As a growth strategist, it is common for me to receive a call from a one-unit restaurateur looking to quickly expand. Many times, the restaurant owner has received an offer that can’t be refused—maybe from a wealthy investor or from a landlord who has the “perfect site” for a second location.
As I spend time these operators on the phone, I always advise them to proceed with caution. Opening a new restaurant location is an emotional and financial roller coaster ride. I know this based on the many lessons I have learned from my own ups and downs as a former multi-unit brand executive and, now, as a business advisor.
No matter your circumstances, restaurateurs who know these three expansion secrets will have a much smoother ride.
Do not let business opportunities drive your expansion strategy. It is flattering to receive a call from someone who has money—or even great restaurant experience—who wants to help you expand your business. However, that “lucky” phone call isn’t a strategy to expand your empire to a new location or format. In fact, it could be devastating if you pursue the opportunity without preparing for everything that a new location requires for success.
It is often said that luck is when preparation meets opportunity. Therefore, a successful restaurateur should have a clear and compelling vision for their concept, set criteria around what type of growth makes the most sense, and an internal team and/or outside advisors prepared to help them articulate and execute a winning game plan.
Restaurant owners who expand without carefully considering each opportunity against their vision, growth criteria and game plan can quickly see a dream turn into a nightmare. A failing strategy has many different outcomes: a struggling or closed location, which could lead to financial distress, living with a poorly supported and operated franchised location, and even destroyed relationships. So be the driver of your expansion strategy in a clear, concise and focused way.
What seems certain today; may not be reliable tomorrow. Holding on is the enemy of true growth. Your new location(s) will come with new demographics, site requirements, ordinances, etc., as growth gives you the opportunity to improve and evolve—more space, different menu items, more efficient layouts and more. Concepts that grow must evolve, adapt and innovate to fulfill the opportunities of a new location.
Here are a few examples of concept evolution that occurs when a new location is opened:
- Adding a breakfast menu to serve tourists and business customers in a new trade area.
- Changing kitchen equipment layout to increase back of house efficiency.
- Creating a limited menu for a special location in a concession environment.
Success isn’t guaranteed. New locations that miss financial targets can dampen spirits or worse, bankrupt businesses. Simultaneously, the performance of your current location isn’t guaranteed, especially if you expand nearby or transfer key talent away from a well-oiled operation. Act immediately to address underperformance and avoid new compounding problems.
Expand with operational, financial and people strength. Reinforce operations with well-defined standards. Document the critical recipes, systems and processes that make your business thrive. Detailed documentation and training materials allow you to hold accountability in your existing restaurant and train in the new location. Without clear standards and “how-to” documentation, you will be setting your teams up for failure.
Fuel growth with sound unit economics. Make sure the economics of your concept are sound and you have accumulated enough cash to weather the financial uncertainty of opening a new location—new locations can often times be unprofitable for extended periods of time. If you plan to expand by franchising, the economic model should perform extremely well even after franchise fees are added.
You and your team cannot be in multiple places at once. Many restaurants are successful because of the fanatical attention to detail paid by their owners. Surround yourself with smart and highly capable people who are culturally aligned. Stack the deck with solid management in your existing location, especially if you intend to transfer managers to new locations. Keep in mind, every hire you make is a bet that may or may not pay off. Hope for the best but plan for the worst.
Irrespective of the risks, expansion comes with incredible rewards. Owners and executives with one, a clear and compelling vision, two, a willingness to evolve, and three, the ability to grow from a position of strength have the potential for incredible success.
My final secret: growth requires change and can be difficult for people who love your restaurant the way they first experienced it. You can reduce this friction by articulating the DNA of your brand and culture to employees and customers alike. By doing so, they’ll understand that you can remain the same great restaurant even as the concept grows and matures.
Using these secrets will certainly increase your chances of creating new jobs and opportunities for the people you employ and financial rewards for investors and yourself. More than that, you will have the experience of building something special and unique that only comes from the early stages of growth and development. These experiences will be shared among your employees and investors, and have the potential to create a bond that can last a lifetime. Embrace the magic and watch the miracles unfold.