People often say that it's better to be lucky than smart. The real challenge, however, is telling the two apart. When you fail to do so, you're liable to make bad decisions based on faulty information, as I recently learned.
You may recall that one of my new businesses is a chain of fast-casual Japanese restaurants called Kobeyaki. My partners and I want to take the chain national someday, for which we'll need outside investment, but our immediate goal is to prove the concept and the model. That means having five to seven profitable locations throughout New York City.
We opened the first Kobeyaki near a college, where we knew there was a lot of foot traffic at lunchtime. Because the area was also residential, we'd have nighttime traffic as well. This way, we could be pretty sure that, if the restaurant failed, the problem was the concept, not the location. In fact, it was an overwhelming success from day one. So we decided to open a second restaurant in another busy part of Manhattan, a commercial area in Midtown where the foot traffic consists mainly of shoppers and employees of local businesses. That restaurant did even better than the first. We were on a roll.
For the third restaurant, we chose a more residential area farther uptown. There was much less foot traffic here than in the other areas and a meager lunchtime crowd, but that hadn't stopped our neighboring competitors from doing well.
We moved forward and quickly regretted it. From the opening on, our third restaurant did half as much business as the first two. After three weeks of slow sales, I began thinking we might have to close the new place. We couldn't get to the next stage if we had even one unsuccessful location.
Right about then, two men walked into the restaurant and told one of my partners, "We love what you're doing here." It turned out they were finance guys who invest in specific locations of interesting startup restaurants. I was intrigued enough to meet with them later at my office.
"What about your 86th Street place?" one of them asked.
"That's been a disappointment," I said. "We're losing money on it." I told him the numbers.
"You shouldn't panic," he said. "There's not much lunchtime foot traffic there. We have one of those too. It's a slow build. That's normal. Most restaurants take a year or more to get established. You got lucky with the first two."
Well, yes and no, I thought. Our success hadn't been luck. We'd deliberately chosen the first two locations because of their foot traffic. The lucky part was that, without realizing it, we'd short-circuited the typical process for building a following. That, in turn, had the unlucky consequence of giving us false expectations about how fast we could do it elsewhere. To prove the concept and the model, we can't always locate in high-traffic areas.
The investors expressed confidence in our prospects. "Your food is good," one of them said. "Your whole approach is good. It¹ll take you a year, but you'll build it up."
I thanked them for their time and said I'd be in touch. Meanwhile, their visit has changed the way I look at the business. There¹s still no guarantee that the uptown restaurant will succeed, but instead of worrying about having to close it, we¹re looking for creative ways to attract new customers. I'm lucky those two guys stopped by.