Considering adding a new location? If so, there are important issues to consider before expanding — issues el Restaurante Mexicano Editor Kathleen Furore discussed with David Scott Peters, founder of Smile Button Enterprises, LLC, a hospitality systems consulting firm in Peoria, Ariz.
ERM: If a restaurateur owns one successful restaurant, what questions should he or she ask before taking the plunge to expand?
Peters: Do they have systems in place that will allow them to expand easily? Often many independent restaurant operators find they have a restaurant that works well, a place customers love, and great food. It's almost magical.
But many times, their success is due mostly to the fact they are the ones working their floors, touching tables, making sure the food and service is great, hiring and training the staff. So when they expand, they can no longer be the only person who builds the business and touches each table.
Without systems in place that allow any trained manager to run the business, the second location can spell disaster for both locations because the magic was the owner who now can't spend all his or her time in one restaurant.
Besides asking owners if there are systems in place so the restaurant can operate profitably without the owner present, I ask:
Is your concept easily duplicated?
Does your menu depend on culinary talent, or can line cooks be trained to put out quality product?
Has customer demand and positive media coverage made your restaurant so popular that you keep hearing, "You really should open one of these in my neighborhood"?
ERM: What are the biggest mistakes restaurateurs make where expansion is concerned?
Peters: They build their Taj Mahal! Often owners look at their restaurant, see customers consistently waiting for tables, and think they could make a lot more money if they just had more seating. But instead of adding seats, they build another location. Because they have this image of their current location bulging with guests they can't seat, they build the second location twice the size, with twice the debt service.
They forget it took them years to build their first business to that level. They don't consider that if they don't fill the new location like they do the original restaurant immediately, the debt service will kill them. Also, with a larger restaurant it takes a lot more people to make it look busy. And people like to go to places that are busy, that don't look empty.
ERM: Once an owner has decided to open another location, what are the first steps he or she should take to ensure success?
Peters: Write a business plan and — most importantly — a financial plan. Restaura- teurs often think they can open a new restaurant for what it cost 10 years ago. The unfortunate reality is that costs associated with opening and running a restaurant are much higher today than they were just one year ago. So imagine how they have changed in the past decade! Owners who want to expand must make sure the numbers still work.
To ensure they can stay on budget and design the perfect restaurant and kitchen, the owner should hire the best team of professionals they can: a contractor to engineer their building to cut costs and stay on budget; an architect to design the space; an equipment/kitchen design consultant to design the space in a way that promotes efficient food production; and last, but not least, a banker or loan consultant to help secure financing.
ERM: What are the biggest challenges owners face in running multiple locations?
Peters: The biggest challenges they face fall into three categories:
People. In today's tight labor market it's hard enough to hire and train enough people for one location. It only gets harder the more people you need.
Systems. There must be systems in place so each restaurant is doing every- thing the same way so the owner doesn't have to be there to run each restau- rant. This makes it easier for the owner to understand what's going on at each location — to make sure the product is the same at each restaurant, for example.
Overhead. Often restaurant owners don't consider the administrative costs of operating multiple restaurants. You need a centralized control point or cor- porate office. Even if it is in one of the restaurants, you need all reporting, cash controls and human resources to be controlled from one location. This often requires a full-time bookkeeper and operations person — positions you probably didn't budget for. The good news: after the initial investment, the cost does not grow with more locations. Eventually it becomes cost effective.
ERM: Should owners of multiple locations do the same things at each location?
Peters: The centerpiece of any restaurant concept is its menu. While the core menus must be identical, there is no reason each restaurant can't offer location-specific specials on a daily basis.
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