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Risky Business

Jean-Paul Sartre called New York "the phantom city," where space "flows through the streets like a cold draught, separating the inhabitants of one side from those of the other."

Every day some of those inhabitants wake up and decide they are going to start a business, in some cases a restaurant or a bar to become a community of socialization, or a store to share what they have made with the rest of the world.

Then of course they have to go about making the business.

And then there are all the books written about business. The titles— like beating-the-odds-do-it-now-you-could-be-the-one— all sound alike. They go on and on about cash flow, cash thirst, shrinking gross margins, ballooning sales costs, managerial blindness. Some tell people how to make business-project spreadsheets with sections on expense control and preopening expense lists. They tell people the world is a jungle, to watch your back, and some get a little gloomy and say, by the way, the number of small businesses that survive five years is very small but it does not matter because you could be the choo-choo that could.

Following are the stories of three new businesses in which the owners probably know nothing of the statistics and have never read any of the books. In each case, the idea did not come because they were sitting around one day saying, hey, now that the city has rebounded from the sharp recession of l989­l992 and had the strongest private employment growth in 1998 in several decades, let's see how many ginger muffins we can sell. Nor were they paging through The Wall Street Journal, noticed the Dow was up, and said, let's open a store and sell four-inch-square pink handbags and make a killing. Nor was it because they read The Crisis in Global Capitalism.

It came out of something deeper, something that is very hard to quantify. They opened their businesses because they wanted to. For experts say, very few would start a small business based on any sort of rational spreadsheet calculation.

Thank God! The go-go dancer at Black Betty's is going to wear a nurse's costume. Now for sure everyone will come.

Bars and clubs are creatures of the night. Their whole job is to seduce people. To do so, they have to be cool. They also need thousands and thousands and thousands of dollars to come into existence.

Black Betty's, scheduled to open at 366 Metropolitan Avenue in Williamsburg later this month, has the coolness factor. The owners are the handsome boulevardiers of Bedford Avenue who know everyone in town.

As for the money, they have been doling out thousands every day for months, mostly from the savings of co-owner Bud Schmeling, 33, and partly from a silent investor. Schmeling's partner, Napoleon Napharoah, 25, had "no money." But Napharoah's connected. Anyway, money means roughly $4000 for the beer taps, $4000 for the hard liquor, $3000 for the sound system, more than $5200 for the liquor license, $2500 for the liquor

license expediter who deals with the community board, $15,000 for the security deposit for the kitchen equipment (they plan to serve food in a few months), $2000 for an accountant to keep the books. Then thousands more for the wood, the lighting, the paper spray-painted copper for the ceiling— for that Moroccan look.

"Oh here, eight dollars for lightbulbs," Schmeling said, sitting near piles of wood that will soon be a door or a stage. "Every so often I realize there's no turning back. Just 'cause you spent all this money, doesn't mean you can stop. I don't have any trust fund. There's no one behind me. I've been saving to open a space for five years. If this bombs, that's it."

"Listen," Napoleon said, "You gotta stay calm because your mental state has to be level or you freak out." Of course, no one thinks it will not make it. Even Schmeling. "Williamsburg has taken off so much in the last five years, you'd have to try really hard to screw up a business."

Long Island­born Schmeling, who has a masters in literature from Brooklyn College and a day job with the Consortium for Worker Education, teaching hospital and ladies' garment union workers, has bartended for seven years at Teddy's, a Williamsburg institution. Napharoah, a former barber who was raised in the neighborhood— his mother has a clothing boutique— for the past two years has been trying to open Juice Daddy at Bedford and North Fifth, which will serve mixtures of "whiskey and wheat grass," he said. "That is another venture."

As for Black Betty's, "The best thing we have going for us is our overhead. It's really low," Schmeling said. "Our rent is $2000 for 2000 square feet. Our landlord is paying for our water. That can get to be really expensive."  

"The landlord is an old-fashioned handshake guy," Napoleon said. "Pat Pescatore. He likes us."

