How do I expand into multiple locations?

A discussion of issues that cause growing hospitality businesses to fail.

We sure do live in interesting times. I recently did a mental review of my business over the last fifteen years and noted the profound changes that have taken place during that time. One of these changes — the emergence of a number of mid-sized, multiple location restaurant, cafe and catering companies — provides some interesting spectator sport for someone like me who is interested in management. 

If you run your business well you will have pressure to grow

The majority of new businesses in this industry start out life as fairly modest affairs, run by people who have worked in the industry and who aspire to self determination, status, a better life, and hopefully financial reward. Depending on the passion and acumen of the owners, they either kamikaze, stagnate or in a small minority of cases, grow to become a sizeable entity.

Success brings success, it seems. As soon as you are seen to be one of the successful industry players, you get ‘hit-on’ by people who want to ride piggy-back off your success with proposals, offers, schemes, etc — property developers want your name associated with their new projects, everyone tries to sell you their sick businesses, administrators and liquidators offer you opportunities to buy defunct businesses for a small fraction of their set-up cost. Temptations come at you from all directions.

Don't let your ego drive you to rash decisions

Going from one restaurant to a group needs careful management

The pressure on you to seize some of these opportunities and grow rapidly can become almost unbearable. This is when it gets dangerous and your ego can easily lead you to extend further than you can cope. Finding opportunities for growth is the easy part of business development; efficiently running new business units is a far more difficult problem, as a number of operators who have expanded rapidly and then contracted just as fast, have found out to their horror.

I’m seeing a disturbing number of hospitality companies gambling their future in this manner at the moment. The signs are usually obvious — wherever you see a hospitality company open multiple new locations over a relatively short period of time, there is a high likelihood of severe problems not far down the track.

Systemisation is necessary for successful multiple location operation

The issue here is one of expanding the management and supervisory infrastructure to match the growth of the business. I’m specifically referring to such things as having a supply of well trained key staff to run the new locations, having management control and accounting systems that will allow the business owner to know what is happening when they are not physically there, and having human resource systems for staff recruitment, training and leadership in place.

You have to learn to let go

It takes time, effort and money to create these systems and to get key staff trained and ready to run new locations. A useful analogy is to think of these things as the foundation below a wall — if the foundation is not solid the wall will fail when it reaches a certain height — as will a business if it grows beyond the capability of its infrastructure.

Good advice can save you a fortune

A number of times over the years I have evolved careful business development and expansion plans with business owners, only to have them throw the whole lot out the window when ‘a deal too good to knock back’ comes along. I have to put this down to good ‘ole impatience, ego and a lack of experience. This has proved very frustrating for me because they have usually engaged our professional consulting services to assist them to grow, then ignored the advice they were given or they have done the exact opposite.

Managing multiple locations is an art

Managing a multi-location hospitality business is quite an art. It is almost impossible to accomplish unless you become very systemised and plan well ahead. Show me an international hospitality operator that is chaotic in nature, or that runs without systems — I will defy you to name one. You just don’t get big unless you are very organised in your management.

I think the critical issue is the supply of well trained, skilled unit managers. Without them you can’t hope for consistency of operation or financial efficiency. Working backwards, you won’t have a steady supply of skilled unit managers unless you have common management and control systems in each of your business units.

In order to efficiently develop a steady stream of mangers you need to be able to shift them around from one business unit to another as development opportunities arise. If a trainee has to go through a six month process of learning a different set of systems every time you shift them, you are going to substantially slow down the process of efficiently developing your key staff.

Good recruitment
A rapid management development system is necessary to grow

If you don’t have a sufficient supply of appropriate key staff available you will probably be forced into a situation where you fall for one of two very costly traps: you will either promote people who are not ready or suitable, or you will bring people in from outside, which is always a gamble with high risk — especially if you don’t have well developed skills at recruiting managers. At best you will end-up with a key staff member with little or no understanding of your business, its staff or its culture. At worst, you will find yourself with someone who costs you a fortune.

I’ve dubbed it the ‘Roman candle syndrome’: the tendency for some businesses to expand rapidly and then collapse. If you look around you will see this happening with disturbing frequency — in some cases to very high profile, experienced players who you would think should be smart enough to know better.

To learn more about the topics discussed in this article please consider the following courses,

For documentation to support the management systems discussed in this article, please visit our resources website.

If you are not sure where to start, contact us now to speak with a consultant.

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