With the considerable benefits of successful expansion, scaling up is one of the main goals of most hospitality business owners. With the chance to increase revenue, boost brand awareness, introduce more people to your offerings, and create job opportunities in their community, the rewards offered by scaling up a hospitality venture are very enticing.
However, between the costs of expansion and the various logistical challenges, such as operational scalability and talent acquisition, successfully scaling up your hospitality business is often risky and complex. Overcoming these challenges requires careful consideration, persistence, and, above all, sustainable growth strategies.
With this in mind, this article details effective strategies for scaling your hospitality business. We’ll explore fundamental aspects of business expansion, such as:
- Defining clear growth objectives
- Tracking and measuring your progress
- Carrying out market research and analysis
- Increasing operational efficiency
- Marketing and branding
- Overcoming the inevitable risks and challenges
Defining Your Growth Goals
Next to understanding where you currently are, the most crucial part of scaling your hospitality business is knowing where you’re going – which requires setting clearly defined and detailed expansion goals. Specific, structured goals are essential because they give you and your employees something to strive towards and ensure you’re all heading in the same direction. They/goals help you to determine if you’re on track to achieving your growth and, if you’re not, help to highlight where you’re presently falling short and what you can do to improve.
When devising your goals, you can’t go wrong with the tried and tested S.M.A.R.T goals framework, which stands for:
- Specific: be as precise as possible about what you want to achieve. “Business expansion” isn’t enough – how are you looking to scale up, e.g., opening a second venue.
- Measurable: make your goal quantifiable to track your progress in its attainment. This also allows you to break it down into smaller milestones.
- Achievable: it’s good to aim high – but it needs to be realistic to keep you motivated and prevent you. This is closely linked to time-bound, as a goal that’s unrealistic in a short time frame may be achievable over a longer period.
- Relevant: this considers the bigger picture: how does this goal fit into your overall business objectives and brand values?
- Time-Bound: a deadline for accomplishing the goal. This creates accountability and urgency – making it a real goal instead of a pipe-dream.
Chances are, you’ve heard of SMART goals before, but there’s a very good reason they’re referenced so frequently – because they work, and contain every element to make your goal effective.
Also, as well as having a long-term goal, you should set a series of short-term goals, or milestones, that help confirm you’re on track. Also, on that note, it’s an excellent idea to celebrate each milestone with your staff, to keep them motivated and reward them for their hard work – while inspiring them to strive for the next one.
Lastly – write your goals down and review them regularly to hold yourself, and your team, accountable. As they say, “if your goals aren’t on paper – they’re vapour!”
Tracking and measuring success
As explained above, the ‘M’ in S.M.A.R.T goals stands for measurable – as objectively tracking the progress of your business expansion is critical. However, knowing what to measure is equally important, so you must select the right metrics to track and establish a series of key performance indicators (KPIs).
Some of the key metrics to pay attention to include:
⦁ Number of customers or orders
⦁ Customer retention rate
⦁ Revenue growth
⦁ Customer satisfaction ratings
⦁ Return on investment (R.O.I.)
⦁ Market share
Market Research and Analysis
It’s difficult to overstate the importance of thorough market research and analysis before scaling up your hospitality business. Developing a thorough understanding of the market – particularly your target market segment – helps you refine your brand, marketing campaigns, and overall business expansion and growth strategies.
Here are some key areas of market analysis to conduct in the process of scaling up your hospitality business:
Customer preferences and market trends: is there demand for what your business offers? Conversely, can you take advantage of any emerging market trends as you scale your hospitality venture?
- Target market analysis: who are your customers? Are they just defined by their location, i.e., where your venue is located, or do they have anything else in common? Analysing your customers’ demographics, purchasing behaviour, etc., will help optimise your marketing efforts and brand development.
Competitor analysis: who are your competitors in your target market? Is there space for expansion? How do they price their offerings compared to yours? Plus, crucially – is there anything you can learn from your competition? - Location analysis: if opening a new venue, this helps determine the best place to do so. This includes assessing whether there is demand for your offerings, if the costs are feasible to turn a profit, etc.