"For some unknown reason," Schmeling said. "There were a lot of other people, more qualified, more money, better credentials than us. He wants us to make it. That's why we got lucky."

The space has a history. Up until the 1970s, Jimmy Nap ran a restaurant there, Schmeling said. The late James Napoli, ranked 31st on Fortune magazine's l986 power and influence list of the top 50 mafia leaders. Nap's place was called the HiWay.

Most recently the space was the Don Diego Restaurant. The owners left mysteriously in the night last year "with food still in the oven and glasses on the table. It was a Dominican beer joint," Napharoah said. "I had my eye on the space for two years. I was always hoping these guys would leave. I got the landlord's number from the federal marshall's paper on the door and traced him down. I was originally going to open with another investor. She didn't like the place 'cause it was too greasy. So I needed to meet someone with the same vision as me."

One night, Schmeling was getting an espresso to go at the L Cafe. "And I was sitting in my office space," Napharoah said. "I have a table in the corner. My office phone is the pay phone outside the Mexican restaurant."

"I'd been looking for a year for a space to open up," Schmeling said. The two started talking. "Napoleon took me over. I knew it was right. Central air, fully equipped kitchen, everything was here— tables, chairs, plates, glasses." Their friends are pitching in to build it and be the bartenders.

Schmeling and Napharoah decided on the name Black Betty's while pulling into the parking lot of the Home Depot on Northern Boulevard in Queens. "Those places give me an ulcer," Schmeling said. "But we were getting some BX cable and saw blades and we'd just been thinking about a name for months. There's a famous old blues song called Black Betty. Leadbelly did the original. We said the name out loud a couple of times. Then we nodded our heads. Black Betty was also the name for the car that used to take prisoners to work. The guy who drove the car was called Uncle Bud, so that kind of worked out."

"We named our corporation Dollar Yo Inc.," Schmeling said. "It's like when you shoot craps, yo means 11, it's a 15-to-one shot. It's a winner."

"In six months we should have recouped our investments. Now if $350,000 a year comes into the place, we're strictly guesstimating, and say we knock off half for our costs, that would leave $175,000. Then our investor gets a percentage. I'd say we'd make $60,000, $80,000 each. But we could be completely off. We might make zero."

"I keep telling him," Napharoah said, " 'How do you eat an elephant? A little at a time.' "

If you ask Pete and Dave about their contractor, their eyes roll. But that situation was just the first of the ups and downs experienced by brothers Pete Adrian, 28, and Dave Ethan, 30, owners of the Grey Dog's Coffee on Carmine Street. There were other struggles. But two years later, The Grey Dog has lines for Saturday and Sunday brunch, longer than at "a certain other desirable breakfast spot in the area." In l999, Zagat Survey rated them 10th in the "Top 100 Bangs for the Buck."

Which was a lucky thing. "All the restaurant money came from our life savings," said Adrian. "Instead of buying a car at 18, we decided to hold on to the money."

Their experience in restaurant ownership was not grounded in the family. Their mother runs a coat-hanger factory in New Jersey. "Growing up in Rockland County, all we did was play Whiffle ball every day, forever," Ethan said. But they had worked as waiters in recent years, supplementing their previous professions— Adrian as a commercial photographer and Ethan as an actor, though he says, "When I retired from acting, nobody knew."

A lot of strategy went into finding a location— it took about a week, they said. "Our first choice was to open a café up by Columbia but they wanted $17,000 a month for a corner space at Broadway and 112th," Adrian said. "Broadway real estate is very expensive no matter what part of the city you're in, but especially around Columbia. The university owns a lot of the realty up there and they just won't rent to anybody. We couldn't even get into any of their places. They just wanted a Gap to open up."

Adrian found their Carmine Street, $5000-a-month, 3500-square-foot space— plus 3500 more in the basement— with a 10-year lease by walking around the city with a notepad.  

