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The second Tupelo Honey Cafe opened in 2010.

Double The Locations, Double The Success?

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What does it take to open a second restaurant?
Expansion

Galen Zamarra opened Mas (farmhouse) in the West Village in New York in 2004 and turned this high-end French Provençal eatery into a success. Seven years later, he faced a major decision that many chef/owners confront: Should he open a second restaurant and if he did, how could he maintain the quality of the first?

Finally determining that the timing was right, Zamarra is opening Mas (la grillade) in the West Village this summer. Before expanding, Zamarra, a 35-year-old graduate of the Culinary Institute of America and former chef at acclaimed Bouley’s in New York, wanted to make sure the first Mas was on solid footing and wouldn’t be weakened once his attention was split between two establishments. Over the years he strengthened his eatery by altering the menu, updating the décor, refining the service style, and hiring managerial staff.

When Zamarra first opened Mas, he virtually ran a one-man show. “I cooked, butchered, made sauces, hired staff, received goods, went to markets, ordered, and served as bookkeeper,” he says. Now the restaurant runs more smoothly because he delegates tasks to general manager Christopher Bender who will help run both restaurants and sous chef John Wells who is involved in menu development, ordering, kitchen supervision, and expediting.

Zamarra said the timing was right to expand for several reasons. He developed a culinary concept of grilling over an open flame using local oak and apple woods that exhilarated him. Secondly, he has outgrown the cramped confines of his kitchen and will have more opportunities in the new, larger kitchen. And lastly, he wanted to extend his brand.

Proximity also played a role in choosing his new location. The new eatery is two blocks away from the first, making juggling both establishments easier. “You can’t be in two places at one time, but I can run over and be here in two minutes,” he says.

One of the major hurdles of expanding involves obtaining the necessary financing. Zamarra solved that problem by obtaining a $3.3-million SBA loan, which enabled him to acquire the building and construct the second eatery. In New York City, where rents can escalate rapidly, owning a building avoids massive rent hikes.

Despite his expansion strategy, Zamarra is concerned that running two restaurants could dilute the original’s quality. That’s why he took seven years to place Mas on solid footing before expanding to his second restaurant.

Planning for a national roll-out

When entrepreneur Steve Frabitore acquired the Tupelo Honey Café (which debuted in 2000) from original owner Sharon Schott in 2008, he immediately saw the potential for expansion of this eatery specializing in Southern cuisine in downtown Asheville, North Carolina. Tupelo was busy for breakfast, lunch and dinner but it attracted mostly tourists since few locals had the time to wait for a table.

Raising $600,000 from a silent investor, Frabitore opened a second Tupelo Honey Café in February 2010. The second Tupelo is located in a residential area, a South Side strip mall in Asheville, six miles from the original. It attracts families and locals, not tourists. “We wanted to prove that Tupelo had legs, could attract locals, and wasn’t a one-trick pony,” he says.

The locals stay 20 percent less at the second Tupelo than diners at the original (tourists have more time on their hands) but spend 20 percent less. Moreover, locals are too busy to dine out at breakfast so the second one is open 11 a.m. to 9 p.m. while the original serves breakfast starting at 9 a.m. and closes at 10 p.m. weekdays and 11 p.m. weekends.

The second Tupelo has 170 seats and is three times the size of the original. Frabitore, who was an established entrepreneur, not a chef, created a solid management team that includes eight chefs, a director of store operations, a controller and a general manager at each café. Each general manager can run the front and back of the house at each restaurant.

Opening a second Tupelo Honey is part of a strategic plan to see if the concept will work nationally. In 2012, Frabitore is considering opening a third Tupelo in the Raleigh/Greensboro, North Carolina, area. “We’re looking to create a viable brand that can be expanded,” he explains.

Doing due diligence

To expand to a second business, chef/owners need to do extensive due diligence, explains Andrew Freeman, who runs an eponymous restaurant consulting business in San Francisco and New York. Research must include making sure financing is in place, researching whether the new location can attract enough of a clientele, and determining whether the owner is ready to make the personal commitment necessary to oversee two eateries. Financing issues can be eased if a hotel chain or investor offers backing, which sometimes happens with successful or “star” chefs.

One chef who made all the right moves when he expanded is Tyler Florence, the Food Network chef. Florence owns Wayfare Tavern in San Francisco and then opened El Paseo in Mill Valley, California.

Florence hired a lead chef for each restaurant, trained them meticulously and collaborated with them on the menu so each could run the restaurant if Florence were unavailable. Moreover, he has general managers who run each café independently.

Expanding often changes the nature of what a chef/owner does. “Most do less cooking and more managing,” Freeman says. Emphasis changes to talent acquisition and “finding someone who can cook as good as you and then training staff,” he says, adding that ultimately, opening a successful second business is about “commitment and having a leadership team in place.”

Many owners fail to understand how expanding changes the equation of running a business. Everything is multiplied, Freeman says. Staffing costs rise, and benefits increase. When owners move from two to three cafés, they may have to consider hiring an HR director or benefits administrator.

Entrepreneurs can use the dishes that have been most successful at their original eatery and turn them into moneymakers, explains Matthew J. Samel, an associate professor at Johnson & Wales University’s Center for Food and Beverage Management, which is based in Providence, Rhode Island. The dishes that are “low in cost, high in profit and easily executable” can be duplicated at the new eatery. Moreover, a limited menu with these dishes can reduce ordering needs and streamline training.

Avoiding the traps

But that doesn’t guarantee success and expanding to a second establishment can be a trap for restaurateurs, Samel points out. Many owners don’t see the traps: failing to obtain a second liquor license; inability to recruit and manage the expanded staff; ignoring demographics to see if a new audience is out there; and not establishing a long-range plan to expand.

Moreover, spending 75% of their time at the new locale can lead to absentee ownership at the original and a loss of business. One way to minimize this risk is to collaborate with a business partner. The ideal candidate could be a former regional or district restaurant manager who understands operations and running a business, Samel suggests.

One key decision to expand involves deciding whether the owner wants to duplicate the original menu and concept or try something new, he adds. Duplicating is easier because it’s based on the original’s success. Another major issue involves proximity to the original. If the owner expands next door, it makes it easier to commute between the two. But sometimes a new location can tap a new audience or demographic.Opening a new location further away and not in proximity to the first can tap a new audience.

Running two restaurants also enables owners to create incentives for employees. For example, staff can receive bonuses by averaging the highest check in each eatery, making it a competition.

Operating two successful restaurants at once can yield several benefits. The obvious benefit is increased revenue and profit. “Where else can an owner obtain 5 percent to 7 percent return on their money?” Samel asks. Owners tap their love of food and beverage, can experiment with new cuisine, reach and satisfy more guests, employ more people and give back to the community.

Succeeding at running two establishments entails relying on competent, trusted staff. “You can’t do it alone or duplicate yourself,” reminds Samel. Hiring a business partner, developing a general manager and relying on experienced staff are critical to success. “The biggest detriment to success (of opening a second eatery) is turnover,” he says.

Despite his penchant for expansion, Tupelo Honey’s Frabitore cautions restaurateurs to “not be enamored of growth.” The objective should not be to open five or six restaurants but to be “maniacally focused on food quality, service quality and overall guest experience. If you own six restaurants and forget to look at customer’s comment cards, that’s when you run into trouble.”

By Gary M. Stern