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    How to Ace Your Restaurant's Second Location

  • For many owners, expanding from one restaurant to two can be the greatest growth challenge. Here’s how to do it right.

    Shouk (3) Restaurant: James C. Jackson (2), portrait: ZOHAR RON c&p
    Shouk founder Ran Nussbacher says the experience of securing real estate for the original location can make negotiations smoother the second time around.

    When Pincho Factory decided to open its second store in 2013, the cofounders received some advice from a friend: “You think going from one to two stores is double the headaches, but it’s not. It’s 10 times the headaches.”

    Nedal Ahmad and Otto Othman—cousins and two of the three owners of the Miami-based fast casual—laugh at the memory. “He was spot on,” Ahmad says. “Maintaining consistency was so hard.”

    Ahmad and Othman had carefully developed eight core offerings that combined Middle Eastern and Latin flavors. Pincho Factory was getting good press and winning awards, but enabling staff to effectively make those signature dishes was tricky. Othman recalls telling a partner to add “three bloops” of water to a recipe. “He was like, ‘What’s a bloop?’ It was hard for me to get my ideas down on paper,” Othman says.

    Today, Pincho Factory is popular, profitable, and set to open its 10th and 11th stores. But its initial growing pains aren’t uncommon. Whether limited or full service, many restaurants have struggled when going from one to two stores.

    “People tend to underestimate the difficulty and overestimate their own ability,” says Gary Stibel, founder and CEO of the New England Consulting Group. They also tend to overestimate their readiness and potential for financial success. It’s easy to look at a profitable month and project it onto a long-term expansion plan, but that approach leads to a false picture. Owners—and, Stibel suggests, an outside consultant—should examine the first store average over a long period of time and ensure the restaurant is financially healthy before taking any steps to expand.

    “There is a typical maturation cycle of about 1.5 years for a restaurant,” Stibel says. “You have to be able to see that the business you’re doing replicates itself routinely. You have to achieve a maturation cycle where the business is sufficiently profitable and balanced in its operations.”

    While some restaurants only decide to expand after their initial successes, others have their eyes already on expansion from day one. The latter was the case for Starbird Chicken. From product development and staffing to kitchen design and equipment, the self-described “super-premium fast-food” concept was built for growth.

    Located in the Bay Area, Starbird features several house-made items, including bread, pickles, and sauces, as well as an app-based drive-thru system.

    These offerings require precise technique, so the development team created a “very buttoned-up concept from all aspects,” says Aaron Noveshen, founder and CEO of Starbird Chicken and its parent consulting company, The Culinary Edge. Operations, technology, and accounting systems were all designed to scale, allowing the second Starbird location to make its debut within 14 months of the first.

    Shouk, a Middle Eastern fast casual set to open its second store early this year, was similarly comprehensive and detail-oriented in its initial development.

    “We didn’t adopt anything that we didn’t think could scale down the road,” says Ran Nussbacher, founder and CEO of the D.C.-based brand. Ensuring product consistency for Shouk’s plant-based pitas and burgers required careful planning in developing the recipes and procedures. The team constantly considered whether staff across multiple locations would be able to make the food perfectly.

    After all, Stibel says, staff who can’t replicate dishes or service levels can harm the reputation of a growing brand in sometimes irreparable ways. It almost always comes down to people, he adds. Management might be spread too thin, new staff might not have been trained properly, or a great team might have been broken up. For this reason, New England Consulting Group recommends hiring staff—especially managers—for the second store at least six months beforehand.

    “A lot of people say, ‘I don’t want to open a second store because I don’t trust anyone to run it the way I do.’ But if you invest in your team, then they will do an even better job,” Othman says.

    Aside from staffing, the biggest pitfall growing brands face is choosing bad real estate, says John Richards, an advisory partner at New England Consulting Group whose resume includes C-suite positions at Starbucks and Dean & DeLuca. Owners are often seduced by good deals on the wrong property or find locations that are superficially similar to the first but lack its visibility, parking, or accessibility.

    Pincho Factory purposely opened its second store in an area that greatly differed from the first, which was in a suburb that required most guests to drive about half an hour. The second store in Coral Gables, Florida, is more centrally located but also more affluent, which prompted the team to rethink some customer experience aspects. The store swapped disposable dishes and flatware for the real deal and added a runner position to bring food to guests and provide refills.

    Navigating if and when to take risks with real estate can be challenging, especially when preconceived ideas about brand identity and demographics can get in the way, Noveshen says. He recommends getting outside help from a broker or other consultant who can expose owners to new opportunities and help them understand how guests are using the space and business.

    In some ways, finding real estate is easier with the second store, Nussbacher says. Once owners have some cachet, landlords are more open to negotiation.

    In fact, after systems are in place and staff are trained, opening the second store can be a good time. “You can start doing the things that you wish you could have done the first time around,” he says.