"It was the first place I saw, really prime, really cute, no Starbucks nearby," Adrian said. "Though I would welcome them to open next to us just to see how poorly they would do." Like lions, Adrian and Ethan are not afraid to take on the competition. "A lot of restaurants have gone out of business on this street. One nearby is the third that's opened since we've been here. We got lucky. Now I'd be nervous to open somewhere else."

The 35-seat, 6:30 a.m.­to-midnight restaurant looks and feels like a Joni Mitchell song— ketchup bottles, hanging plants, and brick walls. Adrian's girlfriend makes the ginger cookies that are shaped like dog biscuits. The bathroom has a picket fence.

"This place just kind of grew on its own," Adrian said. "Because the place had a kitchen, we made the immediate decision that we'd serve food. We were just going to serve coffee. Then as soon as we opened, a guy asked for an omelette. Dave said, 'Oh, I can do an omelette.' "

"Listen to the people and they'll tell you what they want," Ethan said.

Now they serve, among other things, wine, Irish oatmeal, and teriyaki cheese steak, depending on the time of day. "Now we have Mike and a whole bunch of cooks," Adrian said. "Mike's right arm is worth about $40,000 a year to us. Right now we don't have enough money to buy a $4700 Hobart mixer for stirring the cookie batter. My Hobart right now is Mike's right arm. Mike's gigantic. I can't reveal Mike's salary but it's less than the Hobart."

Adrian and Ethan got an education while shopping in the restaurant supply stores on the Bowery. "There we were with our clipboard," Adrian said. "We said, 'Oh boy, we can get everything we need for $20,000.' Well, why don't you give a bandit $200 in cash? It's like an open market, no holds barred. Everything comes with no warranty or a 30-day warranty, which is like no warranty."

"When spring came, we needed an ice machine," Ethan said. "We got the most affordable. Well, the one we bought didn't make any ice. It chilled other people's ice. So we were always having to buy ice. We make 35 iced coffees an hour! Do you know how much ice we need? We traded our ice machine to the exterminator for free service.

"I spend at least one day a week down on the Bowery now. I've established a relationship with some of them so now I don't feel nauseous every time I pay for something."

Adrian and Ethan estimated that about $40,000 of their $130,000 start-up costs went to buying equipment. "The rest covered the $25,000 five-month rent deposit, a $3000 deposit to Con Ed— we remember the day we got that letter— and about $7000-a-year insurance."

Restaurants require daily outflows of cash much greater than those of, say, a gift shop. "And at any one time, there's $3000 worth of produce, dry goods, sitting in the basement," Ethan said. Stocking canned goods alone can run $1500. "Food is 30 percent of the gross. About 25 percent goes to salaries." The restaurant currently has at least nine employees.

Adrian and Ethan could not say how much the restaurant takes in but they estimated that neither brother "is making more than $40,000 a year in salaries"— and they did not take much salary for the first nine or 10 months. "We're probably doing so well because we probably make the least amount of money of any [restaurant] owners in the city," Ethan said. "That's because we're constantly reinvesting into the business," Adrian said. "We're more interested in building something that's going to be extremely valuable one day. There are times we invest for the business in the stock market, put a couple of thousand in Microsoft. A lot of businesses do this. It's like a 401(k) for the business."

They said they do not plan on opening up other restaurants. They have begun catering. "It would be nice to make over $100,000 a year each," Adrian said. "It all depends how hard we're willing to work. And how hard our girlfriends are willing to work." Both girlfriends work for not-for-profit organizations. "Most of our days off, we're waiting for 19-year-olds to show up to wash the dishes. If they don't, we do. We love this but it makes us feel very old."

They will never forget December. "We made $5000!" The champagne flowed. Then came cold, bitter January.

For 22 days, the rings and bracelets and necklaces sat sparkling in their cases, alone, ignored. For the little store at 188 Orchard Street, the 300-square-foot store that is smaller than the owners' apartment, time froze and "nobody bought a thing."  

