Opening a business in Rio is not for wimps or dummies

Be prepared mentally, emotionally and financially, says Californian Sam Flowers

Second in a series of profiles of foreigners who bring their dreams to Rio de Janeiro. Here’s the first.

How does business get done in this country? ESPN recently asked in 2014 World Cup: Will Brazil Be Ready?

With great difficulty!

Always a warm host

The first step taken on a path from Santa Barbara, California, to Rua Barão da Torre in Ipanema was when Sam Flowers was a mere ten-year-old, begging his mother to let him learn how to decorate cakes. That led to a B.S. degree in hotel administration at Cornell University, with an eye towards opening a restaurant.

“The irony is that I learned enough about the business to get frightened away,” Flowers admits with his easy smile. Even so, while earning an MBA he continued to decorate cakes, dreams on a back burner.

During eight years in executive management at Universal Studios, Flowers took a couple of vacations in Rio. “The first time I came alone and it rained every day. I didn’t speak Portuguese,” he recalls. “But I had never been anywhere before where I blended in, a country of mixed-race people.”

Flowers spent eighteen months here in 2004-5, that included a stint at PUC to learn Portuguese. He also scouted out locations, entertaining thoughts of chocolate chip cookies and brunch. On learning that opening a business will get you a resident visa, Flowers reserved the name Gringo Café on the internet. Then he went home to develop a business plan and put together the necessary funding for his enterprise.

“You have to have a back-up plan,” he advises. “With enough resources for a worst-case scenario. Not having enough cash set aside is one of the top reasons restaurants fail”. According to Flowers, nine restaurants in the vicinity of the Gringo Café have opened and closed in the two years he’s been in business. No positive cash flow for from one to three years is typical in the restaurant business, he adds.

Is it cake frosting yet?

What are the biggest problems a gringo restaurateur faces in Rio de Janeiro?

  • Customers shy away from new foods; Brazilians eat crêpes and pasta, but have little experience with delights such as Sam’s mouthwatering blueberry pancakes or comforting macaroni-and-cheese
  • Employee turnover; the current low unemployment rate means training lots of chefs and waiters, only to have them move on
  • High payroll costs, due to taxes; “The burden is dramatic,” says Flowers. “And you pay income tax even if you’re losing money!”

Economists have long described and lamented the so-called “Brazil Cost“, which retards business vitality for everyone, not just foreigners. Steps have been taken to reduce this at different levels of government. But much remains to be done.

Meanwhile, revenue in the Gringo Café’s second year is up 15-20% from its first year. Rio’s high dining-out prices have actually helped business, as tourists and locals head away from prime venues on Avenida Visconde de Pirajá to find more affordable meals on back streets.

When Flowers began to dream of the Gringo Café, he looked for someone who could describe to him all the steps of the process of making the investment, getting a visa and setting up the business. Such a person didn’t exist, he discovered. Now he’s doing some consulting on the side for other dreamers. “You really have no way to know what [the business] is going to look like until you’re in it,” Flowers concludes — despite so much careful preparation. “You have to test and adjust.”

About Rio real

American journalist, writer, editor who's lived in Rio de Janeiro for 20 years.
This entry was posted in Brazil, Transformation of Rio de Janeiro / Transformação do Rio de Janeiro and tagged , , , . Bookmark the permalink.

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