How one Argentinian immigrant entrepreneur “Americanized” a much-loved staple from home—and created a new market in the U.S.
Ricardo Rezk moved to New York City from his native Buenos Aires 22 years ago to study the clarinet. But through a series of twists and turns, Rezk changed his focus: starting a company producing low-fat, organic empanadas. The seven-year-old firm, called Rico M. Panada, is now poised for national expansion with a host of stores ready to sell his product.
Here’s his story.
New York, New Life
In Buenos Aires, Rezk attended a music conservatory to study the clarinet. When the New York Philharmonic arrived on tour in the late 1980s, Rezk took a lesson with the orchestra’s principal clarinetist. He was so inspired by the lesson that he applied for admission to the New School in New York City, where the musician taught. Rezk was accepted and came to New York in 1990 to study.
In 1993 he earned his MA and was hired to play for the New World Symphony. It was a great opportunity. After several years however, he was ready for a change. As a musician “you live a very secluded life,” he says. Tired of “being alone,” he decided to change careers. He became a guide leading tours.
Inspiration on the No. 7
Rezk worked as a tour guide until an incident on a routine commute changed his life again. He was on the #7 subway train traveling from Queens to Times Square. He saw passengers on the train trying to eat pizza and hamburgers. Between battling the swaying train, and trying to eat, most of the passengers’ lunch either ended up on their shirt fronts or on the floor. The thought occurred to Rezk: If they were eating empanadas, they wouldn’t be making such a mess. And if the empanadas were baked, not fried, the meal would be a lot healthier, too. “I thought, That’s what I have to do. I have to make an American empanada,” he says. “It was a revelation.”
“I thought, That’s what I have to do. I have to make an American empanada,” he says. “It was a revelation.”
Training To Be an Entrepreneur
Rezk kept his job as a tour guide for another year. But during that time he threw himself into learning the U.S. fast food industry. In the process, he came to understand that he had a huge gap in his background: He knew nothing about business.
Rezk looked around for a solution. He found out that many American colleges and universities offer courses on entrepreneurship, both on a full-time and part-time basis. Rezk applied to Baruch College in New York. For the next two years, Rezk took every course he could that was likely to build the knowledge necessary to launch his business, from accounting to marketing.
Lessons from a Business Plan Competition
While he was at Baruch, Rezk decided to test his business idea. He entered the Baruch College Entrepreneurship Competition and was placed among the winners. The experience was invaluable in a couple of ways. First, having to write a business plan gave him the discipline to focus and plan out every aspect of his business. Second, the feedback and critiques he received from faculty proved to be critical in overcoming obstacles down the road.
Making the “American Empanada”
Rezk knew that a traditional empanada might not sell in the United States. For one thing, empanadas often were fried, and that wouldn’t appeal to health-conscious Americans. And it was likely that the recipes favored in Argentina might not go over well in the U.S.
To test his ideas, Rezk started holding focus groups for groups of eight to 10 participants at Baruch, moderated by a classmate who was president of the marketing club. The first goal was merely to find out whether people were familiar with what empanadas were. Most participants recognized the food; that meant Rezk at least knew he could use the word in the name of the product.
But volunteers also then tried out a variety of empanadas that Rezk made. It turned out that some recipes like the traditional chili or tuna empanadas loved by Argentinians, bombed. Rezk kept experimenting with taste combinations and finally came up with his first “American Empanada”: an all natural, low fat, organic chicken pot pie empanada. It was a hit.
After graduation, Rezk worked for a year at a Small Business Development Center (SBDC) based out of Baruch, fine-tuning his plan in the evenings, looking for the right equipment and space. His plan was to develop a franchisor network of small retail outlets that would sell empanadas made in a central bakery. When Rezk found the perfect space for his bakery, he figured he was home free. He planned to fund himself with money from the sale of his house and savings he’d built up during his time as a tour guide until the business got going.
