Express Success

Brian Cardinale and Jim Matzke's online seafood business was just a few months old when a whale of the restaurant business came calling last year. The recession kept them from capsizing.

Brian Cardinale was sitting at his computer last summer when a surprise email popped up in his inbox.

It was a message from McCormick & Schmick, the national chain of upscale seafood restaurants. Restaurant executives had shopped anonymously for seafood online and liked what they got from Cardinale's company, Express
Fresh Seafood in Naples. The food was fresh and it was carefully packed with gel packs inside special Styrofoam containers.

For Cardinale, 40, and his business partner and cousin, Jim Matzke, 26, it was quick validation for the company they launched in May 2008. When they were creating their business plan, they knew the competition was sloppy and their quality was suspect. Some fish they ordered even came wrapped in newspaper on bags of melted ice.

Joe Taylor came to the same conclusion. He's the financial analyst and project manager for McCormick & Schmick's efforts to launch an online store. Surprisingly, he says, there are only a half dozen online seafood stores and most of them do a poor job of packaging and shipping. Taylor found Express Fresh Seafood using a Google search.

McCormick & Schmick is a big player in the seafood business. It operates 92 upscale restaurants across the country and Canada and its stock is publicly traded. Because its main focus is operating restaurants, it was looking for a company like Express Fresh Seafood to fulfill its online orders.

But demand started slowing just as both firms were launching their online stores. The reason is simple: People don't have as much money to spend on seafood and steaks because of the economic downturn. Research by Epsilon
Targeting showed a 30% drop in annual online sales of meats and seafood in 2008.

However, that hasn't stopped McCormick & Schmick and other restaurant chains and food retailers such as Legal Sea Foods, Morton's Steakhouse and Omaha Steaks from developing Web-based stores. Cardinale is discussing agreements with others, including Bonefish Grill, Nobu Sushi and Williams Sonoma. Despite the downturn in consumer spending, online sales are a great source of new income when restaurants aren't as full as they used to be.

Cardinale and Matzke run a lean operation out of a small warehouse and office in east Naples. They're betting that people will spend more on at-home luxuries like fresh seafood because they want a break from scrimping all year.
“People are just sick of living in a recession,” Cardinale says. “It's just a gut feeling.”

Leaving paradise
As the former manager of Paradise Seafood on Marco Island, Matzke knew there was demand for shipped seafood. That's because he did that for customers of the island retail store, many of whom were part-time northern residents who wanted the fresh taste while they were away.

Matzke tried in vain to persuade the owners of Paradise Seafood to start a seafood-shipping business. “Nobody would listen to me,” he says. “They didn't grasp it.”

So in October 2007, while in Michigan for his father's funeral, Matzke and cousin Cardinale made plans to start Express Fresh Seafood. At the time, Cardinale was working for automotive-research group R.L. Polk, advising media companies on how to attract more advertising from car companies.

Both media and automotive industries were struggling and Cardinale had an urge to satisfy his entrepreneurial itch. “I always had a dream of owning restaurants,” he recalls.

Cardinale quit his well-paying job in Michigan and moved to Naples, settling in a relative's home here. He and Matzke pooled their savings and started developing the Express Fresh Seafood Web site and leased space in a small industrial park in east Naples.

Collier's government roadblocks
Initially, Cardinale and Matzke invested $50,000 in the business. “We didn't even go looking for outside investors,” Cardinale says.

But costs started to pile up quickly. One reason: Collier County's notoriously difficult permitting process delayed their startup by two months.

Building inspectors demanded special plumbing work and a flippant fire inspector walked out without explaining how to fix a minor problem. “It really was so frustrating,” says Matzke, echoing what many business owners complain is an anti-business attitude in Naples and Collier County government.

The pair hurried to install food-preparation systems and leased giant refrigerators and walk-in freezers. But every day that permitting officials denied their occupancy was another day of lost sales.

