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Holding Their Own
Local small businesses prove that economic slowdowns and multinational competition are no obstacles to success. Here are some of their stories.
BY JOSE L. CARMONA
March 21, 2002
Business unusual: Offering new or better products and services is often key to small business success
A tiny sandwich shop open less than 18 months draws 500 customers a week. A local telecom startup competes successfully with multinational giants. A corner grocery store is quickly becoming a chain.
With hard work, creativity, and resourcefulness, more and more local small businesses are living proof that troubling economic times and increased competition are no obstacles to achieving success.
What are these businesses doing differently that has allowed them to achieve success? Can a new business really make it in Puerto Rico when consumer confidence is low and people are more cautious about spending money? How do you beat the competition and succeed?
To find out, CARIBBEAN BUSINESS interviewed representative small businesses on the island and found that each has carved out a niche, is sticking to it, and is providing customers with excellent service and value for their money.
After graduating from high school, Alex Garcia, born and raised in San Juans Ocean Park area, moved to New York and then to South Beach, Fla., where he worked in several restaurant management jobs. A few years later, he decided to return to his homelandand to Ocean Parkdetermined to open up a business.
Although there were already several successful businesses along McLeary Ave., Garcia realized the area lacked a gourmet sandwich shop that catered to health-conscious local residents and tourists who were looking for a place where they could get a quality product, but without the poor service or high price tag offered by the competition.
"I knew the Ocean Park area and what it needed," Garcia told CARIBBEAN BUSINESS. "I really wanted to cater to work the tourists and those who are health conscious. Something a little bit different that wasnt your ordinary rice and beans place."
So in September 2000, with $18,000 of his own money, Garcia opened Pinkys on Maria Moczo St., less than a block away from its area competitors.
Suppliers provided Garcia with credit and equipment, which really helped him stretch the initial $18,000 investmentthe product of the sale of his car plus some money saved.
According to Garcia, Pinkys concept is slightly based on a similar restaurant in South Beach that sells gourmet sandwiches to beachgoers.
The establishment might not be very big on space, but is certainly big on service, Garcia said. Pinkys offers vegetarian & specialty sandwiches, salads, and wraps, plus natural juices & shakes. It also provides delivery, even to the beach area of Ocean Parksomething the competition doesnt do. Additionally, Pinkys accepts corporate accounts and does corporate lunches.
"Its all about service. In most places, service is very poor and Im very hard about that," said Garcia, a high school graduate of St. Johns in Condado. "And its very important to know everyone by their first name, make them feel at home, relaxed. And thats something rarely done here."
Pinkys has four employees and opens from Tuesdays to Sundays for breakfast and lunch.
Although not a classic diner per se, Pinkys is reminiscent of the 1950s, Garcia explained. Coca Cola posters of the era and numerous pictures of customers, taken by Garcia, fill the walls.
Its precisely the laid back, casual, relaxed atmosphere that attracts more than 500 customers to Pinkys every week, Garcia said. With no big advertising budgetjust word of mouth and flyers passed at the beachPinkys clientele has kept growing.
"Unlike to other places, business increased right after Sept. 11 and has continued to grow ever since," said Garcia. "The bottom line to our success has been consistency, quality, good service, and a great steady clientele."
Over the past eight months, Garcia has received several offers to open up other businesses, even opening Pinkys in other parts of the island and the world. But Garcia wants to take it slowly, one step at a time.
"Pinkys has definitely been designed to be franchised," said Garcia. "Right now, I dont have the energy to do that myself, because Pinkys has been pretty much a one-man operation. But I have built this restaurant to be exported from Puerto Rico."
Garcia is reinvesting some of the profits back into Pinkys for improvements. His future plans include adding a grill, which will allow him to expand the menu and make Pinkys a more marketable product, especially for export.
"There might be other Pinkys opening around the island, but I would never leave this location," Garcia said of his Ocean Park business. "I want solid investments and people that know what they are doing. You can put a lot of money in my face, but that doesnt work for me."
The only drawback Pinkys has faced so far has been the lack of an alcohol license, which according to Garcia, is due to Tourism Co.s refusal to endorse his business.
In 1997, Felipe Hernandez founded Islanet Communications as a local, regular Internet service provider. Two years later, Islanet Communications became a full telecommunications provider, certified as the second facilities-based competitive local exchange carrier (CLEC) in Puerto Rico and the only wireless CLEC on the island.
Hernandez put in an undisclosed amount to start the business, but currently venture capitalists and individual investors have chipped in $6 million for the company.
Among Islanets biggest accomplishments is the development and implementation of the only frame relay and asynchronous transfer mode network in Puerto Rico, serving more than 60 multi branch companies islandwide, including Pitusa, Hyatt, U.S. Postal Service, AGA Gases, and the U.S. Department of Agriculture.
