Well, who doesn’t like that bit of extra sales that bring in more profits? Irony is not many businessmen are able to go beyond a single establishment that they can keep under their direct control and unlock growth by expanding to more than one location of business. An owner’s involvement in the day to day business activities, with each activity being approved hands on by him, restricts his ability to replicate a successful business model though he/she can see the potential opportunities available in other locations as well.
For example, consider a successful restaurant owner, who over the years has maintained great food quality, provides the best of services, a great environment and a disciplined staff. How does he manage all that? He keeps a tight control over everything that happens in the restaurant from purchases of vegetables to meat to cutlery, maybe handles all the cash, keeps a check on customer interaction, markets the restaurant, takes on the spot decisions, decides on discounts depending on the customer, i.e. basically taking every decision for running his restaurant. Now, assuming the restaurant is famous and attracts customers from the other side of the town. So, there is a good brand image, potential demand plus the owner has the resources to open another branch, but the owner may be reluctant to open a new restaurant as he is not clear on how to control both locations and ensure the same quality. He may find a partner or maybe through his family, expand into more locations but as soon as we extrapolate this growth problem to more than a dozen locations, the same challenges start appearing
Strong & active on the ground control is possible, if your business is confined to a smaller operation and you can mentally or physically check every aspect of your business. But the question is how to access control if your business is growing? To answer this question for any growing business, any owner needs to understand that instead of taking these decisions, he needs to set up parameters on “HOW” the decisions are taken.
The foremost way of doing the same is controlling the Controller. In the case of the restaurant, a quick solution is to hire, intern/train a manager to look after your operations at the other restaurant and keep a check on activities through him and delegate him enough authority to take routine decisions. For e.g. in case of how much discount to be given, the manager can be authorised to provide a maximum discount over a certain amount of bill. He can be taught how to interact with the customers and various other aspects of the job. In the above case, the toughest challenge is to get a person you can trust to run the place; the biggest risk in such a situation is if the person leaves; all the investment done in him goes waste while putting the business in a huge risk.
We also need to prepare for a scenario where the manager may not put as much effort into running the restaurant as you do even if you give him incentives or sweat equity.
To unlock value in your business while minimizing risk, a lot of homework needs to be done before you start expanding; this homework can be considered an investment to help unlock the value of the business and help it grow to may be more than 1000 locations. The first thing is to define and break up the processes and develop a framework for how your business is managed; this is to ensure that you manage the business through this framework and not through day to day direct involvement. You still would be actively involved but in managing the key parts on the framework. Though this is applicable to most of the businesses, for some it’s easier than others; it’s like defining the process to replicate art again and again, so true, it’s not an easy process.
Once a framework is defined, a system can be developed to manage each process. This system would be a solution of variable measurements, controls, escalations, delegation, empowerment, etc. Once the system / framework and its control is worked out, it is put into action through different productivity and communication tools.
Hence, the framework management involves using productivity tools, CRM, project management tools, policies & procedures, work place instructions, clear job descriptions, roles and responsibilities, KPIs, performance incentives, etc. and varies from business to business.
It is this system and its implementation that needs to be worked on to earn higher profits and generate higher sales, be it through opening more restaurants elsewhere or starting a franchise chain.
Just as the daily operations need to be dynamic with the changing environment, the framework that you have set to operate the business will also evolve accordingly.
One big mistake generally done is underestimating how deep one want so dig to define the processes; if we dig too deep, it would take too long and become cumbersome; if we don’t, the framework does not remain effective.