If you are considering opening a restaurant, your top priority should be to avoid mistakes. While many companies have experienced massive growth like Quiznos and Chi-Chis, they often over-expanded and ran into trouble because of various issues that they didn’t anticipate.
Fortunately, this guide is here to help. We look at some of the common mistakes that restaurant owners make during rapid expansion to multiple locations and how you can avoid them.
Expanding Too Quickly
Perhaps the biggest problem that a lot of restaurant chains run into is that they expand too quickly, take on unsustainable debt, and dilute their own quality because of their rapid growth, leading to substandard service that ultimately reduces their margins. They can also run into problems of cannibalisation, where new stores take customers from their existing stores in a particular town.
The slower approach, like that taken by In-N-Out Burger, is better. These use cash-funded growth, and they put a lot of investment into each new location to ensure that it attains the quality required by the company.
Poor Location Selection
Another issue that a lot of companies run into is location selection. They choose areas geographically rather than really thinking about whether they’re serving their market in these areas. For example, companies won’t always consider things like competition and foot traffic. They can also sometimes neglect to think about demographics and cultural preferences. Instead, they locate locations in what they believe are popular areas without really thinking about whether local people want to use their services. When this happens, it leads to a lot of expense and, ultimately, closures.
Inconsistent Experience
Another issue that a lot of expanding restaurants run into is providing an inconsistent experience to their clients. One location feels very different from another.
The reason this happens is that a lot of restaurants don’t use the same wholesale restaurant furniture suppliers or fit-out companies. They might even have different training protocols for different cohorts of staff. This can lead to backlash because of inconsistent execution, with customers reporting completely different experiences between one location and another.
Inadequate Systems
Rapidly growing restaurants can also run into the problem of inadequate systems for multi-location management, and at specific locations, they have single POS or manual processes that break down under scale.
Obviously, the way to get around this is to use proper software for the industry. But many new entrepreneurs don’t know this or understand its benefits. Having centralized controls seems like a low priority compared to launching the next location.
Ignoring Financial Realities
You also see a lot of new restaurants getting very excited about their growth while ignoring the financial realities of what they are trying to achieve. Many go into debt to open new locations, and then when the cash flow isn’t there, the creditors come calling.
It can take several months for a brand-new outlet to really begin attracting local people since it takes such a long time to get to know about it. But during this period is when many restaurants fail, especially those looking to expand rapidly.
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