Squeezing The Lemon: Leveraging your Investment by Adding Locations

Joe owns a pizza parlor in a metro area. He has invested in equipment (ovens, furniture), employees and advertising, which total $300,000 in annual expense. Every day, Joe attempts to “Squeeze the Lemon” as hard as he can. In other words, he’s trying to generate the most profit he can from the money he’s spent. Adding locations may be a way for Joe to increase his profit to new levels. Assume that Joe add 4 locations in the area.
As with most decisions, there’s good news and bad news. By adding locations, his advertising and promotion dollars are more effective. Customers can visit the location that is closest to them. With 5 locations, Joe’s Pizza is more visible in the community- there’s a better chance the a consumer may drive by and think about visiting Joe’s. Joe may be able to shift employees between locations, based on sales volume, and the experience level of an individual employee. If Paul is a productive worker, why not move him to your busiest location? Have new employees train at a store with less customer traffic.
The bad news: Joe shifts from being an “Operator” to an “Owner”. Joe has to manager more staff, become a leader, and consider setting better compensation systems to retain employees. He’s no longer focused on whether the floor in his single location is clean- he’s more concerned.about how each location is staffed on a busy Saturday night. Is Joe willing to take on this role? (Reference: Wall Street Journal, Inside Franchising, 4-19-07)
The Lesson: Adding locations may allow an owner to increase profit on each dollar invested. This can only be accomplished if the owner is willing to shift into a manager role- is that something you want?