Why Growth?

Let’s take another step back before proceeding.

Do customers sometimes ask whether you’re part of a chain? Do you get requests for a franchise? Are customer inquiries coming from outside the area you currently serve? Are suppliers offering volume discounts you aren’t large enough to take advantage of? Are competitors growing around you or crowding you out? Are good employees looking for opportunities you can’t currently give them?

Maybe you simply see an opportunity to make substantially more money, build a more valuable business, or create something that depends less on you.

Whatever brought growth to mind, we’ve probably heard some version of it before.

But the reason you started thinking about growth isn’t necessarily the reason you should grow.

Why Not Grow?

There are plenty of reasons owners resist growth. They may be comfortable with the business they have. They may worry about losing control, taking on debt, hiring more people, risking what they have already built, or simply creating more work for themselves.

Those concerns shouldn’t be dismissed. Sometimes deciding not to grow is exactly the right decision.

But not always.

We’ve advised clients we believed should grow who decided not to. We haven’t always been able to convince them.

One that still stands out to me is Nespresso, a Nestlé company and an early pioneer in espresso coffee service. Around 1990, after expanding in Switzerland, Germany, and Italy, they asked us whether the United States was ready for them.

We researched the market. We found several growing espresso service companies on the West Coast doing well and expanding, while the broader market was showing increasing demand for a better coffee experience.

Our conclusion was quite clear: the opportunity was there, and moving quickly could give Nespresso an opportunity to establish a commanding position in the emerging U.S. espresso market.

They hesitated.

By the time they made a serious move into the United States, Starbucks and numerous smaller competitors had already helped create and occupy much of the market Nespresso had once had an opportunity to help define.

Growth has risks. So does waiting.

What Are You Afraid Growth Will Do to Your Business?

Most resistance to growth isn’t really resistance to having more business. Owners worry about what comes with it.

More employees. More locations. More debt. More complexity. More people making decisions. More opportunities for something to go wrong. Less time. Less control. And perhaps a business that becomes bigger without becoming substantially more profitable.

We’ve heard owners say they don’t want another location because the one they have already takes too much of their time. They don’t want to franchise because they’re afraid someone else will damage the name they’ve built. They don’t want outside capital because they don’t want someone else telling them what to do. They don’t want to hire another layer of management because nobody will care about the business the way they do.

Those aren’t arguments against growth. They’re circumstances your growth strategy has to address.

And we’ve seen the opposite happen when growth was structured correctly.

We’ve seen brands become stronger, not weaker, as they gained more distribution. We’ve seen profits increase as greater market saturation improved advertising efficiency, purchasing power, management leverage, and customer awareness. We’ve seen owners gain more control as responsibilities moved to capable managers and better systems. We’ve seen employees who might otherwise have left become managers and executives because growth created opportunities for them.

We’ve also seen businesses become less dependent on their owners as growth forced them to develop the organization, systems, and people the smaller business had never required.

Growth doesn’t have to multiply the circumstances you’re trying to escape. Properly structured, it can help change them.

Now let’s go back to the initial question: What to grow?

What to Grow?

Growth doesn’t necessarily mean doing more of what you’re already doing. Before choosing a growth strategy, look at what you already have.

What do your customers value most? Where do you make your best profits? What products, services, locations, customer groups, capabilities, relationships, or other parts of the business have the greatest potential? And what are you doing today that you might be better off doing less of, changing, or leaving behind?

Sometimes the opportunity is to multiply something that already works exceptionally well. Sometimes it is to take an underused capability into a new market. Sometimes growth comes from adding something the business doesn’t have today.

The business you grow does not have to be simply a larger version of the business you have now.

The process we use for turning around or refining businesses is designed to help you discover and implement exactly that. Go to Turnaround to learn more.

Growth Strategy and Structure

If you investigated the free Growth Feasibility Model, you have already glimpsed what our larger strategy and structure growth program offers.

The model asks you to make assumptions about what growth might look like and then shows you some of the financial consequences. But those assumptions have to come from somewhere.

How will you grow? Where will the growth come from? Who will make it happen? How quickly should it happen? What resources will it require? What will you own and control? What will others own or control? What capabilities will the business need that it doesn’t have today?

And, just as importantly, how do those decisions affect one another?

That is where growth strategy and structure begin.

Start With the Strategy, Not the Label

We don’t begin by deciding that you should franchise, license, open company owned locations, acquire other businesses, add distributors, or follow some other predetermined growth model.

We develop the strategy first.

Nor do we design around avoiding a particular label. Trying to make something “not a franchise,” for example, can be just as limiting as deciding in advance that it must be one.

We start with your goals and objectives and the circumstances of the business. Then we work through what you want to accomplish, what resources and capabilities you have, what you need from others, what you want to control, what risks you are willing to accept, and what the economics will support.

Only after the strategy begins to take shape do we ask what it should properly be called and what legal, financial, organizational, and operating structure it requires.

Your growth strategy should determine the model. The model shouldn’t determine your growth strategy.

Determine Your End State

Deciding what you ultimately want the business to become isn’t easy. But you need a starting point because that end state will shape almost everything else.

It doesn’t have to be permanent. In fact, you should expect it to change as you learn more.

Once you have an initial end state, work backwards toward the business you have today, one step at a time. At each step, ask what circumstances must be in place for the next step to become possible.

What capabilities will you need? What people, capital, systems, relationships, capacity, markets, or other resources must be in place? What has to happen first? What could prevent it from happening?

