Commentary

Do you understand the 'trifecta of foodservice expansion success?'

Expanding to more sites won't generate the same anxieties as the first opening, but you will encounter a different set of challenges. Lee Leet, CEO of QSR Automations, discusses three ways to avoid those challenges.

Image courtesy of iStock

February 25, 2019

Lee Leet is the CEO of QSR Automations.

By Lee Leet

There's a familiar expression, "the first million is the hardest to earn." If you're a foodservice operator, the first business is the hardest to open. Once you've overcome that hurdle and all the related challenges, the next step is to lay out your vision. Your goal may be to maintain a steady and successful single foodservice establishment, or you may have ambitions for expansion to two, five, 10 or even more.

Expanding the number of units won't generate the same anxieties as the first, but instead, you will encounter a different set of challenges. It's important to have a game plan to keep your strategy in check and most importantly, define your vision.

Here are three questions you should ask yourself and your partners before you set off on this expansion quest:

1. Is the timing right?
Staff timing — No man or woman can be in two places at one time, so the first order of business is building a strong and reliable staff. This staffing effort will help you juggle competing interests for your time as the tsunami of decisions hits.

Calendar timing — Depending upon your family, business and community, you may find that one season of the year is more to your advantage than another.

2. Are your finances secure?
Determine if your current business is in a good financial position to service expansion debt. Using borrowed capital to fund an expansion project or growth initiative isn't right for every business. The economics must make sense before you take a loan, so due diligence in this area can typically mitigate the risks.

3. Do you have the right location?
When scaling a foodservice business, the effort should center on acquiring new customers, knowing that each new location has its own demographic, built-in competitors and challenges. Scope out the geography of the area, including reading through online reviews of competitors to discover what customers have experienced and what they want and don't want — all are necessary steps during your field research phase.

What about the future?

Beyond today, you'll also want to consider future demographics and geography. With business closings, a rash of bankruptcies and the meteoric rise of e-commerce and discount chains, malls are struggling. A new build site adjacent to a once popular mall requires careful consideration in light of that shopping evolution.

Once you've asked and answered these questions, secured funding, and settled the stomach churn of indecision, it's time for your expansion team to move on to putting standards, process and infrastructure in place.

The trifecta of expansion success
When an operation begins to scale for expansion, conflicting objectives will arise. What was once the entirety of the operation will now become one of many moving spokes in the operational wheel.

1. Manage Tensions
At many points along your expansion journey, you may feel as if you are squeezing a balloon to take tension off one side of the business only to find it suddenly expands elsewhere. These tensions aren't peculiar to the foodservice industry; you'll find them in every industry expansion. As highlighted in research reprinted in a 2006 Harvard Business Review article, three business tensions always exist:

Profitability versus growth — When hyper-focused on boosting margins, businesses can get sidetracked in the effort to boost growth. Both are important.
Short-term versus long-term outlook — When management is focused solely on strategy, execution can often fall by the wayside.
Whole versus parts — When operators focus more so on the parts, or individual units, other benefits from the whole will suffer, and vice versa.

Successfully navigating two opposing objectives at the same time is crucial in serving competing interests from various stakeholders. Additionally, operators must consider that these competing tensions are not independent of each other; if managed properly, they will create synergy across all units and the organization as a whole. By juggling these three business tensions and likewise, balancing each in concert with the others during the expansion process, operators are likely to keep business running smoothly at every location, while still meeting the performance objectives of partners, financial backers and shareholders.

2. Select solid infrastructure
In many respects, a successful foodservice business expansion lies in the ability to offload manual processes to automated technologies. Paper tickets no longer cut it when scaling foodservice operations.

In addition to a universal point-of-sale system, foodservice operators planning to scale their operations must make intuitive technology investments that can seamlessly integrate with their chosen POS. With an integrated solution, operators can quickly analyze potential problems by pulling granulated data that can pinpoint chokepoints.

Consistency matters to multi-site operators in high growth mode. Providing consistently flawless delivery and experiences that diners come to expect wherever they travel. One way to maintain such consistency is attention to centralized and standardized documentation that your technology can push to all sites. With a consistent, comprehensive onboarding process, and on-going training effort, the same level of customer service at every unit can be more easily assured. Training breeds confidence, so automating as much of your training to maintain consistency is vital to expansion success.

3. Grow beyond expectations
Forward-thinking operators who hunger for increased revenue can do so in many ways, including expanding hours, developing additional cash streams through third-party delivery services and more. Yet, to become a much larger industry player, unit expansion will achieve that goal more quickly. The often prolonged expansion effort won't be without challenges, but by adhering to the three-pronged scaling strategy outlined here — maintaining operational consistency, building solid infrastructure and managing tensions — you can avoid the common pitfalls that detract from current operations while pushing forward to new levels of foodservicee profitability.