July 12, 2012 |

All Systems A Grow

By Dave Ostrander

grand opening Ultimate pizzeria

Many operators have asked me questions about opening a second unit. Going from one store to two was one of the hardest moves I ever made. Going from two to three was much easier. I caution operators that if your current store is running better when you are not there, you may be ready. If you need to be on the schedule every week and “make it, bake it and take it” yourself, the second unit will never make it.

Great companies begin with the end in mind. They have a clear picture where they will be in the future. Their operational, financial and marketing procedures are in place and are functioning well.

Multi-unit operations are completely different that single units. Single units can usually survive and thrive without solid operating systems. The boss is never far away and can make all of the hairy or unusual business calls. When there are multiple locations and your name is on the sign, every situation needs to handled in the same way.

Operating systems give step by step detailed instructions on every area of how you want the restaurant to run. The manual spells out all of the who, the what, the why and how of running the restaurant. When and only when these systems are in place is it time to consider growing your concept.

Once the tedious operational manual has been printed and refined, the next hurdle is selecting the management team. You should find yourself mentoring and growing your managers more than making pies. I’ve homegrown every manager I’ve ever had. I feel they must be hungry to know everything you do. The why we do it this way must be learned face to face. We didn’t have many sacred cows at Big Dave’s. Managers were encouraged to challenge the status quo and convince me that the new way was better. They often did and we were all better off from it. One side note regarding manager grooming: let them make and learn from their own mistakes. It’s almost impossible to see a train wreck coming and let it happen. If it doesn’t hurt the business, let it happen. Experience is the best teacher. My good friend and client, Sean Brauser, owner of Romeo’s Pizza of Medina, Ohio, shares my philosophy of grooming managers and cutting them in on a piece of the action of new stores. These managers have been personally coached and have been running the place without you. In order for them to move to a second unit they must have trained their replacement.

Financing the new operation is a lot less scary that the first. Lessons learned from opening number one will still be fresh in your mind. A comprehensive capital budget is a critical step in ensuring that the new store will not financially bleed your original anchor store. Lenders and partners tend to pull back if you go over budget. This financial model must include often forgotten expenses like permits, security deposits, professional fees, staff training and recruitment and working capital. The Murphy’s Law of Restaurant openings is to get your best number and add another third to it, kind of like home remodeling projects. Sales and expense projections should be one of the first orders of business. The Pro-Forma should reflect three scenarios: a conservative worst case as well as an average and optimistic study. At this point, I’ve advised many clients not to go forward. If the expenses are too high and the costs of building out and occupancy are high, chances are that you won’t be able to make a substantial profit. This is not the time to dash the dream; just look at other in-budget options.

Your second operation has several options to evaluate and choose the best for your circumstances. You may choose to have all of your units company-owned, enter into partnerships or franchise. All of these arrangements are common in our industry but each of them has different requirements.

Finding an affordable ‘A’ location could be a challenge especially in prosperous trading markets. Whenever possible I advise my client’s to locate in a property that was at one time, a restaurant. The space has already been health department approved, probably has ADA bathrooms, ample water, sewer (grease trap) big gas lines, large incoming electrical service and adequate HVAC. Having these pre paid assets in place will shave tens of thousands off of the capital budget.

Also consider:

• Is it a corner location with exposure from two side roads?
• Could a drive-through be installed?
• Does the main road have easy ingress and egress for customers as well as delivery drivers?
• Is there ample space and friendly signage ordinances in place?
• If my shop gets really busy can I place an exterior walk in cooler or storage building in the back of the building?

It’s easy and normal to have dreams and aspirations of multiple locations. You probably have been asked repeatedly by friends, family and customers to expand. Once you have done your homework and have passed the money, financial, operating systems, personnel issues and gut check…go for it. Just look before you leap and surround yourself with solid advice from people who have been there and done that.

Second Unit Checklist:
• Can my first unit run smoothly and profitably without my being there?
• Do I have enough financial resources to expand without putting a burden on number one?
• Do I have a management team in place?
• Do I have rock solid systems in place?
• Is this an Ego or business decision?
• Have I consulted professionals and other successful operators and learned from their experiences?
• Is my brand name awareness strong in the marketplace?
• Are you an excellent manager of managers?
• Have you thought out your long and short term exit plan?
• Will the sacrifice of much of your existing personal free time be worth it?