When you're in the early stages of building what you hope will be a nationally recognized brand, you're constantly faced with choices of how best to spend your limited time and capital. The hardest choices have to do with unexpected opportunities. Some may indeed help you reach your goal faster. Others are simply distractions and will lead you to waste your resources and may even put your enterprise at risk.
Recently, my partners at Kobeyaki and I were confronted with having to make such a decision when we were invited to open one of our fast-casual Japanese restaurants in New York City's Madison Square Garden. Sure, the benefits of having a location there are obvious: Your restaurant's name is exposed to the millions of fans who visit "The World's Most Famous Arena" every year. If you seek brand awareness, you can hardly do better.
The catch is that it's tough to make money in the Garden, or so our research has told us. As with most famous locations, there are various fees--for advertising, other types of promotion, whatever--that you must ante up to enjoy the privilege of being there. So your business has to do extremely well just to break even. If it doesn't, you could lose not only time and money, but also the opportunity to do something more productive with them.
By way of context, I should explain that we started Kobeyaki four years ago with the goal of making it a national chain. We now have three restaurants in Manhattan. The first two have made money almost from the start. The third one was unprofitable for its first 18 months, but is now at breakeven and improving. I have long believed that we must have at least seven successful restaurants, inside and outside the city, to reach the next level. By that, I mean the point at which we'll be able to raise the outside capital needed to accelerate our growth.
We thus have an important choice to make. Instead of taking advantage of the Madison Square Garden opportunity, we could build a profitable restaurant somewhere else in the five boroughs of New York City. That would be the safest route. We have learned enough to identify the best locations. Failure in the Garden could push us further from our goal than we are now. Indeed, we might end up so far behind that we would have little or no hope of beating the odds of establishing Kobeyaki as a leading fast-casual restaurant brand. We are not the only ones trying to go national, after all, and just a very small number of us will succeed.
Then again, we know that we need brand awareness to make it as a national chain, and a Garden location could have a huge impact on our ability to get it. If I were sure that this opportunity would still be available in a year or two, I might decide to wait. By then, we should be closer to establishing the track record we'll need to take the next step toward our ultimate goal. But I can't count on getting another shot to play the Garden if we turn down the current offer. An opportunity like this doesn't come along every day. There's no guarantee we'll have one in a year or two.
So we've decided to move forward with preparations to open a Kobeyaki in Madison Square Garden. The Knicks, the Rangers... and Kobeyaki. The potential rewards of this location seem too great to pass up, even if we do lose some money there. I'll let you know how it works out.