Expanding your business? Before you do, be sure to do your homework first to avoid any possible risks. John Burfitt reports
James Eling, the founder of Marketing4Restaurants consultancy, shares the story of a bistro operator who was running a small restaurant so successfully that he expanded and opened up two more. But then something unusual happened.
The restaurant operator noticed that only one of the businesses at any given time was doing well, and the other two were not. So, he decided to rotate his attention between them—until after a few years he noticed the good restaurant was always the one he was in and the ones that were struggling were the ones he wasn’t in.
“Too many people in our game make the mistake that they think running a 30-seater means they are a successful restaurateur,” Eling says. “But when they expand, they discover there’s a massive difference between running a restaurant and running a much bigger one or a number of them.
“Running a 30-seater can be relatively easy as you’re hands-on across the board and giving it your full attention. But once you expand to a 60-seater or you open another place down the road, then there’s a whole range of different factors that you probably never thought about in the smaller place—and that difference can change the entire game.”
It’s a lesson Michelle Grand-Milkovic and her husband Michael Milkovic have been living every day over recent months since they expanded their 42-seat restaurant business love.fish in Rozelle in Sydney’s inner-west to sparkling new premises in the Barangaroo precinct of the city. The new harbourside love.fish seats 175.
“We’ve had a lot of success with the love.fish brand, but we had got to the point in Rozelle where we were ready for that new challenge and to grow,” Grand-Milkovic says. “We’d been offered new site opportunities before but once we saw the Barangaroo location, it just all clicked for us.”
Expanding the business to not only a new tourist-focused harbourside location, but to a space four times the size of the original restaurant, brought with it plenty of soul-searching along with intense analysis of the books and records that had made love.fish a success in the first place.
“Just because everything worked like clockwork in a 30-seater does not mean it will automatically work in a 60-seater.”—Michael Fischer, Michael Fischer & Associates
“The most important thing for us was to stay focused on the initial vision—how do we grow and upscale, and yet keep our core values and not lose sight of what made us successful to begin with?” she reveals.
“That led to other questions about how to maintain the quality of the food and the produce we work with, as well as the standards of the service we provide and our relationship with our staff. We grew our staff from a family of nine to a family of 40, yet we still had to maintain our core values.”
Maintaining an awareness at each stage of the growth of the business took some dedication, but Grand-Milkovic says it has kept them on track.
“It helped keep us focused but we were also taking on new lessons as business owners, in understanding that our roles had evolved as the business grew,” she says.
“As a small business owner, you get very used to be being hands-on with everything, from payroll and ordering through to being on the floor serving customers. We had to take a big lesson in delegating—knowing where our strengths were needed, and then learning to trust others to take care of the day to day. “In the end, we found it wasn’t just our business that had to grow, but that we had to grow as leaders, too.”
The main considerations when expanding your business—whether it is knocking out a wall and growing into the shop next door or into all-new premises—are the same, says Michael Fischer of consultancy Michael Fischer & Associates.
“If you’ve been successful at imposing your standards on a small business, whether you’re also able to impose your standards on a larger business is very much about your abilities as a business manager,” Fischer continues.
“If you want a good strategy to follow, I think it all boils down to one word: productivity. If you can work out a way to get increased productivity out of the components of your business as you expand, then you’re well on the way to making a monetary success.”
“Too many people in our game make the mistake in that they think running a 30-seater means they are a successful restaurateur. But when they expand, they discover there’s a massive difference … running a much bigger one or a number of them.”—James Eling, founder, Marketing4Restaurants
For example, if a restaurant is being doubled in size as it grows into an adjacent property, Fischer says attention must be paid to components that possibly won’t need to change, like the size of the kitchen, grease traps and toilets. Then what does need to be expanded needs to be identified, like staffing rosters, air-conditioning and other controllable expenses.
“You have to remain aware of the productivity for all components and what needs to be done with them if you are growing,” he says.
“Just because everything worked like clockwork in a 30-seater does not mean it will automatically work in a 60-seater.”
Fischer also adds that attention must be paid to why your regular customers like what you have to offer and how this might be impacted in larger premises. Also, will the new offering attract enough new customers and maintain existing ones? “You need to take a tough look at the demand for what you are offering,” he says. “With that 30-seater, you might be spot-on in fulfilling what customers want, and enjoy regular full houses. A 60-seater, however, might be spreading it too thin and make it look like your once busy business is now always half full. That level of analysis needs to be done thoroughly before any new lease is signed.”
As love.fish now enters its second year in its new premises, and enjoys great success, Michelle Grand-Milkovic says their decision to expand continues to pay off.
But she says decisions about expanding your business shouldn’t be made lightly.
“We had thought about expanding for a long time but the opportunity needs to be right and the location needs to be right,” she says.
“In our case, the new premises ticked both those boxes, along with a number of other components that just seemed to be in line. Add to all of that one huge leap of faith, as you have to be prepared to work harder than you probably ever have to make it all work.”