- Strategic partnership analysis: are there any related businesses with which collaboration would be mutually beneficial, resulting in revenue growth for you both? Better still, you could establish multiple strategic partnerships.
Developing a Growth Strategy
With your clear goals and market analysis in hand, it’s now time to consider your growth strategy. Fortunately, there are several effective strategies for scaling up your hospitality business and, consequently, multiple paths to achieving your growth objectives.
Business expansion strategies to consider include:
- Organic growth: expanding your existing operations by opening another venue, launching a food truck, creating a pop-up restaurant, selling branded products (a sauce, for example) etc.
- Acquisitions: purchasing an established hospitality business or venue – particularly if it aligns with your target market, preferred location, etc.
- Mergers: alternatively, you may identify a similar or complementary business with which a merger could prove profitable and drive further expansion
- Strategic partnerships: unlike a merger, this is a looser alliance with interrelated businesses, such as local food suppliers, beverage brands, food delivery services, and possibly – if you have branded products for sale – retail stores.
- Franchising: although this is a more advanced, and costly, growth strategy, you may consider allowing other independent business owners, i.e., franchisees, to open venues under your brand.
Financing your market expansion
OK, now you understand your business’ current status and standing, as well as well-defined goals and have a roadmap for getting there. The question now is, how are you going to pay for it?
- Typical financing options for scaling up your hospitality business include:
- Your own capital: also known as “bootstrapping”, this sees you finance your expansion with the business’ cash reserves or personal savings.
- Loans: this could be from a bank or other financial institution, or from family, friends, or associates. In some cases, namely a loan from a bank, this will incur interest payments.
- Investors: this involves someone supplying your business with capital, in exchange for a stake in your company and a slice of the resulting profits. As with a loan, this could be a family member or a business associate who sees the potential in your expansion plans.
- Crowdfunding: a relatively new form of raising capital, made possible by the internet and social media, this sees you finance your growth plans by acquiring small amounts of money from large amounts of people. Kickstarter and GoFundMe are prominent crowdfunding platforms.
- Government grants: depending on your circumstances, such as location and company size, you may be eligible for a government grant to help finance your business plans.
The best course of action is to consult an accountant or financial advisor who’ll help you assess your options. They’ll be able to help you prepare financial statements and organise your tax affairs, so you’re in the best position to secure a loan or investment capital. Better still, with their thorough understanding of the business and economic landscape, they’ll know which government grants you may qualify for.
Increasing Operational Efficiency
One of the most common challenges of business expansion, especially in the hospitality industry, is that you can’t be everywhere at once. Consequently, it’s harder to maintain the same quality standards that you’ve established in your existing venue.
With this in mind, you need to develop a series of systems that ensure you consistently deliver the same memorable customer experience. Just as importantly, when developing these systems, it’s crucial to discover as many ways to streamline operations as possible.
One of the best ways to optimise your business processes is by leveraging digital solutions and new technologies. A prominent example is installing an ePOS (Electronic Point of Sale) system designed specifically for the hospitality industry.
While most ePOS systems were mainly concerned with processing payments, today’s more innovative point of sale and payment solutions help with a wide range of operational aspects. This includes handling customer orders from multiple sales channels (table orders, online orders, food delivery apps, etc.), inventory tracking, and better communication between kitchen and front-of-house staff.
Another way to help boost operational efficiency is to ask your staff how they feel things could be improved. This could be through a town hall-style meeting, a casual chat involving food and drink, or an anonymous suggestions box.
Additionally, you’ll have to develop streamlined operational procedures and processes around talent acquisition, i.e., dealing with your increased staffing needs. This includes creating a precise idea of the type of person you want to hire, i.e., skills, experience, personality traits, etc., the most efficient way to on-board them, and establishing a career progression path – where possible.
When you’ve developed the systems outlined above, as well as any other key processes, collate all of the information into an operations manual. This will detail every role within your business and their responsibilities, which tools and technologies you utilise and how to use them, how to handle an array of issues, who to contact for different scenarios, etc.
