Open Three and You're a Mini Chain

By: Lloyd M. Gordon, President
GEC CONSULTANTS, INC.
Skokie, IL 60076

Part III

So now you really think it's time to become a mini-chain? Over the past two months I've presented my views on what's required to become a mini-chain, the technicalities, the philosophies and the human factors. This month I would like to conclude by tying up the package with a beautiful ribbon and entitling it "The Strategic Mini-Chain Plan."

This plan should address the following ten major areas of strategic planning and provide answers to many of the questions inherent in planning the development of a mini-chain.

1. Have a strong restaurant concept. Is your basic restaurant concept profitable? If it is, it can be expanded, if it isn't, think of revising it or forgetting it.
2. Have a strong personal desire to get bigger. Do you have the time, the emotional where- with-all and the tenacity. to put the package together and see it through to its successful conclusion?
3. Establishing a short and long term financial strategy. Do you have your financing in place to adequately cover all of the cost of producing a mini-chain without jeopardizing the cash flow of your existing restaurants? First, in the short term what is your strategy to finance the first unit of the chain, what assets are being pledged? In the long term is public money being sought? Are you opting for private subscriptions or Initial Public Offering IPO)?
4. Have a method for physically expanding. Have you examined every aspect of your current concept and operation procedures so that you can replicate your restaurant with ease and precision? Have you pictured the developmental organization needed to find sites, plan facilities, purchase equipment and supplies and to expedite construction and to get the grand openings effectively completed?
5. Have a strong training organization. Do you have the training materials in place which are necessary to operate your restaurants without your personal attention? This requires you to have an operations manual and procedures to amend that manual as the need requires? It also, means that you have adequate numbers of trainers to carry out these training duties.
6. Have a strong and dynamic human structure. Do you have key personnel developed to expand your vistas and undertake activities that you now personally handle? What activities do you wish to reserve for yourself? What is the role of the founders in the management structure? How much of the management is composed of founders, how many are shareholders and what percentage of them have no financial interest? Is your ownership distribution the best possible to achieve your long term success?
7. Have a well-developed system of controls. Have you revised your controls for optimum efficiency in producing bottom line cash flow by minimizing poor purchasing practices, waste and theft? Are your controls easily replicated so as your chain expands these systems can produce day-to-day analysis of costs and sales? It is best to have a central location established as your home base so that corrective action can be summoned quickly and conveniently to take action when the needs arise.
8. It is essential to have a well thought out marketing plan. Do you have a marketing strategy for your mini-chain? Does the strategy take into account other new target markets that may be different from those that you initially catered to? Are you knowledgeable of the most effective media to use to market this mini-chain vs. those best for a single establishment? Do you have a realistic budget established for pursuing an effective marketing strategy? Do you need to consider raising outside funds for marketing maintenance? If you could sustain long term marketing over a period of time would you benefit from greater product identification and firmer customer loyalty?
9. You have to get professional tax strategy advice. Have you planned for the development of taxation strategies so that as the chain grows it benefits from the greatest possible tax savings and accrual of capital? You have to provide for the establishment of a tax advisory group that will keep you alert to all changes in the tax codes and mandates on local and national levels.
10. Create a knowledgeable Board of Directors. Finally, you need a savvy Board of Directors to help steer your enterprise toward established goals. It is a daunting task to establish a board that is (1) responsive to the needs of the company, (2) with the expertise among its members to understand and address the situations that arise and (3) to respond effectively and promptly to situations to minimize negative impact and to maximize positive potential.

If your responses to the above questions are generally "yes", (this gives a glimmer of hope that you are prepared to launch a mini-chain), then you have a more than average chance of successfully operating a mini-chain. However, to improve your chances even further, you should evaluate every "no" answer. Look at each negative answer carefully and make a list of what can be done to convert it into the positive column in your score keeping. This may require the use of a professional consultant or outside expert to provide the detailed insight and experience to convert a negative into a positive. However, not every entrepreneur can accept this help.

My experience shows that there are three types of executives with distinct attitudes that may influence their success in developing a mini-chain.

First, are the persons who are convinced that they can do anything, at any time and any place, all by themselves without thought for outside assistance. These constitute a small percentage of executives who manage to get their mini-chain up and running. Often, later they may experience various problems in the ten areas described previously. These executives devote constant attention to the weaknesses in the linkage of the chain, stretching their personal resources to the breaking point and threaten the mini-chain's long term success.

Second, are people pretty much the opposite of the first type. These individuals are fearful of their ability to go off on their own in mini-chain development. They are faint hearts who have the skills but are unsure of which of the ten areas they really can handle alone. They hesitate to make decisions and when they finally do decide, they agonize constantly if what they are doing is correct. This tends to exhaust and demotivate them. This is unpleasant for themselves and those they work with. These personalities often decide not to pursue an expansion policy.

Third, are the self-confident types who maximize their strengths and attempt to minimize their short comings so that they can move forward to accomplish goals. Most mini-chains are developed by this type of individual. They are the visionaries who examine all ten areas carefully. Then they prepare a course of action to accomplish a plan maximizing their special talents in any of the ten areas. But sensibly, they seek out help and advice in those areas in which they have less talent and experience. In the final act, they produce a play that runs on and on called the "Successful Mini-chain." If you believe yourself to be that sort of person, you to can become a successful player in the mini-chain business community.

Mr. Lloyd M. Gordon, President of GEC Consultants, Inc. has an MBA from the University of Chicago. He has concepted more than 390 restaurants and has been consulting for over 44 years. He helps people enter the restaurant industry, points the way to profitability, and helps keep them successful. To discuss "Open Three and You're a Mini Chain - Part III" he can be reached at 847-674-6310.

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