Gearing Your Chain For Growth
Some of you chain specifiers already have gone through growing pains. Some of you haven’t—yet. Say you have a successful concept. You build a second store and maybe a handful more in your home market. So far, so good. Your dealer, your installers—everyone’s on the same page and in the same zip code. Then you build one out of town. Maybe you franchise a couple in the next state. Now you’re building more, faster. Your supply lines get stretched. You’re building to different codes in different places. Maybe you’re building in different climates, and your costs are changing. What happens when you go big time?
Growing to the next level is not just a bigger version of what you’ve been doing. Who knows the local codes? Where do you go for equipment maintenance in different cities? Who can handle the logistics of storing, staging and delivering what goes into a store?
“In the beginning, when you have a couple of stores in development, maybe five or seven a year, everything is an event,” says David Biederman, Chief Development Officer at Denver-based Smashburger. “Everything is very much ‘one-off.’ Then, as you start to grow, everything becomes more of a process and a system, and your approach changes.” Biederman has seen Smashburger go from its first unit in 2007 to a few more local units to more than 300 stores in 34 states and overseas in 2015. In recent years, Smashburger has been opening 60-80 stores per year, both franchised and corporate units. In the beginning, Biederman says, he was the development department. Then, as growth picked up, Smashburger added real-estate, construction and design departments and coordinators. No longer could people walk around with information “in their heads.” People needed standards, operating procedures and documentation—a more formalized process.
Almost from day one, Smashburger began thinking about future expansion and needs, he says. “We always had an eye on managing overhead, and we determined that we would retain certain capabilities internally and delegate others externally.” For example, he says, an internal person retains control on all of the finishing materials because concept identity and branding need a watchful eye.
“To preserve the look and feel of the restaurants, we had to create an infrastructure to help ensure the franchisee does it the way it’s intended. You want to set up processes that minimize opportunities for mistakes or missed steps,” Biederman says. The company tries to streamline points of contact, too. “We set up our system so that a franchisee can build a store by making five phone calls.”
Freight also has to fall under a watchful internal eye, and numbers can vary a great deal depending on who’s building where. A lot of equipment doesn’t need to be routed through a series of locations—it can be delivered from a factory to a job site or any designated location, such as a forward staging area, he points out. “The KES [kitchen equipment supplier] partners are important in that process,” he says. They handle coordination, telling the factory where to ship, deadlines and due dates, where equipment might be stored/staged, who will load the truck to deliver to the job site, who installs the equipment, etc. And they deal with general contractors. “We decide [these details] on a site-by-site basis.”
Millwork is a special case, he notes, and might be for many operators because it is so heavy and expensive to ship. “For millwork, we had to diversify suppliers geographically and also secure [supply in] the pipeline,” he says. So Smashburger now has a second millwork supplier in another part of the country to reduce freight costs. But other than that, “We have had the same millwork since store No. 5,” he notes. “We are down to one KES, who has been with us since our seventh store. That’s been one of the keys to our success—controlled growth, and the fact we’ve had many of the same suppliers from the beginning.”
At Food Concepts Int’l., parent of Abuelo’s, V.P. of Properties Dickie Overstreet has navigated the same kind of obstacle course “from store No. 1” in 1989 to No. 45 under construction at press time. The principles have been similar, but the logistics have been a little different. The first store opened in Amarillo, Texas; early on, Lubbock, Texas, became the corporate home. The first three stores were opened with used equipment, Overstreet says, and, in that part of the country, “Every place is a two-hour drive from every other place.” Amarillo, Lubbock, Abilene, Arlington—he recites a string of locales, adding that in Abuelo’s case, a “local” dealer was never really local. Now the chain stretches across 14 states, and Overstreet says they still retain some of their suppliers from the early ’90s. “They earned our business and continue to do so.”
Abuelo’s first equipment dealer, as geography would suggest, was a regional company about six hours from Lubbock that was heavily into logistics for many clients. To this day, the same company handles logistics, warehousing, assembling and consolidating bulk shipments for construction sites, including transportation, delivery, installation and other services. As expansion continued and different markets required different details, refining the plan and processes became key. Overstreet says hiring a kitchen consultant and gathering of all the suppliers and engineers into one room for a meeting led to the creation of a new, smaller modular floor plan that everyone understands clearly, which reduces installation issues as the chain grows. The logistics company fields a dedicated team that knows Abuelo’s system and equipment inside and out.
As Biederman and Overstreet both note, managing expansion all boils down to forethought, planning and attention to details. “If you don’t have a plan, it’ll be a mess,” Biederman says.
Plan And Communicate
For many chains, the “plan” is dusty. The last half-dozen years have seen slow or no growth for many chains. Staffs have shrunk, and the organizations’ skills and knowledge base have eroded. “A lot of people are getting caught reramping up and needing to rebuild some skills,” says Andy Simpson, Partner at Results Thru Strategy, a Charlotte, N.C.-based consulting firm that specializes in foodservice operations and their supply chains.
“Expansion, first of all, always comes down to organization and comprehensive planning,” he says. “We work with chains looking at the basics of organizational strategy. New-store opening is a detailed process, and it requires detailed documentation. You need clarity for everyone involved.” In short, you need to write detailed standard operating procedures. You don’t want specialized knowledge just residing in someone’s head.
The next thing, Simpson says, is an intelligent budget. “It sounds silly, but even fairly large companies have disorganized budget processes and tracking. It takes lots of time to shape details, which are even more important when dealing with franchisees.”
