Three critical factors for successful restaurant growth

Written by Izzy Findlay

Written by Izzy Findlay

23rd April 2019

Three critical factors for successful restaurant growth

What levers can be pulled to ensure successful restaurant growth? We explore three examples, alongside some valuable lessons learned from the industry.

According to the Business Leaders’ Survey from CGA, 74% of business leaders in the eating and drinking out sector expect more business failures this year compared to 2018. With so many restaurant chains restructuring and closing sites over the last couple of years, what levers can be pulled to ensure successful growth? Why do so many brands struggle to create value as they scale?

Our experience with casual dining brands shows that there are three crucial elements to growing a restaurant. No matter the size of the brand or their growth trajectory, losing sight of any one of these will likely lead to problems further down the line.

This blog looks at the three key factors alongside some important lessons learned from major industry players.

1. Consistently deliver on ‘why’ you exist

Customers want an authentic experience. They identify a brand with its differentiating factors – for example how the eating-out experience made them feel, the values they share with the brand, the quality of the food and drink and the brand personality. As brands grow, founders move on, and leaders increasingly look to please shareholders, too often the original purpose and personality of the restaurant gets overlooked. The ‘why’ is lost.

As we outlined in our recent Brand Momentum Index, in today’s world, restaurants cannot exist without a strong purpose and personality. Therefore it is vital you have clarity on why you exist and maintain the very essence of this throughout your proposition as you grow. If growth will dilute your core values and purpose, you should not be doing it.

One to learn from: Jamie’s Italian

Once a disruptor to the casual dining space with customers queuing down the street, Jamie’s Italian expanded at pace only to fall into near bankruptcy. Along their growth trajectory, the brand lost sight of why they existed. CEO Jon Knight recognised that their unique selling point had been lost and tried to refocus the brand around Jamie. Customers across the UK revealed that they felt the food had become uninspiring, they were unaware of the sustainable, authentic sourcing of food and that the pasta was freshly made on site. The turnaround strategy aimed to get Jamie fully back involved – helping to create menus, posting restaurant dishes on social media – as well as listening and reacting more quickly to customer feedback. Sadly, it was too late.

2. Fine-tune your location strategy

Great caution must be exercised when selecting the location of sites. A detailed location strategy should be in use and thorough research into the customer base at any potential location. Too often, chains with an appetite to grow fast will overlook the finer detail, resulting in ill-judged site openings.

Whilst some chains are suited to a large number of locations, others suit just a handful. Generally, it depends on how broad a customer base they can appeal to. The proposition must work well there and the location must represent the brand. A new opening must positively add something to a brand portfolio.

Other considerations to include are whether a “one size fits all” approach to your proposition is best or whether you can adapt your proposition to the local market without taking away from the brand. Testing locations first, e.g. with pop-ups, can prove useful, and it is worth considering your approach to opening a new site – getting the level of marketing and publicity right to increase attention and ensure consumers get excited.

One to learn from: Dishoom

At the Casual Dining Show this year Shamil Thakrar, co-founder of Dishoom claimed “I think our success has been our measured expansion”. Dishoom has grown slowly with just seven sites since opening the first restaurant in 2010. Sites are selected carefully, in coveted locations, and there are still queues of people outside every night of the week. It is unusual that a casual dining brand with such popularity has not expanded more rapidly. Instead the founders focus on building the quality of the experience and the brand culture and limiting growth where it could be detrimental.

Complexity is embraced as a core part of the business model. Each time a new restaurant opens Thakrar will write an in-depth story with his team, giving great descriptive detail to the new site, imagining the equivalent in 1960s Bombay. They also build hype around a new opening through a well-planned marketing strategy. For example, the fourth site opened in Kensington with a ticketed dinner including an immersive theatre experience. When it comes to growth, they religiously stick to their brand mantra: ‘deepen and don’t dilute’.

3. Focus relentlessly on your internal culture

The best way to keep the customer happy is to keep staff happy. We see time and time again that restaurants with the best customer service are where employee culture is thriving. This means taking time to understand employee ambitions, giving them opportunities to meet these, investing in their development, identifying the best way to incentivise and reward, and creating a workplace and brand which they are genuinely proud to be part of. For some companies this may be about empowering managers, giving them greater incentives and autonomy by creating mini ‘businesses’ within the estate. For others this may be about greater flexibility and benefits.

One to learn from: Leon

The positive internal culture at Leon comes from a focus on the front line. Training programmes are created around what they want trainees to feel, think, know, as well as what skills they want them to have. Half of the staff enter a central ‘School of Magic’ where they spend four weeks learning about Leon, from its origins and history through to food principles, customer service, their farmers and suppliers. CEO and co-founder John Vincent says that training must be imaginative; at Leon they think about how they can make it fluid, fun and use gamification. Trainee feedback is an important part of the process to ensure they are getting it right.

Empowering restaurant teams is also key. Leon give trainers freedom to adapt training to individuals or groups as they see fit, to allow some creativity. Likewise, Vincent emphasises that HR must be seen as the fundamental job of those at the front line and built by them around their everyday experiences, rather than developed in theory by a central team. This means restaurant staff are truly responsible for the leadership, training, behaviours and performance management of their team and the head office role remains strategically focused.

As Leon continues to expand internationally, maintaining a strong internal culture and empowering staff will be key in ensuring excellent customer experience.

Key Takeaways

When considering the speed and scale at which to grow, there is no cookie cutter approach. Restaurant businesses will be suitable for scaling to different sizes, at varying speeds. A brand can be grown successfully so far as it can maintain an authentic, differentiated and quality customer experience.

First, you must be absolutely clear on why your restaurant exists, how it creates value, and have a well-defined vision for its future. Then growth must be planned in line with this and avoid diluting the brand. Don’t forget that value gained by scaling up, at the expense of excellent customer experience, will not be long-lasting.

As you grow, remember:

1. Consistently deliver on ‘why’ you exist
2. Fine-tune your location strategy
3. Focus relentlessly on your internal culture

By Izzy Findlay, analyst at Stone & River.

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