Owners Jelena Behrend, 31, and Maria Luisa Mosquera, 29, who opened Oxygène Collectif in November, shrug off climate concerns. Behrend, who learned to forge gold and silver from gypsies in her native Serbia, knows that for a jewelry store to be successful, it has to be beautiful, like a movie star, and $10,000 months will follow. "I have a very good product," she said, speaking of her sterling rings that run $60 to $250 and necklaces from $200 to $1600. "You also have to develop your own clientele. You cannot depend on people walking by."

Even so, the Orchard Street location is good, in good weather. "Of course, we wouldn't want to be stuck in the middle of nowhere," said Mosquera, a Miami-born Wilhelmina model. "We opened here because every couple of weeks someone is renting another space, someone of our genre."

"But the street is not Soho yet," Behrend said. "There are lots and lots of people we will never get."

Orchard Street, the Lower East Side's main retail artery, went from being a street of pushcarts in the 1800s to a center of discount clothing to most recently a street of fabric stores, leather jackets, and socks. Now there are bars like Kush with its golden Moroccan light and stores with Eero Saarinen womb chairs and French T-shirts that cost hundreds of dollars.

There is a changing aggregation cluster. Just ask Oxygène Collectif's neighbor, J. Hauptman ("You name it, I sell it"), who sells boxer shorts in thin cardboard boxes piled high on old wooden shelves— because "underwear, that's how you get people in the store!" His father opened the store in 1959. Ask Hauptman how business is. "Terrible. It's a nighttime business now. People who come at night aren't interested in Fruit of the Loom."

So what is good for Oxygène Collectif is not good for Hauptman.

"He's so great. I shovel his snow," Behrend said.

In Behrend's favor are her low costs. She needs about $2200 a month to cover the $1800 rent, $100 electricity, $200 phone bill, and the rest for "flowers, bonbons, monthly fees to the bank for accepting credit cards."

Behrend and Mosquera, now roommates, also have a wholesale business, selling their silver and gold at Selima Optique and Bond 07. "If I was just counting on store money," Behrend said, "I could kiss everything goodbye."

Behrend and Mosquera invested $30,000 of their own money to start the store, she said. "We did everything ourselves, built our own displays, wired our own electricity. I used to do this kind of thing to survive."

"When I arrived in the States 10 years ago, I arrived with $70 and I didn't speak any English. I cleaned houses, anything.

"We always worry, 'Are we going to be able to pay the next rent? The phone bill?' We do not have a home phone. . . . I haven't bought clothes in, I don't know when. You see, this store is our baby. You have two neurotic women obsessing over it like crazy. We clean and sweep and scrub 24 hours a day."

She explained the name: "Oxygen is part of the air, very necessary to breathe, to live. As for the Collectif, we have a great time, breathing together. We couldn't spend five minutes without each other."

Or away from the store. The night Behrend could not pull the gate down, "I slept in the store. I was afraid we would be robbed."


The Small Picture

As it turns out, small business is big. The Department of Labor's Office of Economic Research reported that 90 percent of all businesses have fewer than 20 employees.

"It is getting easier for people to get into business," said Bruce Phillips, a Department of Labor analyst. "The price of going into business, the cost of technology— faxes, computers— is going down. It is easier to get money than ever before. American Express will generally give you a credit card with a $25,000 limit so if you need to go out and buy that griller, you do."

Phillips also reported that "women are starting businesses twice as fast as men, roughly. That's continued for precisely 10 years."

In New York's five boroughs, in 1997, there were 181,774 businesses with 19 or fewer employees, according to figures from the New York State Department of Labor, based on unemployment insurance tax records. In 1985 (the earliest figure available), there were 170,508.

In 1997, there were 11,459 eating and drinking establishments in New York City; in 1985, there were 10,675.

"The boulevardiers of Bedford Avenue," Bud Schmeling and Napoleon Napharoah of Black Betty's

Dave Ethan and Pete Adrian serve up doggone good coffee on Carmine Street.  

Photographs by Regina Monfort


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