Bird’s Eye View: Balancing Investment and Performance

Three things to consider when investing in capital expenses while maintaining operational excellence and ROI.

By Mark Whittle, CFE

We're all fighting for that proverbial piece of the customer pie — or in Hooters’ case, should I say chicken wing? Successful brands know you cannot rest on name recognition alone to keep customers coming back for seconds, thirds or more.

Whether overseeing an iconic restaurant brand with hundreds of locations around the globe or operating a handful of units with regional affinity, at some point you’ll need to consider making strategic investments in capital expenses. While a quick-fix solution may seem appealing in the near term, a piecemeal approach could hurt your business in the long run. You cannot predict what challenges the future holds, but it is important to maintain a long-term perspective when evaluating existing assets and considering growth and expansion.

Guest-Centric Mindset

We’re all familiar with the adage, “If mama ain’t happy, ain’t nobody happy.” Well, the same goes for the customer. Change can be an uncomfortable thing for many guests, especially if you have built a loyal consumer base for more than three decades.

Hooters is investing a significant amount of time and capital into remodeling existing U.S. locations with a new, contemporary comfort design concept that matches the fun-loving persona of the brand. Over the past 21 months, we have remodeled nearly 60 corporate-owned restaurants with plans to maintain an aggressive pace for 2015 and continue at a rate of more than 25 remodels per year. In addition, our Hooters franchisees are accelerating the remodeling of their restaurants as well.

While an approach of this scale may not apply to every business scenario, the thoughtful planning process always will. Before the first domino falls, you have to be committed to doing it right — which means your business decisions must be guest-centric.

Maintaining operational excellence and exceeding consumer expectations are critical considerations when shaping an investment strategy, but where do you begin? Start with tried-and-true customer feedback, which is exactly what we did prior to the launch of our major remodel initiative. From commissioning market research or hosting focus groups to polling managers for anecdotes and reading notes stuffed into a suggestion box, that feedback is a valuable item in your capex toolkit. The hard numbers combined with candid comments, good or bad, often provide raw insight into evolving customer preferences and desires and highlight the areas where you can focus your energy for growth. And as a franchisor, we always solicit feedback from our existing franchisees. The last thing a franchisor would want to do is launch a new prototype or remodel enhancement program without involving franchise partners; their insights are invaluable.

After a lot of listening, we chose to concentrate Hooters strategy on three tenets of the guest experience — food, atmosphere and service — and it continues to pay dividends. From expanded menu offerings, a centrally located bar area and comfortable seating, to modern aesthetics, sleek finishes and top-of-the-line AV packages, guests are responding enthusiastically to our newly remodeled restaurants, and potential franchisees are also taking note.

The consumer never stops changing. We can’t either.

Embrace Strategic Growth

Growth can mean different things to different organizations, whether it is expanding your customer base, growing your footprint or adding new products or services to create an additional line of revenue. However you evaluate and define growth for your business, you need your investments to support the bottom line. Take the time to crunch the numbers and thoughtfully define clear goals against a timeline that supports the overall strategic plan.

It is essential to identify specific milestones and set dates to work to achieve them. Start with the overarching long-term goals, then take each one and identify an ideal timeframe, such as adding 15 units within the region over the course of the next three years. Then breakdown your objectives further, making the near-term objectives very precise. For example, open the first five units by the end of the year, open the first new location in the next four months, and so on until you have clear action items and next steps to achieve each one. Also, when embracing growth, part of the strategic considerations must include clearly defined geographic targets to ensure you are maximizing synergies and entering into the best possible markets for your brand. Over the past 30 years, I have seen too many brands that accelerated growth in a shotgun approach, versus a very deliberate, geographical approach, and quickly lost all momentum.

Don’t be afraid to be ambitious. It’s no secret Hooters has accelerated our growth strategy. We’re in the midst of an aggressive five year plan to ramp up the development of new corporate-owned and franchise-operated units domestically and abroad.

When dealing with a broad-based strategic plan, you’re likely to have several irons in the fire at one time — which is why it is important to also identify the trusted set of people, partners and experts who will help you stay true to your objectives and attain your goals each step along the way.

Partner Up

Our experience shows the most successful business practices are accomplished with great partners. As franchisor, we seek enthusiastic, smart franchisees who know their markets and customer bases. It truly makes all the difference. Whether opening the world’s largest location in Las Vegas or expanding in Asia and South America, a good partner has feet on the ground and not only understands the opportunities and challenges in each market but eagerly serves as a cheerleader for the brand.

We provide the tools, support and guidance for success, but it is always a give and take process. Embracing diversity while staying true to your brand helps make your growth investments successful. For example, there are key market differences in each U.S. state; imagine the difference between countries? That’s why we allow many of our international locations to “localize” certain dishes on the menu, we trust the expertise of our franchise operators and work with them to identify the best fit for each location.

The same applies for all aspects of business, especially when operating in growth mode. There are so many day-to-day responsibilities to maintain existing operations at a high standard, you must know when it is time to trust the experts in order to grow. Identify the areas of your plan that are essential for success, then take a step back to determine if there’s an expert resource that may best serve your needs.

Our secret sauce? Hooters recently signed an agreement with Colliers International, the third largest commercial real estate brokerage firm, and its team is committed to help increase units and brand visibility in the United States and internationally, while successfully leveraging our existing real estate holdings. This was a strategic move for Hooters, as we wanted a partner with global reach and expertise that balanced with the ability to act nimbly in local markets. Colliers’ experience in market analysis, site selection and overall management of retail and restaurant expansions complements Hooters long-term strategy for smart growth across the globe.

Ultimately, it truly is all about relationships. From listening to your customer base, counting on your employees and trusting your ecosystem of partners, good relationships keep businesses running. If you can count on them, your customers can count on you. And when your customers can count on you to meet their needs, you have the successful recipe needed to continue to grow. 

Mark Whittle, CFE, is senior vice president of global development for Hooters of America, LLC.