As you work backwards, you will uncover obstacles you hadn’t anticipated and opportunities you hadn’t considered. Those discoveries may cause you to change your goals and objectives, revise part of the strategy, or even reconsider the end state itself.

Then work through it again.

The process is iterative. You continue working backwards, questioning and revising as necessary, until you arrive back at the present.

Only then do you structure the first step and begin implementing the strategy. We aren’t trying to structure the entire future in detail today. We are getting sufficiently clear about the future to know what needs to be structured now.

Now Give the Strategy Structure

Once you have worked your way back to the present, you have a strategy. But a strategy still doesn’t tell you exactly how the growth will work.

That requires structure.

Structure determines how the different parts of your growth strategy fit together, who does what, who pays for what, who controls what, how money flows, and how the relationships work over time.

Depending on your strategy, some of the questions may include:

Corporate or third party channels. Which parts of the market should you serve directly, and where should you rely on franchisees, licensees, distributors, dealers, representatives, strategic relationships, or other third parties? Different channels may also work alongside one another.

Products and services. What exactly will each channel offer? The best offering for one market, customer, location, or channel may not be the best offering for another.

Locations and territories. Where can the business operate successfully? How should markets be divided? Should anyone receive protected or exclusive territory, and if so, under what circumstances?

Investment requirements. What must you invest, and what must others invest? Consider not only the initial investment but working capital, development costs, staffing, facilities, equipment, inventory, marketing, and the cost of supporting growth before it becomes profitable.

Training and support. What must people know before they can perform successfully? What initial and continuing training, operating assistance, technology, management, marketing, and other support will be required?

Suppliers. What should be purchased from you, from designated suppliers, or locally? Where are consistency and control important, and where does flexibility make more sense?

Core products and services. What must remain consistent for the business to retain what makes it valuable? What can be changed for different customers, markets, channels, or circumstances?

Marketing and sales. Who creates demand? Who generates leads? Who makes the sale? Who owns the customer relationship? Who pays the cost of acquiring and retaining customers?

Control. Which decisions must remain with you, which can be delegated, and which should belong to the people closest to the customer or market? More control isn’t always better. The question is where control needs to reside for the structure to work.

Term and renewal. When third parties participate in the growth, how long should the relationship last? What must happen for it to continue? What happens when circumstances change or the relationship ends?

Compensation. Finally, how does everyone get paid? Fees, margins, commissions, royalties, rebates, shared revenue, markups, incentives, and other forms of compensation can change both behavior and economics.

None of these decisions stands alone. Change the territory and you may change the investment. Change the service offering and you may change training and support. Change the channel and you may change control, compensation, marketing, suppliers, and the customer relationship.

Test the Structure Financially

That’s why we don’t simply design a structure that sounds reasonable.

We build a financial model around it.

We can test different combinations of channels, growth rates, investments, fees, margins, staffing, support costs, development schedules, and other assumptions. As the numbers change, the structure may change. And as the structure changes, we run the numbers again.

Strategy, structure, and financial feasibility develop together.

Then Ask What You’ve Created

Only after the strategy and structure have taken shape do we step back and ask what we have actually created.

Does it constitute a franchise? A license? A dealership? An agency relationship? Does it involve securities, employment, tax, industry specific, international, or other regulatory requirements? What agreements, registrations, disclosures, approvals, or other legal work may be required?

Those requirements matter. They just shouldn’t determine the strategy before the strategy exists.

When specialized legal, accounting, tax, regulatory, or other professionals are needed to implement the structure, we can work with them, help coordinate their work, and advise you as their recommendations are incorporated into the overall strategy.

That way, the specialists help us properly implement the growth structure rather than inadvertently redesigning it one specialty at a time.

Applying the Process to Restaurant Growth

Everything we’ve discussed applies across industries. The circumstances, terminology, regulations, and available growth structures change, but the underlying process does not.

For restaurant owners who want help developing their strategy and structure, we have a complete My Restaurant Franchise Strategy and Structure course and coaching program. It takes you through the process of developing and testing your own growth strategy and structure with our guidance over a 10-week period.

We give you new instructions and homework each week and schedule a one-on-one session to review and revise what you have prepared each week. By the end of the program, you will have your own fully customized franchise strategy and structure to implement, along with supporting implementation materials.

For those who would rather learn how to do it themselves, My Restaurant Franchise Strategy and Structure book is a step by step instruction manual for developing your own restaurant franchise strategy and structure.

How About Other Industries?

These restaurant and franchise specific offers are simply the first complete growth programs offered by Turngrow. They reflect our experience structuring or restructuring more than 300 franchise programs in dozens of industries, about half of them in the restaurant industry.

Similar programs will be added for other industries. In the meantime, owners in any industry can use the restaurant programs to learn the process, or contact us to discuss how we can help develop their particular growth strategy and structure.

Quality Control

When you implement your growth strategy and structure, you may need help from attorneys, accountants, financial advisors, marketing specialists, technology providers, contractors, and other professionals.

Each will naturally approach the project from the perspective of his or her own specialty. Unless someone keeps the entire strategy and structure in view, individual decisions can gradually move the implementation away from what you originally designed.

A finely tuned growth strategy can lose much of its value one seemingly reasonable decision at a time.

To help prevent that, and to make necessary adjustments as circumstances change, we can serve as the quality control director for your implementation. Our role can be customized to your particular needs.