Building restaurants is sexy. It is fun. It represents all possibilities. It gets your employees and your customers excited. Oh yeah — and it gets you and investors excited, too.
And, if you invest all your money into new units, you will end up making less instead of more.
Why?
Because, without infrastructure and a platform for growth, your successful multi-unit independent restaurant company will not be able to capture the full benefit of sales and profit that can happen at new units (and existing ones) — or the ensuing great guest experiences that keep people coming back for years.
My decades of research into return on investment for infrastructure points to one thing: If you want to have the most success, you must have the infrastructure to support your expansion units before they open.
I tell my clients, “Let’s act now as if we have those units — so we can truly be ready to support existing and future units when the latter come online.”
Playing Catch-up Costs More
People who play catch-up after units are open risk the control, execution, and profit these new units can create. They give themselves more of what they don’t want.
I have heard it many times:
- “I’ll invest in my corporate team after I get the two units open that are currently under construction.”
- “I’ll get that marketing up and running after we see how the new restaurants do.”
- “I’ll have that technology in place after profits from my new restaurant can pay for it.”
Every time I have seen an organization get serious about infrastructure I have seen a 2-3% drop to the bottom line.
One of my client’s CFOs did not believe that was possible. “Our costs are about as low as they can get.” But he was comparing them to history. When that 2-3% materialized, he had learned a valuable lesson. Also, he was thrilled. At his organization it represented a profit increase of $650,000 annually.
Three Most Important Things to Do
- Forecast your capital expenditures and make sure your infrastructure and growth platform expenses are at least equal in priority to unit development. Too many operators get this backwards.
- Choose the right senior managers — the improvements they make will more than pay for their salaries. If that is not the case with your people, you have chosen the wrong people. Start again.
- Upgrade technology. Technology is not a panacea — but today’s independent restaurateur has access to an incredible amount of information that can boost their businesses in ways only the biggest companies could do just a few years ago.
There is no line on your P&L for missed opportunity. But, if you could go back in a time machine and invest in things like corporate team, marketing, and technology before your new units open, you would find you would actually make more money and please more guests.