Marketing and branding
Developing comprehensive, effective branding and marketing strategies is one of the most fundamental, sustainable growth tactics for expanding your hospitality venture.
Before expanding your hospitality brand, it’s critical to be clear on what your brand is. This will allow you to offer a consistent customer experience while you’re scaling up. Now, something to remember is that your brand isn’t your name, slogan, furniture and décor, or even your menu items – it’s how all those things come together to make your customers feel. Subsequently, your brand is your connection between your business and the customer: the emotions your venue and food offerings evoke when people think about them.
A few things to reflect on concerning your branding include:
⦁ What’s your unique selling point?
⦁ Why do customers visit your restaurant?
⦁ Is your brand identity (name, colours, logo, etc.) consistent with your menu and the customer experience you’re striving to create?
For help in answering these questions, you can ask your loyal customers. Of course, you can incentivise their participation with a generous discount – maybe even combining a brand development session with a tasting event.
Once you’ve refined and strengthened your brand, it’s time to turn to your marketing strategy. If a particular marketing channel has proven successful, you can simply expand on it and explore ways to do it more efficiently. That said, for your market expansion, it’s essential to explore other marketing channels for reaching new customers and expanding your reach.
This could include:
⦁ Local SEO: e.g., creating or improving your Google My Business (G.M.B.) page
⦁ Social media marketing: creative use of Instagram, Pinterest, YouTube, etc.
⦁ Influencer marketing: working with prominent influencers or local celebrities to promote your brand
⦁ Content marketing: creating content relevant to your brand that your target market could find valuable, interesting, or entertaining, e.g., recipes
⦁ Strategic partnerships: cross-promoting with a related business you’ve aligned with
⦁ Loyalty and referral schemes: a generous loyalty scheme will help boost customer retention, while a referral scheme (where both the referrer and referred customer enjoy a discount, free drink, etc.) is a potent way to increase your customer base.
Managing Risks and Challenges
Even with thorough market analysis, a detailed growth strategy, and enough financing, the business expansion still has its risks – and overcoming challenges in scaling up your hospitality business is inevitable. How you overcome these challenges and manage risks will determine how successful your expansion plans will be.
Some of the most common risks that come with scaling up a hospitality business include:
⦁ Financial constraints: you may have secured capital to finance your expansion plans – but is it enough? You may have underestimated your expenses, and there’s always a chance some expenses, such as ingredients or utility bills, increase in price.
⦁ Changing consumer preferences: market research may reveal demand for your offerings – but that could always change.
⦁ Increased competition: other businesses could recognise the same opportunities as you and expand their operations. Alternatively, similar venues might pop up in response to your success.
⦁ Brand dilution: if you don’t refine your operational scalability to consistently deliver the same memorable customer experience, you won’t create the same connection with customers and could compromise your brand
Now, as for challenges, here are some you’re most likely to encounter when scaling up your hospitality business:
⦁ Hiring the right staff: finding enough people with the skills and work ethic to represent your brand
⦁ Too much focus on long-term goals: too much emphasis on your ultimate objectives can discourage you in the short term when things aren’t going your way
⦁ Overlooking systems to increase efficiency: without the right systems in place, your company will be needlessly inefficient – resulting in wasted effort and effort that could be used to refine your offerings or improve your customer experience.
Rigidity: although having a plan for scaling up is essential – you must also recognise when it’s not working and adjust it as necessary.
So, to recap, the most essential and effective strategies for scaling up your hospitality business include:
⦁ Assessing your current position
⦁ Defining your growth goals
⦁ Tracking and measuring success
⦁ Market research and analysis
⦁ Developing a growth strategy
⦁ Financing your market expansion
⦁ Increasing operational efficiency
⦁ Marketing and branding
⦁ Managing risks and challenges
Including these strategies in your overall business expansion plans will not only give you the best chance of achieving your growth objectives – but will help you reach your goals faster.
