SPECIAL:
THE GROWTH EDITION
THE INTELLIGENCE TALKBACKThree foodservice professionals give their views on one question
Jay Bandy,
foodservice consultant, Georgia, US Good growth is a combination of staffing, capital, real estate, financials and business conditions. Having a management team that is already working in a brand’s restaurants allows for a smooth and successful opening, and having key staff trained prior to opening allows for a better training environment for new staff, higher sales and better execution. Growing too fast has risks. Cannibalizing
sales from existing units and misreading markets can lead to a negative impact on cash flow, while growing faster than the market allows leads to declining sales. Market share takes time to build through marketing and guest loyalty. In most instances, growing slowly is
better than growing fast. Letting operations and finances catch up after each opening builds a stronger foundation. The exception is with concepts that require faster growth to establish market share through units and marketing dollars.
Opening a second location is a proof- of-concept test: it’s hard to oversee two locations and manage one unless finances allow someone over both units. There are, of course, brands that are
built to grow through acquisitions or new sites. This requires a complex financial model backed by private equity firms or other investors. There’s no substitute for doing the work
to understand your brand and finances, what makes you successful, and building a plan to open future locations.
Karen Malody FCSI, foodservice consultant, Oregon, US First and foremost, it’s vital for owners to do everything they can to grow what they have before investing in more locations. In other words: build your core before committing. Having more locations doesn’t always end up being growth. If not carefully managed, it can sabotage financial health. A flagship location is often successful because the owner/operator has been very involved with the operation. They can’t be hands-on in every location. A solid infrastructure for growth needs to be in place – for example a robust POS system, a detailed accounting system, and recipe documentation and costing. Finally, demographic and psychographic research, if not done carefully, can lead an owner to a location that’s inappropriate to brand acceptance. Success in one area does not guarantee success in another. As a business owner, it seems impossible
not to dream of growing. It’s the nature of an entrepreneur. We should always be seeking opportunities to expand. Yet this enthusiasm must be tempered by strict analysis, research, and financial planning. If a location has maximized its capacity and there is solid financial and operational data to support expansion that will bring in a new wave of customers, I can see where adding more sites can accommodate a documented need. But all of the points previously stated must be pursued first: do your research and don’t get caught up in a dream of simply being bigger.
What is the best way to manage growth?
Brandon Kua FCSI, foodservice consultant, Malaysia Good growth is when the sales at a store improve on a monthly basis and the brand is getting more recognition through organic growth, such as through word of mouth or recommendations.
The risks for operators embracing fast
growth are plenty: cash flow, supply chain disruption, quality of service and meal, human resource supply, etc. A slight miscue on any part could hit the operator badly. I would always prefer to grow
organically. Allowing growth to take place naturally would ensure that the operator grows in stature with the brand, while tweaking and fine-tuning along the way. There’s no hard-and-fast rule, but it’s the business vision and philosophy of the operator and organization that decides which is the best route to take. There’s no reason not to embrace
growth – it’s the only way upward and forward. I believe everyone goes into business to grow it and make money. Embracing growth ensures that the business has longevity. I think you’d worry if someone goes into business and doesn’t want it to grow. The expansion strategy of launching
many sites – like the American fast-food chains do, for example – allows for growth in brand equity but not necessarily in profit. Personally, I think that multiple concepts is a great way to offer variety and works well as a route to catering to a larger market. However, the risk is that by focusing on expansion we lose the focus on building brand equity and a profitable business. Any foodservice operator who is looking to expand must focus on building talent and allow growth to happen organically from within.
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