Good Growth: The Art of the Second Location

When Laura Moore opened a second shoe store in Austin, Texas, she went about it all wrong.

She
had no full-time personnel at the first location of InStep to operate
the store while she supervised the opening of the second. Also, Moore
didn’t know what to ask her real estate broker when she went looking
for a second location; within a year, the biggest tenant of the upscale
strip mall where she set up shop moved out and two other retailers
followed suit.

“We had this expensive space in a great
part of town, but all the customers were going across the highway to
shop where there was more stuff,” Moore says.

She
learned the hard way that it’s not easy to expand to a second location
– unless you have a clear plan with specific objectives. A new shop is
like another startup – even if it’s part of an existing structure.

So how can you open a second location easily and thrive? Follow this advice.

What’s the plan?

Have
a business plan for each office, advises Robbie Ferris, CEO of SFLA
Architects, with three offices in North Carolina. “Each office has a
very different function. What works in one office doesn’t necessarily
work in other offices.”

Based in Fayetteville, the
honchos at SFLA talked for years about opening a branch in Raleigh. But
they didn’t do it until the market was ripe for the picking.
Specializing in designing schools and university buildings, SFLA opened
its Raleigh office when it saw “a tremendous need for schools” there,
Ferris says.

“The decision was very easy once we looked at the market and how it was changing.”

Don’t hesitate, delegate!

You
can’t open a second location if you have to manage the first. Imagine
juggling bookkeeping, inventory and customer relations while answering
contractors’ questions about building your branch. Impossible.

Your
second location needs an entrepreneur’s eye – so be sure you have
operations in place to supervise, run and maintain existing offices.
Roland Spongberg has four or five managers in each of his 36 El Pollo
Loco restaurants in California, plus four district managers. Having
reliable staff who can supervise each store is crucial because he, like
you, can’t be everywhere at once.

“When we send a
district manager into our restaurants, we like him to be there for four
or five hours, so they can really see what’s going on,” says Spongberg,
who also hires “secret shoppers” to hang out in his eateries and report
on service, food quality and cleanliness. This way, Spongberg doesn’t
have to be on-site at existing outlets when he’s scouting new sites.

Trust your instinct…

When
Spongberg interviewed to become a franchisee for El Pollo Loco in 1988,
he agreed to open at least five locations. The first was in Long Beach,
where he lives – he was familiar with the area and knew where people
were likely to grab a meal. It was pretty much a no-brainer.

The
choice for his second location, in Lakewood, Calif., wasn’t as
familiar. “Each time you open a site, you learn things that are
important to opening a successful restaurant,” Spongberg says. “There
are certain things you look for: demographics, daytime population,
traffic, access. It can be a little frightening.”

At the
start, Spongberg asked the head of El Pollo Loco to ride around with
him, scouting locations. “He’d say, ‘Here are some of the things you
may not see, here are some of the things we look for,’” Spongberg
recalls.

Eventually, you’ll develop your own gut feeling about finding the good spots to set up shop. When you do, trust it.

“Everyone
calls that down-deep feeling something different, but I just say trust
it,” says Ferris, whose firm employs 55 people and handles as much as
$450 million worth of projects at any given time. “We talked about
opening a Raleigh office for a long time and it didn’t feel right. When
it felt right, we did it. We always know when we’re making a mistake,
and we usually know when we’re doing something right.”

…but back it up

Don’t
rush in where angels fear to tread if you’re looking at unfamiliar
turf. Do your homework, consult a local real estate expert, know where
and what you’re getting into.

And search for synergy.
When Moore finally moved her second shop across the highway to the more
populated shopping center, business boomed.

“I have
three managers who’ve been with me for seven years now,” says Moore,
whose initial second location fiasco gave her the push she needed to
get her business grounded. She feels great owning two stores.

“It’s a little bit of a status thing,” she admits. “You have two stores, you’re growing. You’re getting bigger.”

One store at a time.

Lynne Meredith Schreiber is a freelance writer at StartupNation.

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