The young company also created the islands only voice over Internet protocol (voice over IP) gateway. Voice over IP technology uses a companys network infrastructure and the Internet to generate calls, eliminating the need to access the public switched network of a telephone carrier.
Last year, the Telecommunications Industry Association chose Islanet as Best Public Network in the World, the first time a local telecommunications company has been selected for this award.
Currently, Islanet offers a wide range of services including wireless high-speed access to Internet & intranets, voice over IP, direct subscriber lines, frame relay and ATM connectivity, virtual private networks, web design & hosting, and applications management & hosting for companies.
"Some time after starting Islanet, company founder Hernandez saw there was a need in the local market for high-speed data, either for Internet access or for point-to-point meeting intranet working within a company versus out to the Internet," Islanet President & CEO Kari Jordan told CARIBBEAN BUSINESS. "He went out and found a vendor who had antennas that could do that at a price consumers could pay. So he introduced the wireless local area networks or wireless high-speed internet access to the local market."
According to Jordan, part of Islanets success was that it found a niche that wasnt met by the competition. The company focused on their core competencies (on what they do well) and went after it.
If you go into something that somebodys already doing and you cant do it either better or cheaper, then you are destined to be second, third, or fourth in the market, Jordan indicated.
"Even though Puerto Rico Telephone Co. (Verizon) and Centennial are in the market, they focus on individual large accounts," said Jordan, who joined Islanet in January after a three-year stint with Centennial. "Islanets service is targeted to small and medium-sized businesses that needed high-speed access at the Internet or to larger businesses that have numerous locations."
There are two alternatives for high-speed Internet accessone is dial up (connecting to the Internet through a phone line or cable using an Internet service provider) and the other one is wireless, Jordan explained.
"Dial up is unreliable and slow," said Jordan. "To really do business over the Internet, you have to have links that are more reliable and much faster than the normal dial up links in Puerto Rico. Thats were wireless comes in."
The companys backbone has more than 45 hubs located around the island, covering approximately 90% of the business areas in Puerto Rico, Jordan explained.
From a business standpoint, by going wireless (rather than fiber optic or cable as Verizon and Centennial do), the company doesnt need to go through the bureaucratic government permits process, and is therefore able to implement much more quickly and at a lower cost than the competition.
"It is much cheaper to deploy a wireless phone, data, or voice network than fiber optic. Going wireless in Puerto Rico is the only feasible way to get things done very quickly," said Jordan. "We believe the island is a very good business model."
Contrary to popular belief, demand for Islanets services was not affected by the recession or Sept. 11.
"When economic downturn comes, companies look more internally for ways to be more productive and efficient, and in our case, being able to get good information sooner," said Jordan, who has 17 years of experience in the telecommunications industry. "By getting the information sooner, companies can make better informed decisions."
Having good information is even more important during a downturn than it is during an upturn, Jordan said.
One of Islanets clients, Pitusa, is in the process of installing a high-speed link to its more than 100 stores across the island, to feed data back to its main headquarters in Rio Piedras.
Jordan believes Islanets growth will continue to be high-speed Internet access and local area networks (wireless data networks).
"Our high-speed Internet data clients are now a bigger portion of the business than the dial up," said Jordan. "The two have crossed each other. Dial up was the bigger piece, now it is the other way around."
Aguasvivas Food Market
In 1989, Omar Aguasvivas, a Dominican native residing in Puerto Rico, quit medical school and moved with his family to New York. For several years, they owned & operated several small grocery stores in economically disadvantaged sections of the Bronx.
In 1992, Aguasvivas and his family decided to sell their businesses and move back to Puerto Rico, which they consider home.
Little did Aguasvivas know that the experience of running businesses in the Bronx would come in handy in Puerto Rico as he searched for the right business opportunity.
Checking the classifieds one day, he discovered that a grocery store next to Manuel A. Perez housing project in Rio Piedras was for sale, and decided to buy it.
"Having worked in the public sector a few years back, I knew the area and the individual character of the people who live there," Aguasvivas told CARIBBEAN BUSINESS. "I bought the business with no fears. I figured that as long as I provided service, I would gain trust and respect."
At a $350,000 investment (financed by Banco Popular), the 5,000-square-foot store, formerly known as the Lucky Seven, became the first Aguasvivas Food Market. Things went so well, that in 1995 Aguasvivas acquired a second store in the San Isidro sector of Canovanas.
"The second store belonged to the Selectos grocery chain. We changed its name to Aguasvivas Food Market," recalls Aguasvivas. "Its our biggest store, with 7,000 square feet of space."