Looking For Specialists
With a plan in hand, how do you assess your supplier strategy? Often, your existing vendors and/or local vendors in your new market can grow with you, Simpson acknowledges. But you need to look carefully at their capabilities, and you have to consider whether you have time for existing suppliers to ramp up or new local sources to get acclimated to your needs. All things considered, you might want to look for a KES or logistics company that not only has geographic reach but also has experience with the special needs and quick pace of foodservice chains.
Another thing to consider as your requirements grow and the stakes rise: If you have single-source suppliers, you might want to reexamine that vulnerability. What if a tornado wipes out a factory, or a labor strike closes your supplier? Simpson suggests, “You don’t want single-source suppliers for anything. You’ll have go-to people, but no single source.”
If you don’t have a bid process in place, you’ll need to develop one. “From a corporate standpoint it makes sense, and it forces you to put bidding processes in place,” Simpson says. “As you expand out of your region or start franchising, you need a bidding process for equipment, construction and other services and supplies.”
Again, detailed communication is key, from bid documents right down to invoices. Have all of the relevant information right on the document; for example, invoices should show a contract number, the balance already paid and the balance remaining. It’ll save you a lot of paper shuffling. “Get a single point of contact for your supplier,” Simpson advises. “Make clear the requirements.” If you need set delivery times, specify them ahead of time.
“One thing to consider: With everything you write, assume the person knows nothing about what you’re talking about.” Make your documents complete and self-sustaining so all of the store operators, franchisees and suppliers can access the same information quickly. “Do you prefer email contact vs. phone? Then say so,” Simpson says. The principle is simple: If you don’t tell someone exactly what you want, what are the chances they will know?
Another thing you might not have needed just operating in your hometown market: a shared portal on your website for suppliers. It makes coordination among various suppliers easier, it works 24/7 and it survives any personnel changes or other complications. Make it easily navigable and ensure suppliers can share specs, inventory, schedules, delivery needs/special instructions as well as any additional information they’ll all need to access while still protecting details that only certain sources will need.
(Note: The new and developing AutoQuotes-enabled FEDA Data Interchange, which tracks all of the equipment shipments in process and shares the information among approved parties, could have a huge impact on project logistics, timelines and communication.)
Not A Bigger Dealer
For an increasing number of emerging chains, going with a national KES or logistics management firm is the way to go. Growing away from your home market, or “the jump to hyperspace,” as Concept Services CEO Hal Schroeder puts it, has many moving parts. “Local chains grow up with a local dealer and a salesman. … A local dealer generally is a jack of all trades. He does some of a lot of different things—smallwares, equipment, cash and carry.
“But what happens if I’m a chain going from Miami to St. Louis? We don’t know the building codes, mechanical codes or health codes in St. Louis,” Schroeder, based in Austin, Texas, adds. “How does my local dealer help me? He doesn’t know St. Louis. What do we do about installation? The Miami dealer has to ship to St. Louis or manage whoever does it. So then the chain realizes it needs a national supplier—not just a bigger supplier, but a national supplier, someone who has a lot of experience with chains.”
A bigger regional supplier often can serve your new market well, of course, and that might be just what you need. But if you’re expanding quickly into many markets, how many new regionals will you need to bring up to speed as you go? As you expand, you’re really no longer just buying materials and equipment. You’re contracting the entire store-opening process.
“As you expand geographically and beyond what you know, you find consistency gets to be more critical,” says Ursula Vermillion, Executive V.P. at The Wasserstrom Co., Columbus, Ohio, an equipment and supplies dealer and KES/logistics firm that has a long history of tending to national chains’ needs. The processes have to be nailed down and repeatable as much as possible, she notes, whether growth is corporate or franchised. A supplier with a national scope has big advantages and lots of contacts in lots of places.
Speed, too, is important. “Speed to market now is much more important than it used to be. Chains don’t have the luxury of time. Maybe the operator is building a freestanding unit, or maybe doing an inline store or remodeling an existing space,” she says. Experience following timelines and meeting deadlines is important. “It used to be an operator had six or eight months to open a restaurant. Now they do it in 90 days,” Vermillion adds. That leaves precious little time for learning curves.
How do you speed the opening process? Different suppliers might have different systems, and that’s part of what you need to think about. “Right now, there is every flavor under the sun for managing expansion,” Vermillion says. “We still believe the best, easiest, most cost-effective way is to assign a project manager who stages the package and does the delivery and installation.”
You don’t want to bounce from one phone extension to another. You want a team who knows your concept, specs, materials and system as well as you do. If the KES assigns an internal team dedicated to your concept, “that is definitely a time-saver and cost-saver,” she says. “When a team does the same thing over and over, they get good at it.”
Schroeder cites the same points. “When you start building a bunch of stores, we have a team dedicated to that concept. That is all they do. They are logistics experts.”
The familiarity with the chain drills down to nut-and-bolt levels. “A chain will have its own nomenclature for things, for how to do them,” Schroeder says. A dedicated team learns that language and knows what you mean as soon as you say it.
“For example, a chain has a standard 60-in. sandwich table. They call it a No. 1 unit, and we understand that terminology immediately. When someone says ‘Store 97 in Omaha needs a No. 1,’ we know what that means.” That kind of efficiency makes a big difference in time and accuracy.
So, with all of this in mind, how do you start? “Pick up the phone,” everyone says. Call your peers. Call industry contacts. Tell them where you’re going and ask them for advice. “When we started expanding into new cities, I knew some people,” Biederman says. “We looked for people who knew chains. I knew some guys locally. We met some other people through manufacturers. To approve a vendor takes six months minimum. Vetting them, understanding them, having them do some work for us, etc.”
What’s the best way to network? “Set aside pride,” Simpson advises. “Ask. Who do I need to talk to? It’s a small community, and people are helpful. Don’t be shy. You’d be surprised what people will share.”