Growing your business is the primary focus of every entrepreneur. Whether growth occurs by way of increasing sales and cash flows at existing business divisions or via acquisition and expansion, the challenges faced are often strikingly similar.
That being said, let’s examine for a moment the prospects and hurdles one will often face when buying a new restaurant, through the lens of a turnaround CFO.
When negotiating the purchase of a new restaurant, the extent of any due diligence process will vary. Often, the final selling price will have some known or perceived deficiencies “baked in” which may provide the appearance of a good deal, with operational issues or problems lurking just below the surface.
Additionally, every business owner has his or her own unique style and process they will endeavor to impart on the newly acquired venture. Successfully assimilating a new restaurant (or restaurants) into your existing organization will take many of the same skills required of interim CFOs or other leaders tasked with turning around a struggling business.
Fortitude and Grace to Make Tough Decisions
Whether it is evaluating and adjusting an inherited employee base or re-opening negotiations with existing vendors, tough decisions will need to be made.
As mentioned previously, the desire to mold a newly acquired operation in your image is natural. You’ve built your business through the growth and experiences you’ve had as an owner/operator, which have undoubtedly informed the processes and procedures you now employ.
Those time-tested processes and procedures have borne fruit for your organization and should not be abandoned in face of new, external growth. As the internal – and most often external – face of your business, it will be critical that you demonstrate the fortitude and grace necessary to make the tough decisions.
Disrupting the status quo is never popular. However, to grow or even maintain existing cash flows, sharp negotiating and workforce management skills will be required.
Efficiently Manage Working Capital
The cash flows from your restaurant(s) are the life blood of your business. Gaining control over the cash flow pipeline of a newly acquired restaurant is therefore key.
From day one, the faster you can identify weakness and cash flow vulnerabilities and adjust, the greater your chances of success. The price you pay for a new restaurant – in terms of real dollars – is rarely the full cost of acquisition. Reinvesting in the operation with hopes of securing greater future gain is all but guaranteed.
As the (often debated) saying goes: “You have to spend money to make money.” Focus on the areas where improvement will yield the greatest return and allocate your precious working capital to those areas.
More Communication, Not Less
Transition is difficult, both for new owner and existing employees of an acquired business. Uncertainty can lead to trepidation and an uncomfortable working environment.
With competition for quality talent at levels not seen in recent years, it is more important than even that a new employer immediately set the tone from the top. Your people will want to hear from you. The more communication – especially in those early days – the better.
By showing strong leadership and passion, you will energize and motivate, as well as send a message to those who may not have been “good” actors under a prior regime. Be seen, be heard, and be a leader.
The challenges faced when adding a restaurant to your organization will be varied. Taking the approach of a CFO entrusted with turning around a struggling operation will provide you with the perspective and wherewithal to get the job done, while planning for the future as well focusing on the needs of the present.
Concannon Miller has nearly 50 years of experience in working with restaurateurs, including advising on new restaurant opportunities. Contact us for assistance if you’re considering purchasing a new restaurant.