Cardinale and Matzke had hoped to launch their business in March 2008, but government-permitting delays forced them to push it back two months to May. Although they had set aside $50,000 for start-up costs, the extra demands by local government bureaucrats pushed that by “a couple multiples,” Cardinale says.

Building the site
They didn't need bureaucratic headaches. Two of their biggest challenges included creating an affordable and elegant e-commerce payment system and figuring out shipping costs with FedEx.

Cardinale and Matzke wanted their Web site to appear professional, so they avoided services like Paypal, a credit-card payment service for people to sell goods on auction sites and small Web sites. “We wanted it to look good,” Cardinale says.

But the software they bought routinely malfunctioned in their tests. Eventually, the entrepreneurs got half their money back, but it didn't make up for the aggravation.

The other challenge was how much to charge for shipping. Cardinale and Matzke eventually figured that it would be easier to charge a flat shipping rate of $45 than to customize a shipping rate for each customer. That's because a customer in California would pay a lot more than one in Florida. Evening out the payments meant they could expand their geographic market further.

With a flat rate, a California customer pays a little less and a Florida customer pays a little more than what FedEx charges Express Fresh Seafood. “We love Florida orders,” Cardinale says.

Managing the downturn
With permits in hand, a well-designed e-commerce site and shipping costs figured out, Cardinale and Matzke launched their site in May 2008. The company works with three wholesale distributors who supply them with restaurant-grade fish.

But there's no question that the top-shelf seafood combined with the $45 shipping fee and $9.99 handling fee makes any purchase costly. “The timing of the economic crash certainly wasn't good,” Cardinale says.

Although most of its 3,000 customers are older, educated people whose annual household incomes exceed $100,000, many cut back on their purchases. One customer who ordered once a week cut back to once a month.

So the entrepreneurs started offering frozen seafood, which can cost as much as $8 a pound less than fresh. “People are extremely money conscious,” Cardinale says.

But the economic downturn had one silver lining: their launch with McCormick & Schmick late last year went smoothly because it was more subdued than they expected.

While they decline to cite financial details, Express Fresh Seafood averages about 10 orders a day and McCormick & Schmick orders total five to 15 per day. Matzke says Express Fresh Seafood can easily handle four times that amount per day. “It's all about time management,” he says.

But Cardinale says he believes the holiday season that's approaching will be better than last year. “We're projecting to be profitable this holiday season,” he says. “People are so over scaling back.”

Old school goes new school

While McCormick & Schmick's restaurants have been around for nearly 40 years, the company picked a small startup in Naples to supply it with seafood for its online store.

“I was looking for somebody who would take on this project as an entrepreneur,” says Joe Taylor, financial analyst and project manager for the restaurant chain's online efforts.

Taylor says he picked Brian Cardinale and Jim Matzke's newly formed company, Express Fresh Seafood in Naples, because the entrepreneurs were eager to cooperate with the restaurant chain. “For me, I almost preferred that they were a young company because they'd be willing to grow with us,” Taylor says.

For example, Taylor says Express Fresh Seafood was receptive to the idea of making crab cakes and stuffed salmon, something a more established seafood supplier might not be willing to do itself.

Taylor says he's not worried that Express Fresh Seafood is too small to grow if orders start pouring in. “They're capable of responding to any kind of push we'd experience this year,” Taylor says. Cardinale says there's room to expand in the industrial buildings where they are located and they can hire extra local people they know who have experienced packing seafood.

Taylor and McCormick & Schmick Vice President of Culinary Development Bill King visited Express Fresh Seafood's facilities and suppliers last year while overseeing the chain's newest restaurant in Naples. “We could tell it was very new, but they made up for that by being enthusiastic and flexible,” Taylor says.

McCormick & Schmick collects money from customers off its own Web sites and sends the orders to Express Fresh Seafood.

Once a month or more often in season, Express Fresh Seafood bills the restaurant chain for filling those orders.

Although Cardinale declines to cite revenue figures, about half of the company's sales come from the restaurant chain's Web site. “When they call us, we respond immediately,” Cardinale says.