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.