Are you truly ready to open a second store? First, ask yourself these 8 key questions.

 

How did I grow Romeo’s Pizza from one unit to 36? That’s the No. 1 question people have asked me over the years. They also ask, “Did you ever think it would get this big?” My answer to that second question is always the same—absolutely! I always had a plan to grow Romeo’s Pizza (romeospizza.com) into a major brand—and I always believed I could do it. But it took time, energy and focus.

Over the next few months, I’m going to reveal the secrets to successfully growing a pizza business in a series of PMQ articles. Maybe your goal is simply to open a second store, grow to 10, or even become one of the top pizza companies in the country. Whatever your ambition, this series of articles will help you understand what it takes to grow your business—and grow it successfully.

For starters, I’ve put together this checklist covering the eight key questions to ask yourself before you even think about opening a second store. I always warn people about opening a second store; it is truly the most difficult and risky time for your business. It’s the only time when the size of your company will literally double overnight. Hopefully, this checklist will help you avoid or defuse many problems on your way to success.

Not only must your first store be profitable enough to support you, it must also be profitable enough to support store No. 2 if/when that store requires more cash than expected, which is usually the case!

 

Can your business run day-to-day without you?

Before I opened store No. 2, I took an entire summer off from Romeo’s Pizza—well, almost. I worked about 10 hours a week during that period; otherwise, I let my team of managers run the business and put my systems to the test. How else could I find the weaknesses in them? It was the only way to determine whether what I had created could be duplicated with success.

If your store depends on you to make it work, you are not ready to open another store. And the only way to know for sure is to pull yourself out for a while and watch what happens. Developing a solid management team now will ensure success in the future. We have a saying at Romeo’s: “It’s always the manager.” Whether you’ve got a good store or a bad store, it always comes down to the manager. Is your manager good enough to take over?

Sean Brauser (far right) and his Romeo’s Pizza team get ready for the opening of a new store.

 

Is your first store wildly popular and profitable?

Simply put, if the sales or the profits aren’t there, your pizzeria hasn’t proven that it’s worthy of duplication. All that matters at the end of the day is net cash flow. Is your current store the market leader? Is it growing in sales and market share? Do you regularly hear from multiple sources that you really do have the best pizza in town? If you don’t, you are not ready to grow. A Xerox copy of a faded print only gives a more faded print. Not only must your first store be profitable enough to support you, it must also be profitable enough to support store No. 2 if/when that store requires more cash than expected, which is usually the case!

 

Do you have a marketing strategy?

This is critical to the success of multiunit operations. You need an arsenal of marketing weapons to increase market share and grow your sales consistently. A good marketing strategy incorporates planning, execution and measurement. It needs to address such issues as how to get first-time trial, repeat orders, long-term share growth, and whether to use print, TV, digital/social media or some combination of the three. Without a time-tested, works-every-time plan in place, you will be lost in the wilderness.

 

Do you have a written business plan?

Written business plans scare a lot of people. But you would never go on a cross-country trip without a map, right? Every business plan for a second pizza store should address forecasted P&L statements and cash flow statements; menu cost analysis and labor cost estimates; start-up costs; cash requirements; and cash reserves. You also need to calculate the ROI (return on investment), and your business plan should include a marketing plan and a competitive analysis for the new market. Finally, you’ll also need a break-even analysis and profit forecast based on different sales assumptions.

Once you have all of these things in one place, present your business plan to someone you trust. This person should be able to help you identify the plan’s strengths and weaknesses and spot opportunities and threats. Get your accountant involved and talk through all of the assumptions and the numbers. Without this written business plan, you will be flying blind.

 

Do you have systems in place to control food and labor costs?

In order to grow, your product must be consistent—and consistently good. Every single pizza must be created, baked and delivered to the customer exactly the way you want it. What looks like the right amount of cheese to Bobby looks different to Susie, and they both might be wrong. Establish portion controls, create charts and use scales for every item on your menu. This approach ensures that customers at all stores will get the same great product every time. You will also see huge cost savings with portion controls.

Likewise, you must create labor grids based on different sales levels. What do you think your labor needs will be? Overestimating will lose money; underestimating means you won’t provide the right level of service, and eventually that will lose money, too. Identifying that sweet spot is extremely important before you expand to store No. 2.  

Establishing portion controls and using scales to weigh ingredients are important measures to take to ensure consistency and control food costs.

 

Do you have manuals?

There are three must-have manuals. First is an operations manual, which addresses how, when and why you do everything that you do operationally in the store: opening and closing procedures and checklists; food prep checklists and order guides; par levels; hiring and firing procedures; and many more. This manual should be the bible of your restaurant, explaining how to run the store when you’re not there. It’s also a living document that never stops growing and evolving.

The second must-have manual covers food prep, detailing how to make every single item on the menu, including your dough and sauce. This manual must be accessible to all employees in the store as a reference guide.

Finally, an employee manual is mandatory. It sets the rules and expectations for every employee, outlines parameters and consequences, and establishes policies for issues such as social media use, cell phones, uniforms and tardiness. We include W-4 and I-9 forms in our employee manual, and each new employee must review the entire manual and sign off on it.

I always warn people about opening a second store; it is truly the most difficult and risky time for your business. It’s the only time when the size of your company will literally double overnight.

 

Are you fully capitalized?

Lack of capital is probably the biggest reason most restaurants fail. Not only do you have to budget for construction, equipment, deposits, training, inventory and miscellaneous costs, you need to set aside enough cash in case things go wrong. Store No. 2 can gobble up all of the profits from store No. 1, especially in the beginning. Are you financially prepared to survive for three to six months with no cash flow from store No. 1? Have you considered the cash drain if sales don’t meet projections? I have seen store No. 2 take down store No. 1 too many times, and then the company goes out of business. You must have enough money to get you through the bad times in order to “grow smart.”  

 

Are you prepared to work harder than ever before?

With store No. 2, the daily pressures will double. The headaches will double. The late-night calls and employee issues will double. You must be mentally ready to handle this added stress and stay focused on the goal. I would love to say that I’m always calm, cool and collected, but, unfortunately, I’m not. But I am 100% committed to the business and to its success, and 100% is what it will take from you. That “whatever-it-takes” attitude is the only route to success!

Before opening that second store, use this checklist and ask yourself these eight questions. If any one question yields a “no,” start focusing on turning it into a “yes” before you move forward. The difference between success and failure in this business can be a very thin line, but if you start out on the right path, your chances for success are far greater!  

Sean Brauser is the founder and CEO of Romeo’s Pizza (romeospizza.com), a 36-unit chain headquartered in Medina, Ohio.