The third location, a closed grocery store on Borinquen Ave. in Santurce, was acquired in 1999 with a $1 million Small Business Administration (SBA) guaranteed loan processed through the Commerce Development Administration and issued by Banco Popular. The store has 5,000 square feet of retail space and an 8,000-square-foot warehouse.
Part of the loan was used to remodel the three stores. Aguasvivas is a firm believer in reinvesting in his establishments, keeping them clean, organized, well stocked, and outfitted with modern equipment. All stores have revamped meat departments.
By opening a closed business, hes doing his part to revitalize the community and provide much needed jobs.
"I have chosen to establish my businesses in economically disadvantaged areas because the residents are not being served by the big grocery chains. Their needs are not any different than those of other people. They just happen to be working class," said Aguasvivas. "I arrived at these communities and they have supported me. I am very appreciative of that."
For Aguasvivas, its not a matter of being afraid, but of providing service. For him, the secret of his business success is that its a family owned business that provides personalized servicesomething the other chains dont do.
"When you come into one of our stores, you are greeted by one of the owners. We deliver your groceries, we help you find what you are looking for, and if you are a senior, we even pick you up, help you do your grocery shopping, and take you back home," said Aguasvivas. "If you provide service, people will support you."
Currently the company has 52 employees, averaging 15 to 18 employees per store. The company provides health coverage, and plans are already underway to offer a retirement/profit-sharing plan as well. The idea is to allow employees to participate in the companys growth.
Plans are already in place for Aguasvivas No.4, which will be located near Monte Hatillo.
Aguasvivas new project not only involves a store location, but the acquisition of an entire mini strip mall, which would include a 12,000-square-foot establishment plus six other commercial spaces for lease.
"This would be our biggest challenge so far," commented Aguasvivas. "The building is partially abandoned, so we plan to rehabilitate the area, just as we have done with all our stores."
Issues involving the buildings owners estate need to be resolved before the deal is closed, Aguasvivas explained. The acquisition will be financed through an SBA guaranteed loan with Banco Popular, although no figure was disclosed.
Aguasvivas projections are that one or two new businesses will open every two years.
"We are already conducting research to open in three towns, two of them being Aguas Buenas and Juncos," said Aguasvivas. "These areas have strong competition, but we are not concerned, because we provide better service. We welcome the competition."
More Success Stories
Tepe a Tepe Owner Maria Biascochea noticed that Santurces Miramar area lacked a casual restaurant aimed at young professionals. After a year and half remodeling what used to be a hospitalillo de drogas (heroin shooting gallery), Tepe a Tepe opened its doors in 2000 offering a light and fresh healthy menu in a clean and enjoyable atmosphere.
Its suppliers are all local and most of the pastries, breads, and deserts are homemade. Biascochea designed and decorated the establishment herself. In times of economic challenges, Tepe a Tepe has been able to increase its clientele and sales.
Decora Specialized in the sale of home & wedding decorating accessories such as artificial flowers, fruits, and candleholders, Decora opened two years ago in the urban centers of Rio Piedras and Caguas, helping revitalize a section of both downtown areas.
To stay ahead of the competition and keep customers coming, owners Jorge Pantojas and Lucy Marrero are constantly innovating and holding special sale events, which help move the stores inventory faster.
Stop and Munch Snacks Inc. Noticing convenient stores needed local suppliers of sandwiches and snacks, in 1994 Mariblanca Rosaly established Stop and Munch Snacks Inc., which prepares and distributes sandwiches for convenient stores such as 7-Eleven, gas stations, and even for Sams Club.
The business now prepares and distributes more than 3,500 sandwiches daily, grossing more than $550,000 a year.
Medical Books in Print Realizing the difficulty faced by local medical students in finding the specialized textbooks they needed, Roberto Arteaga established Medical Books in Print in 1994.
The bookstore & distributor of medical textbooks now generates more than $2 million in annual sales and recently established operations in the Dominican Republic.
LM Waste Co. With the average citizen generating some nine pounds of garbage each day, Rey Gonzalez saw the islands growing demand for solid waste management. After completing his masters degree in Environmental Sciences, Gonzalez joined the father-son team of Roberto Roca Senior & Junior in 1999 to create LM Waste Co.
The company that started with one contract (in the Municipality of Guanica), a couple of used trucks, and a handful of employees has now grown to 600 clients, 90 trucks, 150 employees, and annual revenue of $7.5 million. The company was recently awarded a $10 million contract for the removal and disposal of two thirds of San Juans garbage.
The San Juan contract, starting July 1, will entail the acquisition of 38 additional trucks and the creation of 115 new jobs. The company, which plans to expand to the Caribbean, recently acquired the 615-acre Yauco landfill, with only 30 acres in use and with a useful life of 50 years.
This Caribbean Business article appears courtesy of Casiano Communications.