As an owner of multiple restaurants, I am often asked by restaurateurs if they should expand on their units and when to do so. This is such an interesting question because the answer lies not only in an empirical evaluation of the logistics of the business but, of equal importance, the desires and goals of the individual person. I know quite a few restaurateurs who are not only successful, but also possess certain characteristics that would support multiple units yet they are simply not eager to jump into the expansion pool. I remember thinking to myself in the not-so-distant past: ‘why would someone not want multiple units? Surely two is better than one and three is better than two!’. However, after growing multiple restaurants I can now see why there is apprehension towards expansion, and the timing is and suitability is worth evaluating.
The first thing I would tell the operating restaurateur is to understand that once you open your second location, the restaurant can no longer be driven wholly by passion and must truly become a fully accountable business. The time that you used to spend at the end of your bar with your favorite customer may now be spent pouring over P&L’s and cash flow statements with your bookkeeper. Attention to minute detail becomes of paramount importance and terms like economies of scale and loss leaders take up an ever-expanding role in your vocabulary.
When analyzing the business of single-unit operators, one can often see a multitude of decisions that do not necessarily follow logical business evaluations but instead reflect the personality and beliefs of the owner/operator. Decisions in single-unit restaurants may be made impulsively. The rules and regulations are often not categorical, and are rather dependent on the whim of the owner/operator. Regulars who are on good terms with the owner appear almost as owners themselves and comps and discounts are often rampant. With that being said, the success of single-unit operations is often highly dependent on these seemingly unorthodox practices. A very sincere and deep loyalty between the patrons and the owner/operators is developed. The owner/operator is frequently at the location for the majority of the operational hours so labor is also greatly reduced. Finally, and most importantly, no one will ever pay attention to the needs and wants of the customer in the manner that the owner will so in general, customer satisfaction is usually very high at a single-unit operation.
From an expansion standpoint, you must keep in mind that many of the practices that make a single-unit concept successful cannot and will not translate into multiple units. The first and most obvious one being that the owner/operator cannot be in two places simultaneously. Try as they might, it’s a physical impossibility. They will quickly find out that there is a strange, immutable law that somehow creates emergencies at the location with which they are not present. Secondly, expansion into a second unit often leaves a vacuum in the original location. Even with a competent and charismatic general manager you will often hear grumblings like “the place isn’t the same since __________ left,” even if the statement is completely unjustified. It also seems unavoidable that everyday trials and tribulations are left unanswered as often the solutions were in the head of the owner/operator that was once conveniently at their disposal. An example of this would be finicky kitchen equipment that only the owner/operator knows exactly how to work, or the regular patron who indulges a little heavily on the spirits, gets a too spirited and won’t listen to anyone except the owner who they have a long and storied history with.
Now that I have scared you with the woes of attempting to capture lightning in a bottle with your expansion, let’s highlight the upside. As all of you restaurateurs know, there is little that will instill in you a greater sense of pride than walking into your restaurant and being greeted with the warm hum of people in the midst of merriment. To be told that your restaurant is a patron’s favorite establishment or to simply see the look on the face of a satisfied customer is a feeling that is beyond compare. To see something that you have poured so much of yourself into, grow into a successful business, is truly wonderful and will make you believe the old adage, “if you love what you do, you will never work a day in your life.” With expansion comes a broader network of customers, employees, vendors, and partners; a larger family, if you will. I can say from personal experience that employing almost 300 people is something that gives me a profound feeling of happiness and accomplishment.
The expansion of your business into multiple units can also potentially be an extremely lucrative endeavor. You can easily imagine multiple profitable units resulting in the creation of wealth and there is no shortage of success stories validating such. As much as expansion can create difficulties and complications from an operational perspective, there is no denying the potential increase in income, and the exponential growth in the value of the brand. Multiple locations also provide for the allocation of certain expenses amongst the units, and increased buying power for the brand as a whole. These factors result in a direct and positive impact on the overall profitability. The question of whether or not to expand should be based on an analysis of the goals and dreams of each individual owner/operator. There are some distinct benefits to growth and they must be weighed against the complexities inherent in the expansion of any business.
Should you decide that expansion is in your future, the next question would be, when?