It's rare, I've found, that you're able to stick to the plans you make when you're starting out in a new business. Something almost always comes up that forces you to change course. It could be an obstacle, or it could be an unexpected opportunity. Either way, your plans often need to be rethought.
I ran into such a situation with the chain of fast-casual Japanese restaurants I've launched with three partners--Kobeyaki. Longtime readers of this column may recall that we opened our first two restaurants in commercial parts of New York City with high foot traffic at lunchtime. They've both done a huge volume of business from day one.
It was a fantastic start toward our immediate goal, which was to raise enough outside funding to build Kobeyaki into a national chain. We first had to prove the model and the concept. We figured we could do that by having five to seven profitable outlets throughout the city. So we were already 20 to 30 percent of the way there.
At the end of 2014, we launched our third Kobeyaki, in a residential area on the Upper East Side of Manhattan. We chose the spot because other fast-casual restaurants were well established in the neighborhood, but this one initially bombed. The street had very little lunchtime foot traffic, partly because of construction down the block. We did less than half as much business there as we were doing at the other two locations.
So we changed our plans. Instead of opening two more restaurants in the city, we had to fix number three. We knew there were potential customers living in the apartment buildings around us. To lure them, we printed new takeout menus and leafleted the area. We also did mailings with coupons for discounts. Our main problem soon became apparent: The local residents didn't like going out in the evening. So we had to do something we'd never planned on or wanted to do: delivery.
At the time, that meant hiring our own delivery people. To hold onto drivers, you need a lot of orders, because delivery people get paid mostly through tips. But we didn't have a lot of orders.We solved that problem by signing up with some food-ordering services. Suddenly, we had plenty of orders. Then Uber got into the act, and offered a service that, for a larger commission, would handle the delivery. Grubhub soon followed suit.
Delivery proved crucial to our turnaround, although there were other factors too. We handed out gift certificates at prep schools in the neighborhood, and students began showing up after school. The city finally finished the first phase of the Second Avenue subway line and took down the construction barriers on our street, which resulted in more foot traffic in the area. Familiarity and word of mouth also played a role. It took a couple of years, but we doubled our weekly sales, proving we could operate profitably in residential areas as well as in commercial ones.
Meanwhile, a couple of other things happened that we didn't expect. We were invited to open a Kobeyaki in Madison Square Garden, where the NBA Knicks and the NHL Rangers play, and we did that a few months ago. Then an airport concessionaire contacted us about opening in one of the terminals at JFK International. We expect to have a restaurant there this summer. Meanwhile, we've signed a lease for a Kobeyaki in Jersey City, New Jersey. After that, we'll probably expand to Boston. If we can demonstrate the appeal of our concept in both commercial and residential areas, an arena, an airport, and three states, we'll be in great shape to start looking for the capital we need to go national. It's not how we planned it. But plans change. That's one thing you can always plan on.