Overcome key challenges to grow your restaurant business

Growth

For most restaurant owners, the urge to grow comes along at some point. The pursuit of growth can bring great rewards, but usually comes with great challenges as well. What are those key challenges and how do you overcome them? Well, the answers to that depend upon where your starting point is as you contemplate growing your restaurant business.

Let’s talk about growing and how that might look different dependent upon your starting point.

For an existing, single-unit restaurant owner/operator, growth could mean:

Growing sales by adding services or meal dayparts

• Adding breakfast or a late-night bar menu
• Adding weekend brunch
• Adding catering
• Expanding takeout and/or delivery

Increasing your building size to add seating

• Adding or expanding an outdoor patio area

While these scenarios come with challenges, these challenges are usually manageable by the owner or operator. They can control the environment in that single restaurant and can control the pace in which to integrate sales-building changes. The biggest challenges are usually time or capital related. But for a single unit restaurant owner, unless they have a great management team that can take on day-to-day tasks to handle, any expansion often means more demands upon their personal time. Obtaining capital can be another challenge, but one that can be overcome with a sound business plan, solid cash flow and a strong balance sheet.

For an operator that wants to grow from a single restaurant location to a second unit, the scenario is quite different.

You, as an owner that has developed, opened and operated a profitable restaurant concept can take pride in that. But you need to be able to put your pride aside and answer these questions honestly as you determine if you (and your restaurant) are ready to take on the multi-unit restaurant plunge:

• Is your first location successful because of the appeal of the concept, the menu, and the quality of the food and service? Or is the location just so good (or is the competition just so lacking), that it has overcome mediocrity in these areas and succeeded despite being mediocre?
• Ask yourself if the concept, menu and service levels are consistently where they need to be in terms of earning business from potential guests in new locations where competition may be more challenging.
• Can you identify your “one big thing” that sets your restaurant concept apart? Often called a “USP,” it is your “unique selling proposition.” It can’t be just “great food” or “great service.” Your competitors will lay claim to those attributes as well. You may need to reflect upon this to come up with your one big thing.
• Weigh your expectations of what a second location can do financially against the first location. Are the demographics similar? Does the second location have easy ingress/egress, visibility, strong traffic counts, and accessibility? Build an objectively honest business plan with very realistic sales projections.
• How will you manage a second location? Dividing your time between two locations may work initially, but it is not a good long-term solution. Will the first location suffer if you are not there all the time? Do you have the talented people you will need to grow?
• Do you have the systems in place to replicate the success of your first restaurant? If you are going to grow your business successfully, you absolutely MUST have a system in place for every aspect of your operation.

When we take this scenario one step further and look at a small multi-unit restaurant group that wants to continue to grow their business through opening additional units, we see that some challenges remain the same and others are new:

• Once again, do you have the systems in place to successfully replicate your restaurants with the same results? The larger you grow, the more critical those systems become.
• Do you have someone in the organization that has the skill set to lead a larger group of restaurants? A tactical, operations-based skillset is critical for leaders of groups up to around 25 restaurants. Once you start to contemplate growth beyond that number, the necessary skill set of the leader can evolve into a more strategic set of skills. For example, the ability to evaluate growth through franchising versus solely through company-owned restaurants becomes more important. The ability to determine how to build your brand in new markets becomes more important. The ability to identify, recruit, hire, develop, and empower other leaders within your company becomes more important.
• If you are the Founder of the restaurant concept, do you have the humility and self-awareness to realize that a time may come when the continued growth of your restaurant group will only be possible if the leader has a different skill set than the skills you possess? Read that again. This is one of the biggest, if not THE biggest, key challenges in the growth of a restaurant group.

As a growing restaurant group, the skill sets required of your leaders continue to evolve with the number of restaurants you have and how widespread your locations are. But keep in mind, those skill sets that were required early on are not obsolete. They simply need to be applied at the appropriate levels. A leader that has those hands-on, tactical skills that were necessary in the early days of growth will make a great district manager and/or trainer. A leader with some strategic skills may make a great regional manager. Never discard talent. Just learn to match the talent to the need.

Let’s identify a few more key challenges to restaurant growth and how to overcome those challenges:

• Identifying your growth plan
  Will it consist of company-owned locations, franchised locations or both? There are multiple options for growth available to a successful restaurant owner. Spend the time it takes to put together a growth plan that will work best for your concept. And know, that as with any other plan for the future, it should be a living document subject to revisions as the dynamics in the industry change.
• Securing human resources
  No, not the department. The actual human talent it will take to lead and staff the restaurants you want to open. The more quickly you want to grow, the more quickly you will need to acquire talented people. Make certain that your company has a culture that will attract and retain talented people. This starts with ownership and filters down through all levels of management and staff to the individual restaurants. If you have a culture that your employees can thrive in, you will find it much easier to attract the talent you need.
• Raising capital
  Whether your growth plans include franchising or simply growing company-owned locations, it takes money. Your growth plan should be realistic when it comes to the investments it will take on your part to reach your goals. If your needs require loans, you must make certain that your cash flow can bear the burden of those loan payments. Many restaurant brands have failed simply because they grew too quickly to support their ability to service their debt.
• Grow in concentric markets
  If you are growing from a local brand, no matter how well known you are in your hometown, you will most likely have no brand awareness as you enter new markets. One solution is to grow concentrically to your core market. It is much easier to build brand awareness in this way. It also makes supporting those new locations easier if they are within a reasonable radius of your “home” store.
• Branding
  To build your brand, you must first define your brand. Seems simple enough, right? But actually distilling down to what your restaurant brand is, what it stands for, and how it interacts with your communities takes some serious thought. Once clearly defined, then you have the task of communicating what your brand stands for to potential staff and guests. Not a task to be taken lightly.

Growing a restaurant brand is a challenging but exhilarating adventure. If you are in that enviable position where you are contemplating growth, make certain that you are building your future on a solid foundation. The planning and investments you make now will absolutely impact the future success of your restaurants’ growth. Consider partnering with a sound financial and tax advisor and an experienced restaurant consultant. Their expertise can help you to avoid the pitfalls you may encounter in your growth journey.

For more information on this topic, or to learn how Baker Tilly specialists can help, contact our team.

The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.