Location, Location, Location
The site selection process has become an analytical exercise for restaurants. Big data, artificial intelligence and machine learning are contributing to a highly structured approach in which restaurants can predict sales for new locations with a considerable level of accuracy. Brands can also use a data-driven approach to identify underperforming stores and subsequently decide whether they should be remodeled, relocated or closed.
It’s safe to say that restaurants haven’t always been as systematic when deciding where to build their next store.
Take Texas Roadhouse, for example. Kent Taylor founded the chain in Clarksville, Indiana, just outside Cincinnati, in 1993. Some of the chain’s first locations beyond the Greater Cincinnati Area were nearly 1,000 miles away in Gainesville, Clearwater and Sarasota, Florida. Two of these three locations quickly closed. A few years later, the company opened locations in Colorado, Idaho and Utah. In a 2003 interview with Chain Leader, Taylor admitted that his love of skiing pushed the brand out West.
Perhaps not surprisingly, Texas Roadhouse isn’t the only chain to have entered Colorado because of skiing; Buffalo Wild Wings, which was founded in Columbus, Ohio, apparently had similar motives when opening one of its earlier units in Steamboat Springs.
It’s hard to blame them, and it’s not like going to the mountains was a huge misstep given how both brands eventually became leaders in their respective categories. But let’s just say most site selection algorithms aren’t factoring in the ownership’s preference for local ski resorts.
Something we should consider, though, is that jumping 1,000 miles between units, whether that’s from Indiana to Florida or Ohio to Colorado, is the most logical progression for some brands.
Hard Rock Café was founded in 1971 in London, and its next locations read like a world traveler's log, with restaurants in Toronto, Los Angeles, Tokyo, New York and San Francisco. It wasn’t until 1986 that the brand did the unthinkable: it opened consecutive locations in the same time zone, with new stores in Chicago, Dallas and Houston.
In the world of growth strategies, Hard Rock Café is certainly an outlier. Likewise, Hard Rock Café is an extremely unique concept. Its niche is in large, urban markets with strong tourism industries, and its unit volumes are well into the millions. Operating a single location is all it takes for the brand to saturate most markets.
If Hard Rock Café represents one end of the site-selection spectrum, then perhaps Lettuce Entertain You Enterprises represents the other.
Like Hard Rock Café, Lettuce Entertain You’s history dates to 1971, when Richard Melman and Jerry Orzoff opened R.J. Grunt’s in Chicago’s Lincoln Park neighborhood. Since then, Lettuce Entertain You has grown to become one of the most well-respected multi-concept operators in the restaurant industry.
In its early years, Lettuce Entertain You kept an intense focus on the Chicago market, opening different restaurant banners across the city. In the early 1980s, for instance, the company dove headfirst into Chicago’s River North district with Ed Debevic’s, Shaw’s Crab House, and Scoozi. Sure, the concepts were different - a 1950s-style diner, a seafood restaurant and an Italian restaurant - but this is the restaurant industry. To some degree, the neighboring concepts had to be competing.
But Lettuce Entertain You embraced this hyper-local strategy, believing that the company could successfully open and profit from restaurants that are literally next to each other, so long as each is executing well and offers something unique. And at this point, who could argue against Lettuce Entertain You? The brand now operates over 120 restaurants under 60 different banners in nine states, though there remains a large emphasis on Chicago.
You can still visit the original Lettuce concept, RJ Grunts, in Lincoln Park. But if you aren’t in the mood for RJ Grunt’s famous burgers and milkshakes, you have plenty of other Lettuce Entertain You options in the neighborhood. There’s pizza at Stella Barras, tacos at Café Ba Ba Reeba, French cuisine at Mon Ami Gabi, sushi at Naoki and so on. The brand’s presence in River North has followed a similar trajectory, with over 20 Lettuce Entertain You concepts now in this neighborhood.
It is within these two extremes - flying thousands of miles to open your next unit or simply crossing the street to debut a different brand - that operators find the unit expansion and site selection strategy that best suits their company. New-age algorithms aside, each has its lessons for consideration.
Hard Rock Café shows the importance of understanding your concept and its niche, and to not oversaturate your target markets. But be careful, its easy to stretch yourself too thin as you expand into new, distant markets.
Meanwhile, Lettuce Entertain You shows the importance of locality. Chicagoans embrace the brand, and its concepts have become neighborhood staples. In fact, the brand almost closed RJ Grunt’s, but backlash was so great that the company kept it open. However, you do have all your eggs in one basket with this strategy, so don’t be afraid to eventually put a Wildfire in Minnesota, or an RPM Italian in D.C.
But to truly understand a brand’s unit development strategy, we have to look beyond geography, because a great location is only part of the restaurant equation.
Blaze Pizza opened its first location in 2012 and then very quickly emerged across the country. By some measures, it is considered one of the fastest-growing chains in the history of the U.S. restaurant industry. And while the chain was able to develop the type of aura you’d expect from a Southern California brand, it spent it early years entering numerous states across the country. Compare that to In-N-Out, which was founded in 1948 and didn’t leave California until opening its 80th unit in 1992. And this first location outside of California was in Las Vegas, Nevada, which is just a short drive from the California border. It eventually took In-N-Out 60 years and over 200 units to reach 4 states. Conversely, it took Blaze 10 restaurants and about a year to enter 4 states.
Now, there are of course numerous differences between In-N-Out and Blaze Pizza. For starters, In-N-Out doesn’t want to go too far east so it can maintain the benefits of its regionality. But another key difference is that In-N-Out is a corporate-run system while Blaze is franchised. As a result, Blaze was less focused on specific cities or markets as it expanded, but instead prioritized quality franchisees, regardless of where they lived. And further, Blaze was one of a handful of fast-casual pizza brands to emerge in the early 2010s, and they realized the importance of being first to market.
The stories of Texas Roadhouse, Hard Rock, Lettuce Entertain You, Blaze and In-N-Out all touch on the ‘art’ of site selection and demonstrate how there isn’t one simple formula to follow when it comes to expansion. However, we are at a point where science is becoming a much more significant part of the process. Data can tell you a lot these days, and operators who used to rely mostly on gut instincts are now able to make more informed decisions with data that in some cases isn’t just validating decisions but prescribing strategies. But still, I think there might always be a little bit of art in the expansion process, at least when it comes to restaurants.
To learn more about market expansion and site selection, check out our corresponding podcast episode, featuring former Blaze Pizza CEO Jim Mizes. Or, take a look at our highlight video.