Commentary

Do you understand the 'trifecta of restaurant expansion success?'

Expanding to more sites won't generate the same anxieties as the first opening, but you will encounter a different set of challenges. Lee Leet, CEO of QSR Automations, discusses three ways to avoid those challenges.

February 20, 2019

ByLee Leet, CEO of QSR Automations

There's a familiar expression, "the first million is the hardest to earn." If you're a restaurant owner, "the first restaurant is the hardest to open." Once you've overcome that hurdle and all the related challenges, the next step is to lay out your vision. Your goal may be to maintain a steady and successful single location, or you may have ambitions for expansion to two, five, 10 or even more restaurants, imagining yourself and your partners as the next Brinker or Bloomin' Brands.

Expanding to more sites won't generate the same anxieties as the first, but instead, you will encounter a different set of challenges. It's important to have a game plan to keep your strategy in check and most importantly, define your vision.

Here are three questions you should ask yourself and your partners before you set off on this expansion quest:

1. Is the timing right?
Staff timing— No man or woman can be in two places at one time, so the first order of business is building a strong and reliable staff. This staffing effort will help you juggle competing interests for your time as the tsunami of decisions hits.
Calendar timing— Depending upon your family, restaurant, and community, you may find that one season of the year is more to your advantage than another.

2. Are your finances secure?
Determine if your current restaurant business is in a good financial position to service expansion debt. Using borrowed capital to fund an expansion project or growth initiative isn't right for every business. The economics must make sense before you take a loan, so due diligence in this area can typically mitigate the risks.

3. Do you have the right location?
When scaling a restaurant business, the effort should center on acquiring new customers, knowing that each new location has its own demographic, built-in competitors, and challenges. Scope out the geography of the area, including reading through online reviews of competitors to discover what customers have experienced and what they want and don't want — all are necessary steps during your field research phase.

What about the future?

Beyond today, you'll also want to consider future demographics and geography. With store closings, a rash of bankruptcies and the meteoric rise of e-commerce and discount chains, malls are struggling. A new build site adjacent to a once popular mall requires careful consideration in light of that shopping evolution. A 2017 report by Credit Suisse predicted that up to 25 percent of U.S. malls would close by 2022. To squelch the retail bleeding of customers, malls have pinned their eyes on restaurants to help keep them afloat. According to commercial real estate firm Jones Lang LaSalle, by 2025 restaurants and bars will comprise roughly nine percent of mall space compared to five percent a decade ago. While you can find great commercial space deals, evaluating the long-term prospects and taking time to weigh all the factors for site selection, would be wise.

Once you've asked and answered these questions, secured funding, and settled the stomach churn of indecision, it's time for your restaurant expansion team to move on to putting standards, process, and infrastructure in place.

The trifecta of restaurant expansion success
When a restaurant operation begins to scale or multi-site operators see the need for further expansion, conflicting objectives will arise at the same time. What was once the entirety of the restaurant operation (a single location) will now become one of many moving spokes in the restaurant operational wheel.

1. Manage Tensions
At many points along your expansion journey, you may feel as if you are squeezing a balloon to take tension off one side of the business only to find it suddenly expands elsewhere. These tensions aren't peculiar to the restaurant industry; you'll find them in every industry expansion. As highlighted in research reprinted in a 2006 Harvard Business Review article, three business tensions always exist:

Profitability versus growth — When hyper-focused on boosting margins, restaurants can get sidetracked in the effort to boost growth. Both are important.
Short-term versus long-term outlook — When restaurant management is focused solely on strategy, execution can often fall by the wayside.
Whole versus parts — When operators focus more so on the parts, or individual units, other benefits from the whole will suffer, and vice versa.

Successfully navigating two opposing objectives at the same time is crucial in serving competing interests from various stakeholders. Additionally, restaurant operators must consider that these competing tensions are not independent of each other; if managed properly, they will create synergy across all restaurant units and the organization as a whole. By juggling these three business tensions and likewise, balancing each in concert with the others during the expansion process, restaurant operators are likely to keep business running smoothly at every location, while still meeting the performance objectives of partners, financial backers, and shareholders.

2. Select solid infrastructure
In many respects, a successful restaurant expansion lies in the ability to offload manual processes to automated technologies. Paper tickets no longer cut it when scaling restaurant operations.

One example that shows the necessity for restaurant technology to improve expansion success is Walk-Ons Bistreaux & Bar. When two LSU basketball alumni Brandon Landry and Jack Warner opened their first restaurant in 2003, blending excellent food with a game-day guest experience, the founders ran a traditional restaurant with pen and paper. However, the unique restaurant concept quickly caught on. Their expansion success over the next nine years led ESPN to name Walk-Ons the No. 1 Sports Bar in America, which further propelled the company to expand its footprint, receiving enough franchise commitments to open in 13 states. Keegan Lanier, senior director of operations and a self-proclaimed "data guy," states in a recent case study: "There's just no way we'd be where we are today without [a best in class Kitchen Display System]."

In addition to a universal point-of-sale (POS) system, restaurant operators planning to scale their operations must make intuitive technology investments that can seamlessly integrate with their chosen POS. With an integrated solution, operators can quickly analyze potential problems by pulling granulated data that can pinpoint chokepoints. Here are three automated solutions that every expanding restaurant operation must have:

Kitchen display system — A kitchen automation solution should adapt quickly and easily to any restaurant environment, providing support for busy kitchens. Expanding operations need kitchen video, programmable prep times, restaurant bin management, and access to real-time production information. By using a state-of-the-art kitchen display system, expanding restaurant operations can reduce ticket times, gain valuable insights, and merge in-house with off-premise traffic to reduce kitchen stress, while providing guests with real-time order tracking.
Guest management system — A guest management solution will allow multisite restaurants to implement waitlists and reservations while managing tables and staff.
Recipe viewer — Add-ons to the Kitchen Display System, like a recipe viewer makes managing multiple restaurants from a single location a breeze. With an automated solution, operators can move to electronic-enabled recipe viewing, and away from laminated books of recipes that are difficult to update. Along with photos of your menu dishes that are placed easily at hand, nutrition and allergy information can be quickly pushed down to every site at the same time with no software reconfiguration needed.

3. Maintain Consistency
Consistency matters to multi-site operators in high growth mode. Providing consistently flawless delivery and experiences that diners come to expect wherever they travel. If a guest goes to a Cracker Barrel in Texas, they'd expect the same consistency in food quality and service if they visited a Cracker Barrel in Kentucky, or anywhere else. One way to maintain such consistency is attention to centralized and standardized documentation that your technology can push to all sites. With a consistent, comprehensive onboarding process, and on-going training effort, the same level of customer service at every unit can be more easily assured. Training breeds confidence, so automating as much of your training to maintain consistency is vital to expansion success.

Grow beyond expectations
Forward-thinking restaurant operators who hunger for increased revenue can do so in many ways, including expanding hours, developing additional cash streams through third-party delivery services, and more. Yet, to become a much larger restaurant industry player, unit expansion will achieve that goal more quickly. The often prolonged expansion effort won't be without challenges, but by adhering to the three-pronged scaling strategy outlined here — maintaining operational consistency, building solid infrastructure and managing tensions — you can avoid the common pitfalls that detract from current operations while pushing forward to new levels of restaurant profitability.

Lee Leetis the CEO of QSR Automations and founded the company in 1996.

Cover photo: iStock