Scaling 101 for Restaurants: The Must-Have Ingredients

    Don't scale without a plan.

    Andrew Smith.
    Savory Fund
    "Having the right culture is paramount," says Andrew K. Smith, co-founder and Managing Director of the Savory Fund.

    In every good dish of food there are key flavors and ingredients that make it consistently and repeatedly delicious. Finding the right balance and combination of sweet, sour, salty, and bitter will work every single time, for every dish. The same is true with scaling a restaurant concept from one or two locations to 20 or 30 and beyond.

    Over the last decade, I’ve helped brands successfully scale from two units to dozens of units in multiple states across America. Collectively, my team and I have generated more than $1.2 billion in aggregate revenue. With every brand, the right ingredients were necessary to replicate the success of the first few restaurants. Today, Savory’s current portfolio of restaurant concepts has grown more than 35 percent year over year and has done so profitably. This growth has continued throughout the recent economic fallout of COVID-19 because we started with the right foundational elements before the crisis hit. In any market condition, it is essential to have the right ingredients. So what are they? Here are a few of the most important ingredients to fold in before scaling your brand:

    Flavor Profile—Hot new trends come and go within every industry. The F&B industry is no exception. You must have a flavor segment or profile that is the hot new trend or operate in a stable flavor segment but with a unique twist. Customers are more finicky than ever and are constantly looking for variety and new flavors. However, flavor segments that don’t have enough broad appeal are risky in the short term. It could take years to build up enough empirical data to support the prospect of replicating the brand into new territories. But having the right flavor profile is one of the most important ingredients to scale your brand. 

    Consistency of Product and Experience—Like any good gymnast that focuses carefully on each step, you have to nail the landing every single time when it comes to the food quality and experience in your restaurant. You cannot let even one order go wrong because that customer will share their experience on social media (Instagram, Yelp, and Google Reviews) faster than you can imagine. One bad experience could spread to hundreds, if not thousands, of eyes. Be sure to nail the landing each and every time. It will matter if you ever plan on replicating that early success.

    Balance Sheet Capital—A healthy balance sheet is required in any business wanting to scale. I have experienced the cost of scaling companies for over 20 years, and it seems to always cost three times as much and take two times as long as you originally plan. For that reason, having access to cash as you consider adding new sites is essential. Furthermore, having access to patient capital is even more important. I have evaluated more than 300 brands over the years, and in many cases, incredible companies raised capital from outside sources at egregious terms. This will typically hinder the company’s ability to scale as it will take time to gain traction and build cash flow when you add new sites. Make sure to find the partner that will provide you the right structure for capital.

    Experienced Bench—Scaling a brand is much harder than it looks. It requires a bench of team members that care, like you do, to duplicate all your brand’s goodness in a new location. You cannot do it alone. You have to build a team of experienced individuals that can help with the scaling process well before you actually start. This is one of the other reasons you need access to capital. You will need to invest in this team well before you have the cash flow to pay for them out of newly built operations. But it is imperative that you have an experienced team as one of the ingredients to your success.

    Culture—Having the right culture is paramount. Within the food and beverage industry specifically, customers can literally feel a brand’s culture. But culture is more than a happy employee greeting your guests. It is how your brand hits all of your patrons’ senses. It is what they see, hear, smell, feel and touch when they go through your restaurant that creates the cultural connection. The culture or “vibe” of your concept is something that you want your guests to describe to their friends, family and co-workers. That excitement is what builds a culture around your brand. It is an essential ingredient to successful scaling. Be sure to consider all of these culture elements as you curate new menu items, design new locations, and welcome new team members.

    Scale at a Responsible Pace—You cannot grow faster than the abilities of your team and beyond the financial capabilities of your organization. So, grow at a responsible pace. This will mean something a little different for each restaurant and concept, based on a myriad of factors, such as staffing, available capital, team experience and more. Quality and not quantity of locations will ensure that your brand is successful. Therefore, it is imperative to have a well-run establishment in each location instead of bragging about the number of locations you have. Run each of them like it is the only restaurant you own.

    Everyone wants the same thing in this industry: to create the next big brand that scales from coast to coast and does so as quickly as possible. But to get to that point, you must nail down the above ingredients. Before you can ever get to stores three, four, or even five, you need to exceed expectations within your first two units every single day. COVID-19 has created uncertain times for many industries. However, as we’ve witnessed dining behaviors change in ways both temporary and permanent, these market disruptions will create unique opportunities for brands to not only weather the storm, but to prosper for years to come. I look forward to seeing new brands emerge from this crisis even stronger, more innovative, and ready for scale.

    Andrew K. Smith is the co-founder and Managing Director of the Savory Fund, a $90M F&B practice targeting 3-9 unit restaurant brands that are poised for immediate growth and replication throughout the US. Savory currently operates 3 brands and 48 restaurants and will be adding 12 new units by the end of 2020.