Hitting a Roadblock and Changing the Business Plan
The trouble was he couldn’t locate appropriate spaces for the retail outlets. His requirements were for something no bigger than 400 square feet, and it was almost impossible to find sites with the right size that could be used to sell food or were located in the high-traffic areas.
Rezk knew he had to find a solution. In short order, he remembered the advice of one of the business plan judges—concentrate on what you do best, make your product, and outsource the retail end to the experts.
Concentrate on what you do best, make your product, and outsource the retail end to the experts.
Specifically for Rezk, this meant focusing on researching and developing recipes that would appeal to American consumers, making the product as efficiently as possible and then selling the product directly to delis and gourmet stores. He reasoned that the stores already had established retail space, staff, customers, marketing budgets and foot traffic. Instead of going through the expense and complication of setting up a retail network to compete with them, why not keep the business simple, costs low and use what’s already there?
Rezk decided to change his business model.
The Conversation of “Selling”
Rezk now had to go out and start generating some revenue.
He approached it in a systematic way. His first step was to compile a prospect list of whole-food delicatessens and gourmet stores in Manhattan. Once done, he got his samples together and started knocking on doors.
His first sales call was to a local deli near his apartment . He decided to walk in and make a cold sales call. Unsure even of whom to talk to, Rezk asked someone behind the counter if he could see the boss. The manager appeared, and as Rezk explains it, “I didn’t really give a sales pitch. It was more of a conversation where I found out what the store manager’s needs and challenges were, and how my product can help him.”
He explained that:
— His empanadas were a healthy, organic baked snack that would appeal to the store’s health-conscious clientele and would fit in with the other products in the store.
— His empanadas were specifically designed for American tastes.
— They were a convenient, “easy to eat” fast food.
— The store’s busy staff wouldn’t be burdened by spending time preparing them—all the empanadas needed was to be reheated.
Rezk walked out of the store with his first order.
After getting his products in a handful of locations, delis reported sales but also a couple of unexpected developments. Rather than eating the empanadas on the go, customers were increasingly asking for them frozen so that they could take them home and reheat them. In addition when Rezk visited the stores he often wasn’t pleased with how they were displaying and serving the empanadas. “Sometimes they were horrible,” he says.
Expanding into the home market
Rather than see these issues as setbacks, Rezk realized that they might lead to a larger market opportunity. Instead of just relying on the delicatessen-counter market, maybe he could tap into the much larger home food market.
In order to do so, Rezk realized that he had to upgrade his packaging and reposition his product in order to appeal to supermarket buyers. He invested in redesigning the packaging (see image on left) going from bags to boxes and heavily emphasized his empanada’s organic, whole food, low fat benefits.
The second step was to start selling to supermarkets. Again, Rezk did his research and compiled a short list of top prospects in New York—supermarkets and co-ops that emphasized local, environmentally friendly foods. His first call and first sale was to a Brooklyn food co-op.
Soon after, Rezk paid a visit to a Whole Foods store in Manhattan. There he struck up a conversation with a young man sweeping the floor. Turned out, the sweeper was the supermarket’s frozen-food buyer, who was helping out because the store was short-staffed. Thanks to that conversation, Rezk’s empanadas were also picked up by Whole Foods in the New York region. By 2007, he’d started selling to more than 50 stores in the area.
Growing the business
By 2009, Rezk started getting calls from supermarkets all over the country asking to stock his empanadas. But he’d reached a roadblock: He couldn’t store enough ingredients in his current refrigerator to ramp up production. Rezk approached several banks about getting a $1.2 million loan to finance a move from his 1,500-square-foot location to one three times the size, but got turned down. Not willing to give up, he now has his eye on the perfect location and is in the process of raising money from alternative lenders, such as small business development centers, to fund the move.
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In the meantime, Rezk has his hands full meeting orders from Whole Foods, as well as Key Food, gourmet markets, and other supermarket chains in the New York area. “We’re poised to grow exponentially,” says Rezk. “This is a product whose time has come in the U.S.”