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ACHIEVING SCALE

How to Scale a Retail Business

After early stumbles, Not Your Average Joe's developed a smart method for opening more and more restaurants around the country.
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The first time Stephen Silverstein tried to scale his restaurant business, Not Your Average Joe's, things didn't go smoothly. He had raised $6.5 million; beefed up the staff at his Middleborough, Massachusetts, headquarters; and opened 15 restaurants. But "I hadn't developed the real estate pipeline; I had no new property in which to invest that capital," says Silverstein. Joe's was burning cash and unable to open units quickly. Following the one-two punch of a 2007 credit card breach and the 2008 recession, "we pulled in our horns and stopped growing," he says.

For two years, Silverstein concentrated on making his existing restaurants more profitable. In 2010, the CEO tried once more to scale. He started by aggressively scouting locations and created a rigorous vetting process, approving only sites that could produce $4 million in annual sales and a 35 percent return on investment. The three locations Joe's has opened under the new formula are performing 30 percent better than older restaurants.

NOT YOUR
AVERAGE JOE'S
 
1994
Year founded
19
Restaurants in four states
4
New eateries coming in 2014

Silverstein also decided to push most of his talent investments out of headquarters and into the restaurants. Rather than hire a multi-unit manager for every five or six locations--as some large chains do--Not Your Average Joe's hires one for every 10 or 12 restaurants. But it pays each unit's general manager roughly 10 percent above market rates, and it will launch stores with only GMs and chefs who have proven themselves at other Joe's locations.

Joe's is now prepared to scale more rapidly. The company, which had sales of $65 million in 2013, now has 19 locations, including three in Maryland and Virginia. This year, it will open four more, including two in Philadelphia. Silverstein recently raised $15 million in private equity, the amount he needs to grow to $100 million without bank debt--and without losing control. "We will not let the founding vision and the focus on the food get lost as we grow," he says. 

 

 

IMAGE: Courtesy Company
From the March 2014 issue of Inc. magazine

LEIGH BUCHANAN | Staff Writer | Editor-at-large, Inc. Magazine

Leigh Buchanan is an editor-at-large for Inc. magazine. A former editor at Harvard Business Review and founding editor of WebMaster magazine, she writes regular columns on leadership and workplace culture.




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