurants should gross between $500,000 and $1 million each.

While these aren't the only players in the field, they've made some of the biggest strides in terms of expansion. Soup Nutsy's Melwani says the New York City market is already getting saturated, which can only mean some of the current players won't be around in years to come. "Sure, there will be fall-off; maybe two or three companies will survive," says Melwani. "We want to be one of the survivors."

Al Yeganeh isn't letting the newcomers pass him by. He, too, is joining in the expansion frenzy by partnering with a marketing guru in an effort to take his soups nationwide. And how does Yeganeh feel about all the other soupsters who are jumping into the stew? "I don't see them as competition," he says, "and I'm never going to have any competition."

Dishing of Soup

More, Please

31.8 percent of Better Homes and Gardens subscribers say they are preparing more soups than they were two years ago.

Bowled Over

The most popular restaurant soup offerings:

Want to Know More?

Frances Huffman, a freelance writer in Pacific Palisades, California, is a former senior writer for Entrepreneur.

Contact Sources

Daily Soup, (212) 633-1800

Hale & Hearty Soups, 75 Ninth Ave., New York, NY 10011, (212) 255-2400

Soup Kitchen International, 259A W. 55th St., New York, NY 10019, (212) 757-7730

Soup Nutsy, 148 E. 46th St., New York, NY 10017, http://www.soupnutsy.com