Another day, and another restaurant group downsizing, or a franchise having dramas. What happened – isn’t growth a good thing?
The belief in expansion seems to be wired into our brains – as soon as your cafe successful, people are asking when you’re opening the next one. You’re already working a 12-hour day – why not do 24?
Let’s be blunt – expansion doesn’t work when profits don’t multiply at the same rate as openings. One store is making $2000 pw – that’s nice, but why can’t 10 stores make $20,000 pw? Because we can’t multiply a vigilant owner, we need to have systems to replace her. Systems that are weak or missing seem to be at the root of expansion problems.
US experience shows that selling a restaurant manager and head chef a proportion of the business (maybe 10-20% each) can be almost as good as having attentive owners, with motivated eyes watching expenses and service, and with the majority partner leading strategic direction, marketing and innovation. The minority partners have real skin in the game and aren’t asked to handle every part of the business. It adds more control and overcomes the weakness of one person having to do too much.
What else is needed to make expansion work?
Smart use of technology – for internal management and customer interaction. Cloud-based systems for staff management and training, purchasing, sales tracking, accounting and marketing. These are broad categories – each one has a host of possibilities for standardisation and cost control. Successful operators are always watching new tech.
Razor-sharp control of numbers. With good systems you can watch sales and costs hour by hour and compare venues to keep everyone on their toes. Modern POS and accounting systems give you the data, and a successful group can now afford a whip-smart financial controller to uncover the opportunities for more savings, better margins and creative use of capital. Borrowing costs come down, and negotiation with suppliers is much more successful.
Separate sales growth from cost control. They’re two parts of a thriving business, and it can be difficult for one person to take on both two roles – the bad-ass cost cutter, and the creative, expansive marketer. Once the business grows in size, you can afford two positions and let them each do what they’re best at.
Recruit the right talent. The impetuous entrepreneur (you!) is different to the keen, flexible manager. You want a team of energetic leaders for front and back of house, but not creatives who get bored quickly and want to keep changing things. Innovation is too important to be left with one or two people. Training that’s a luxury for small owners, can now be used to develop talent, improve selling skills, improve kitchen productivity and act as a magnet for clever, career-minded hospitality staff.
Great deals with rent and real estate. A successful restaurant group has the P&L and bank support that landlords and developers are hungry for. With your strong results, you can negotiate for rents of 4-6% of sales, adding extra margin to your bottom line. They want you to pay more? Sorry – there are plenty of other sites looking for good tenants.
Marketing for expansion. You can now afford marketing expertise to do the campaigns and promotion run by (some of) the best operators – smart use of social media advertising, expert customer loyalty programs, a fresh calendar of events, and offers to fill the quieter days. Even delivery services can work once you have negotiating power and production systems to ensure that it’s not profitless numbers.