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How can a small shop survive in Manhattan,NY with a rent of  min 5k per month ? i just can't figure it out ...

https://i.ibb.co/rfXsm9p/biz11.png


Let's take this example, 2 fast foods next to each other

Both sell similar products at avg product price of 5 usd

Both pay rent 5000 usd month


5000 / 5 = 1000 customers monthly needed just to pay rent ,not including utilities ,salaries,stock ,advertising etc ...How do you think they survive and make a profit ?

It's one of the largest and densest cities in the world. The obvious answer is they have incredibly high transaction volume. The fast food restaurants you're looking at probably deal with several hundred customers a day, or at least they did before the pandemic.

High overheads like rent are also factored into the prices. A burger that costs you $3 out in the suburbs could cost you $8 in Manhattan. Everything costs more in the city.

In some places, some will use the relatively expensive foods or things as an opportunity to get the cheap ones down to the location and sell on things like "motorized hawkers" or cheap stores (probably in special places reserved for them). I guess an expensive city will make provision for stuff like that for people who wish to eat/drink cheap.
. I usually get surprised when I find cheap regular food being sold so expensive in a city. I hardly buy them especially if they are of thesame quality or size. I look for the cheap ones

Bro, the reason is very simple! The businesses are getting enough number of customers which make it up for them. Every new business starts with a target customer base and if they can successfully attract the targeted customer base to their business, they sustain or otherwise they stop operating. It's simple!

From you example, I will remove Subway because they are a global brand and then don't operate as per a stand alone business. Subway usually operates state wise and look at the profitability accordingly, unlike standalone shops. But if you see that standalone shops are surviving with 5k rent, they definitely get such volume to sustain.

If the location is a densely populated area with lots of customers eating out then both businesses can survive, but if not, one may have to diversify or improve. Selling the exact same product with a neighboring store means competition.

•Rebranding your store: improving customer service, reaching out to a new customer base (such as accepting Bitcoin payments to attract crypto enthusiasts)
•Introducing new products: upgrading your recipe or introducing new items
•Leveraging on the internet to attract more customers: rather than waiting for customers to come to you, you can take your business to them, using; SEM and SEO tools.
These are just some of the ways one can keep such a business thriving.

Perfect suggestions, businesses are like a gamble where there is a possibility of winning but also a chance of losing. However, it is a risk that every business person takes for him to gain profit. Even top companies they experience the same as a matter of fact, small businesses may find it more difficult on how to gain profit out of the expenses.

The first thing that a business person would do before putting up a business in a certain location is conducting an ocular and checking the marketability of the area for their product before pushing with the plan aside for other promotion and marketing strategies that are already waiting to be executed.

That's definitely part of it.  And I would assume for small business owners, they rely a lot on business loans in addition to cash flow.  

I haven't been to NYC in quite a few years, but I recall being amazed at how many little mom-and-pop stores there were, selling everything from music to antiques to any number of things.  My guess is that those kinds of shops also have some kind of online presence and don't rely exclusively on foot traffic sales.

There was a member who was going to start up some kind of crypto arcade/coffee shop thing in NYC a few months ago.  I wonder what happened to him and his idea?

Edit:  OP gets 1 merit for showing a pic of the city, which makes me want to take a trip back there one of these days.

I don't think it's right to underestimate the capacity of that "small shop" you are talking about. If it stays in that rented space for a long time surely means it's profitable. No one is stupid enough to continually invest in something that loses in the long term, that's just outrageous.

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Being in a coffee shop or arcade place that is crypto themed would be fun. Not a bad venture, I guess?

You make it sound like a lot when in fact it's pretty low

1000 customers a month means 33 customers per day or two customers per hour or one customer every 30 minutes. For example, the largest McDonalds here has on average 2k customers a day, with the smallest one only 600, multiply this by the 4-5 euro average order and you're going to realize 5k is nothing.

The demand is too high I guess. They wouldn't last for a year if they cant get much in return. The rent was high due to the location and probably they are selling much more than $10K a month.

Starting a business requires a good location. A place with expensive rent means that the location is good enough for a business. Do you think shop owners would agree to pay expensive rent if they are not earning enough?

I may not be familiar with the place and the shops in that place, but maybe there's quite a lot of various shops there where people love to go shopping.  They won't stay there if they are not earning there. It only means that their revenues can handle all of their expenses (rent, utilities, and salaries). And that's how business works. The more people go to that place, the higher its demand for business renting. So, of course, the owner can increase the price of renting there.

I don't think I need to do math or any computations but that's how it works. Even in malls, rent expense there is expensive because it's a good place where people go to spend their money. Same thing for this place.

Does that particular place really cost $5k a month? Seems excessive for 125th Ave (Harlem?).

