When (and When Not to) Grow Your Restaurant Group

Proof of concept.

Knowing your restaurant brand has legs – that its single-unit economics can be repeated and repeated and repeated – is like that can’t-fail feeling Hillary Clinton felt the night before the election.  

In the end, proof of concept doesn’t prove that success will follow, because no concept has permanent proof.

That’s just the laws of economics.

Still, the big money wants to evaluate proof of concept before investing.

But proof of concept becomes elusive if you do not keep pace with the market and competition.

Just ask Kona Grill or My Fit Foods.

Reasons to Grow

For my clients, their brand is their baby – and its DNA contains a growth gene.

They want to give this child the best life possible – lobbying teachers for good grades, enrolling them in extracurricular activities, and choosing the right college.

And everyone wants to build a great net worth for their families.

Matthew’s Five Thresholds of Growth

Over my almost three decades of advising growing restaurant companies I have identified five conditions for growth. 

You need to handle all five of these before you grow your business – no matter what kind of “logic” you may talk yourself into:

  1. Solid brand
  2. Culture that attracts diners and employees
  3. Intentional strategy
  4. Single-unit economics
  5. Operations that work without relying on ownership

If you cannot check all those boxes, go back and work on your restaurants until you pass those tests, period.

Four Common Self-Delusional Growth Strategies

People often give the wrong reasons for wanting to grow.

Though these reasons seem to follow very logical thinking, they are really just generally accepted theories waiting to be debunked – like the Flat Earth theory or 10,000 Hours theory.

Here are some examples of what I mean by this faulty logic:

  • Segmentitis: Your concept looks and feels like nothing else in its segment. This could be the best news possible, or the worst.
  • Market Delusion: Your concept works in a small market/big market/home market. So it must work in a big market/small market/out of town.
  • Growth as a Retention Tool: Your management team needs upward mobility or you will lose them.
  • Growth for Cost Management: You seek economies of scale with management, purchasing, and marketing.

Over to you. What steps will you take to mitigate growth-related risk before you sign those new leases?