15 things to ask yourself before expanding your concept
By Robby Kukler
2023 is off to a strong start for many operators. As the owner of one – or maybe two or more – successful restaurants, you have a great team and the community loves you, so you’re thinking now might be the time to open another concept. While 7 in 10 restaurants in the U.S. are single-unit operations, restaurateurs are passionate entrepreneurs and we love the excitement of planning “what’s next.”
On the plus side, growing your business can provide more opportunity for your team, a new creative outlet, strengthen your market relevancy and potentially satisfy the dream of making more money. Realistically, it can also mean exposing you and your team to significant operational stress, debt and financial risk.
During my 40 years in the restaurant business, my teams and I learned to ask some hard questions before embarking on a growth journey, a strategy that paid off. The essential first step in the “to grow or not” journey is to dig deep and answer some tough life questions to determine if the challenges of growth make personal sense:
- What really drives your happiness? (career, financial success, overcoming challenges, spending time with friends and family, exercise, travel, philanthropy?)
- Where are you willing to sacrifice in some areas of your life to grow your business over the next two to 10 years?
- How will you manage the stress and risk of increased debt and responsibility?
- Is your spouse/partner 100% supportive?
- Do you enjoy working in the business (hands-on) or do you enjoy working on the business (managerial or executive roles)? In either scenario, where are you willing to share responsibilities (giving up some control)?
Your answers to the above lay the groundwork for the next step. If you decide to move forward, step two is aligning yourself and your business partners regarding the operational variables. Here is where you nail down what is working and can be replicated and what should be improved, documented or subject to a contractual agreement before opening more locations.
What makes your restaurant and current business model successful?
Is it the location, the unique or exceptional food, the design and atmosphere, the amazing people you’ve hired and trained or the extraordinary service experience? Determine what it is, how you articulate it and if it is transferable or duplicatable.
Do you have procedures in place for how to consistently run your business?
Growth requires written Standard Operating Procedures (SOPs) for everything ranging from hiring and training to service and guest experience expectations, cleaning, bar operations, BOH execution and expectations, ordering and receiving, menu costing, etc. These procedures should be documented in a format that can be used for training, ongoing follow up and accountability with your team.
Is your restaurant as efficient and profitable as it can be? Do you have systems and tools in place to track your financial performance?
How does your balance sheet compare to industry benchmarks? You need to know all your costs as a percentage of sales and also have standard financial procedures for how you receive and account for all food and beverage coming in your back door, tracking waste, inventory, writing budgets and producing P&Ls, payroll and day-to-day accounting procedures.
Do you have a deep bench of great staff?
At the end of the day, every great restaurant relies on smart, hardworking, hospitable team members with knowledgeable, supportive leadership guiding them. Have you been that leader? Do you have managers ready to step into that role? Do you have hourly team members who can “tell your story” as part of a new opening team?
As Danny Meyer famously said, “Hospitality is almost impossible to teach. It’s all about hiring the right people.” Have you hired the right people to successfully grow with?
Assuming you and your partners are aligned on the operational necessities and as a team have committed to one another, it is time to align on the big-picture organizational “why” topics.
What values drive your business?
Is profitability the No. 1 priority, or do other values come into play? Is your reputation and involvement in your community important to you? What kind of work environment do you want to provide for your team members?
Why are you growing?
Is it deal driven? Is it to create opportunity within your organization? Are you trying to build a growing livelihood for decades to come, or create a legacy to be passed on to family members? Do you and your partners want an exit strategy to sell your business in a larger transaction down the road? Based on the “why” behind your growth plans, you can better discuss growth over the next five, 10, maybe even 15 years.
How will you grow your company?
Will you duplicate your existing concept, create new concepts or will your company be a combination of both? Set big picture mileposts for the five-, 10- and 15-year timelines, but get into great detail, year-by-year, for the first five years.
In other words, how many restaurants will you open and how frequently? Will you grow locally or expand outside your city? How will you finance these restaurants? Are you willing to personally guarantee loans or prefer to give up equity to investors?
The simpler and more duplicatable your concept, the less complicated this may be. But there is nothing simple about going from one or two restaurants to multiple locations, so don’t fool yourself.
As the organization grows, who will be responsible for what areas of the company?
62% of restaurant owners currently report being understaffed; growth means hiring and adding to the “plate” of your current team. Identify needs that will arise as more restaurants open and the increased areas of responsibility you and your partners and management team will be accountable for. Who can take on additional responsibility, and what new positions and levels of talent should you forecast for?
Ideally, your SOPs will include job descriptions for all positions, including those of your partners. At the end of the day, it’s vital to know who is accountable to whom and for what. Because as they saying goes, “Where everyone is responsible, no one is really responsible.”
Does your organizational structure and communication model support growth?
This follows the accountability decisions discussed above and can be shown in an organizational chart to illustrate who within the company reports to whom. This can also lead to protocols of how and when important information is communicated amongst leadership as well as across the company as you grow. Your communication model should aim to be transparent and consistent; share ideas and information about the company with your team in a tone and tenor consistent with your aligned values and culture.
Have you planned for the unexpected – financial and other?
Like life, business does not proceed along a straight line, so expect things to happen that are not in your plan. The goals and desires of individual partners may change, the world may change, your business may endure hard times – the list is endless.
The median cost to open a restaurant is around $500/square foot. Plan for the unplanned with (at a minimum) enough cash on hand to cover six months to a year of debt payments, rent and utilities, two payroll cycles and to replace all your food and beverage inventory prior to opening.
With the help of a seasoned mentor and an attorney, discuss difficult scenarios that may occur in the years ahead and determine how you’ll handle them. What if a partner gets ill and can no longer work? What if you want to change careers? What happens if the business is faced with a moral or legal challenge? Determine how each scenario would be handled in terms of compensation, liability, work responsibilities, etc. It is crucial to think through as many scenarios as possible and create a binding legal document to fall back on.
Success in our industry is found in the details. Answering these 15 questions gives you a simple yet strategic foundation from which to embark on growth. Keep this list fresh and revisit on a regular basis – don’t spend the time and energy creating such valuable touchpoints to then have them sit on a shelf and gather dust.
Doing this hard work up front will provide a stronger business foundation for growth and ultimately provide you and your team a feeling of enjoyment, engagement and purpose in your work, and therefore your life.
Robby Kukler is passionate about fostering an exceptional hospitality model that succeeds for owners, guests and team members while embracing the fundamental hospitality principle of people taking care of people. With 40 “hands-on” years in the business and as the founding partner of acclaimed Fifth Group Restaurants, Robby’s track record for developing and growing successful – and enduring – restaurant concepts and companies has earned him and his teams countless industry awards and recognition. With the newly launched Kukler Restaurant Advisory (KRA), Robby harnesses this experience to show restaurateurs how to set and achieve their own KRA – Key Result Areas – for lasting stakeholder success. To learn more about KRA, contact Robby at firstname.lastname@example.org.