Having said that, two locations a block away from each other can have vastly different costs. It's all about foot traffic. If the rent is $5k then it means there's a demand for it and it's worth that much for the business occupying it.

I don't know when this picture was taken, but I'm honestly amazed by the amount of garbage visible on the sidewalk and the road, maybe the city's cleanup services were on strike or is that something normal for NY? To me personally this does not look touristically attractive...

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You have already received your answer, but I would add that many such shops actually serve as a screen for some other illegal business. It's about the USA after all, watch a mafia movie and it will be clearer to you ;)

Well, there is two reasons why they can, the average price could be 5 dollars, but they usually sell extra that would help them.

For example a burger could be 5 bucks, there are some people who will get chips with it, and get drinks with it, and there will even be people who will get other stuff as well (nuggets and so forth) which means that place will not need remotely to 1000 number at all.

That is what I imagined before I talked with a person who owned a mcdonalds at a place there was basically nothing around, not really many people even went there at all neither, so why would people pay 10 million dollars for a mcdonalds franchise when there are 10 people who go there per day? Well they do house calls as well, so people call that mcdonalds and ask for stuff.

Basically all of these places make money from the extra and not just the fast food main item.

Very easily (well till now).
It's all about the numbers. There are 1.6 million people living in 23 Square miles. More once you factor in the people who commute to work there.

There are a dozen+ STATES that do not have that many people. The question really is how do stores in those unpopulated places survive.
How about this fun (pre covid) statistic...

Penn Station the main train station in NYC has (had...) over 650,000 people going through it per day.

That is more then the population of Wyoming or Vermont. How much would you pay to have that many eyes on your store per day? And why would you want to open up a store in a place like Wyoming when nobody is around to shop there.

-Dave

You can look it up on Google street view - November 2019.

I don't think many tourists are visiting that particular location and in general people don't go to NYC to admire clean streets. You can't see the trash from the top of Empire State Building.

Apart from all the reasons mentioned above on how a small shop can survive with this kind of rent I feel there has been one thing left out:


Many shops don't.


Maybe it has always been that way but I feel that especially in the last few years there have been many articles and opinion pieces on this matter:
https://www.theguardian.com/business/2017/dec/24/new-york-retail-shops-amazon-rent
https://www.citylab.com/life/2019/08/vacant-storefront-tracker-law-nyc-retail-rent-control/595294/
https://www.theatlantic.com/ideas/archive/2018/10/new-york-retail-vacancy/572911/

Additionally, just because you see a store renting a place doesn't mean they are doing well. Maybe next year they'll be gone again. There's a bit of survivorship bias going on in that you'll mostly remember stores that stick around, not the ones that have to close after a short run.


Edit: While the stores in OP's screenshot have stuck around for the full available Streetview timeline (2009 - 2019) you can see a bit of fluctuation on the opposite side of the street (Referring to the locations of the curry place and the deli right next to it, also the nail saloon or whatever that was being replaced by Chase some time after 2013).

Even if it is a global brand people purchase the franchise and run the business, they need to set up everything and if they are under loss they will be forced to shut down.

@OP In a normal situation all these shops are able to survive but the lock down and the Corona scare will force many business to close down as when can we expect people going out in groups and dinning, it might take several months and it is impossible for everyone to sustain in a situation like this.

If they get orders for home delivery they can survive if they are getting the sufficient orders to sustain and hopefully the government will intervene in helping these small businesses to survive.

Pipdips? https://bitcointalk.org/index.php?topic=5185072

Something tells me it never got off the ground. :D


They operate under a franchise model. Each shop does operate as a standalone business because they are independently owned by a franchisee. It's a struggling brand too. (https://www.washingtonpost.com/news/business/wp/2018/04/26/its-just-not-what-people-want-anymore-subway-to-close-hundreds-of-u-s-stores/) I wouldn't want to be slinging deli meat in today's restaurant market.

You underestimate the affinity of the people in dense cities to flock to these shops out of habit and/or curiosity on what's new on their offerings.

It's mostly consumer psychology that drives these owners to set up shop on small spaces albeit the ridiculous prices for rent. Also, property owners would not make the prices of the rent high if there isn't enough foot traffic/public activity going on around those areas. And I'm pretty sure the owners of these small shops had their risks assessed thoroughly before releasing the moolah on this gamble which we call business.

The fact remains the same though, a huge portion of these shops/businesses are set to fail even if they got off the ground pretty quickly. The remaining ones that you see either got that great formula of businesses and consumer wants/needs plus good management on their stores/business.

This what first came into my mind after reading op. 1000 custmer a day (just for rent cost) are not easy to be served in a small square with a competitor neighbor even by working 24/7. 5$ fixed price for any order can't handle all the charges of a "called" profitable business.
Both fast food shops should have various methods to get max extra earning, unless the projects are just a mirror to lunder other activities. It's obvious that they can survive during crisis like the actual one.

Note that some big companies open food/drink shops near to them to primarly serve their stuff and custmers. So not to care so much about rent as they are not opened to make profit.

HIGH DEMAND!

This is just a simple or basic law of supply and demand.You've been puzzled on why they did sustain? of course there are lots of people who do buy out into those stores.
even the rent is outrageous if there are lots of people goes to the store then it will surely compensate overall.Its just amazing on how they did but one of the reason is
the store location believing that spot do have lots of people residing there into that city which is evident if we do try to look at the image.

$ 5,000 a month divided by $ 5 for a hamburger = 1,000 hamburgers, which we divide by another 30 days in a month, and we get 33.3 hamburgers to be sold to cover the rent. This is not so much, given the huge number of people who prefer to eat on the go because of employment.

Just as a side note although some places, like the ones shown in the picture are somewhat difficult to move there are a lot of retail places that can close Friday afternoon in one location and be open Monday AM in another.

Had a friend had a clothing store that she did that with. Always went month to month rental. Went to landlords and basically told them what she was going to pay. Probably 25% of asking. All she asked for was 30 days + the remainder of the month notice if they needed her to move out because a "real" renter was moving in. Because, no matter how busy retail was between 1995 and 2018 there was always space in Manhattan to be had for cheap even in the very expensive areas. Landlords also know it's easier to rent an occupied space then an empty one. At the end of the day it's just getting her staff in all weekend to box up all the clothing and stuff. Put all the boxes and the shelves in a van drive someplace else and unpack and repeat the circle of filling the van / emptying the van all weekend till they were done. Probably did it more then ten times in 23 years.

Always made a decent amount of money. Moved out to southern California after the 2018 Christmas season because she could not take a cold winters anymore. Doing the same thing there on a smaller scale. No idea if it will work on the other coast.

But yeah just because they are ASKING $9500 a month for a space does not mean anyone is paying it.

Stay safe.

-Dave

That's New York this is the place that never sleeps and there are a lot of people from all walks of life that lives there if the food is good and service is great it will create a buzz and if the place has a good location, there will always new customers coming in, I don't think the shop will go out of business, the landlord or owner of the place will give them consideration during this pandemic.

The stores alongside it also survive, they all must be in the strategic location to have gotten people passing by that eventually buy some of their products.  They wouldn't be able to make it if the stores nearby sells the same products. If besides the fast food stores lies beside a burger king, the two fast food would likely have same problem.

You know actually there is an economy strategy which requires competing companies locate their shops equally in free spaces.
but thats not realistic at all, so there is an opposite one - you collapse all shops in one good place where a lot of people are and they decide where to go by themselves
this strategy works pretty much all around the world and most of the shops are profiting

Bro the rent won't be that high if the shops weren't able to afford it. We always need to put into consideration about "location" and since Manhattan New York is one of the most densest cities in the world I doubt that they don't even earn any profit from it at all except right now where the pandemic is actually causing a lot of trouble I know these business owners aren't really having trouble paying their rent because they can. Next time you are there and when all things clear out maybe dedicate a month to see if they surpass 1,000 customers in a month to see if they are able to earn any profit, and that is assuming that these customers are just purchasing one 5$ meal.

Simply because they're earning a good profit which is higher than their expenses. We can't base the earnings of business on the size of their establishment but it's how they run it. A good business strategy, hard work plus a trusted product with a higher demand could provide an assurance of gaining a better monthly profit which is enough to sustain their rent and other expenses.

Yes. A business will only gain higher profits if it passes the taste of the consumers and not basically on the size of the business site. So it's really obvious that this small shop has made a lot of customers per day which will target the monthly rental or even exceeds the amount.

When did you take that picture? is it before or after the pandemic, if it's on a subway in Newyork, it should have a lot of people walking and gathering, New York is one of the places that don't sleep, that $5000 rent is nothing if they have good foods and a steady client, food business in New York can always survive, because of the huge number of people going in and out.

Its pretty simple. They wouldn't survive if they didn't have the customers. Also, $5 is very much on the low side for a food purchase in N as is $5000 rent for that matter. Places that arent busy go under regularly. If you could see a time lapse of also any set of business units in any major city over the course of 20 or 30 years you would see just how common that is.

If the shop is located where millions of people crossing there everyday the paying 5K would be worth it and no one is going to pay such huge amount for rent if they are not making enough profits.I guess that 5K would be the profits for those shops in just one or two days so all the remaining profits will be the owner's.