Not a chain and not a franchise, the term restaurant group can be confusing. But to put it simply: Restaurant groups are individual restaurant concepts all managed by a single corporate entity. Unlike a chain, which is a series of three or more restaurant units managed from a common headquarters, according to Boston University School of Hospitality, a restaurant group puts multiple restaurant concepts into one “multi-concept operator” portfolio. And this format of restaurant ownership is more popular now than ever.
In fact, it’s such a standard practice that you may not even realize how many restaurants you visit are actually part of a restaurant group.
If you have visions of restaurant empire-building, you’ll likely end up attempting to create a restaurant group. But as with any business, the distance between setting the first table to claiming New York Times accolades or a Beard Award is a long road to go. Here’s a look at how to do it.
Open a restaurant
Too obvious? We hope so. Naturally, opening a restaurant is step one on the long journey to owning multiple restaurant concepts. But you can’t just open any old restaurant. A great restaurant group requires the careful confluence of:
• Talent • Investment • Legal Structure • Creative concepting • Service • Branding • (Need we say it?) Great food
That’s what separates the Danny Meyers from the mom-and-pop shops of the world. So how do you bring all of these elements together? Let’s take a look.
Unless you have Doc Ock of Spider-man fame’s mechanical tentacle appendages that will allow you to cook in multiple kitchens at once, you’re going to need to hire a chef or two to run your restaurants. Finding great talent, however, is only half the battle. Keeping great talent, especially in today’s staffing shortage, is the challenge.
Savvy restaurateurs and restauratrices know that to secure great staff they have to use a variety of tools. For instance:
Recruiting agencies: these can help weed out only serious contenders for the chef position
Internal promotion: the beauty of owning more than one restaurant is that you have more positions available to promote from within
Word of mouth: often restaurant owners turn to their community to find new talent
That’s just to get qualified applicants in the door. Hiring is another job entirely. When looking to place a new chef in a restaurant, owners should consider a prospect’s...
Experience: If a chef has only worked in small cafes, consider whether they can handle a 500 cover a night restaurant.
Ability to train staff: A natural teacher is a critical quality of a great leader and that goes for chefs just as much as managers.
Attention to detail: Quality control is paramount to a successful restaurant. Having a chef who can meet your expectations when it comes to detail can make or break an establishment.
Lining up investors
Ever wonder why a seemingly successful restaurant suddenly closed? If you can rule out the food and the service, chances are it’s because it was undercapitalized to begin with, or an investor relationship turned sour. Finding the right people to back your dream idea is a challenge and, if done poorly, can signal then end of what could have been an institution before its even unlocked its doors.
So how do you find great investors? Here are a few real world examples.
Network, network, network: “Cultivate a network of lawyers and people familiar with investments that can review deals and support the entrepreneur.” That’s what La Cocina program director Geetika Agrawal told Eater in 2019.
Get a lawyer: Restaurant attorney Jasmine Moy told Eater that one of the crucial parts of why restaurants need lawyer is for “drafting and negotiating all the contracts you need to start, run, and grow a successful hospitality company, with some business advising and hospitality consulting tossed in for good measure.”
Make it legal
Forming a business is complicated. There are sole proprietorships, partnerships, corporations, and Limited Liability Companies. And what makes sense as a one restaurant owner may not make sense for a multi-concept business.
To choose the best path, restaurant groups should first seek legal assistance to scrutinize and develop the appropriate multi-concept business structure. This could take many forms.
Under the self-explanatory headline “Structuring a Restaurant Group for Success” FSR writer Jordan Fisch explains that “once your investors are identified, an entity should be created to act as the parent company for your first restaurant and any future restaurants. Each restaurant should be owned wholly, or in part, by this entity.”
He adds that “a separate entity for each restaurant provides the flexibility to have different investors in each restaurant establishment.”
In other words, creating separate entities for each restaurant, restaurant groups can scale faster and grow bigger with the flow of cash from a variety of investors.
This structure can also help protect intellectual property like the all important restaurant branding groups must spend so much on. But: "With the formation of each separate legal entity, it is essential to draft separate agreements, each of which must be properly drafted to be enforceable and effective for its intended purpose." Bottom line: When it comes to forming a restaurant group, get everything in writing.
Business 101 says you can’t sell a product unless people want it. So you have to make something that drives customers to your restaurant. This, sadly, requires a lot more than merely R&D in the kitchen. You’ll need to:
Come up with a theme. Are you opening an Italian fine dining establishment? Or, a hot chicken drive-thru?
Research the market. Opening a new fro-yo store within two city blocks of three other fro-yo places might not be such a great thing. Do your homework first.
Vet your name. Naming a restaurant may seem like the easiest part of the business plan, but that’s not always the case. Vet your name with friends, family, and maybe even a marketing agency to see if it’s a good fit.
Figure out price point. Can your clientele handle your food costs? More market research will answer that question
Choose a location. Find a place that’s eager to have your food
Write a business. then scrutinize it for any weak links
Want to be a restaurant group? Lather, rinse, and repeat on steps 1 through 6, implementing all the lessons learned in previous outings to make your newest operation more efficient and well-positioned. You're on your way!
Most restaurant groups, even those that have both fast casual and fine dining in their portfolios, define themselves by certain qualities and more often than not one of those is service. For instance, restaurateur Tom Douglas operates more than a dozen Seattle restaurants and is synonymous with fun atmospheres and great staffs that offer top notch service.
Building a multi-concept business without excellent service is next to impossible as any of the big name players will tell you.
Branding goes hand-in-hand with concepting, but in no way is it a static enterprise. Once you’ve come up with your initial brand — from the font to the front door signage — it doesn’t stop there. A brand extends beyond the menu to how a restaurant interacts on social media, what it advertises, the local organizations it supports.
In a multiple investor situation, it’s important that restaurant group’s flesh out a mission statement well before unlocking the doors on more than one location to determine the group’s philosophy as it will influence the branding as well.
One would hope great food would be a foregone conclusion. To really make it in the restaurant group world, you have to consistently deliver quality dishes all day every day not just in one location but in many sometimes in multiple cities and even countries at the same time.
Already serving consistently great food? Maybe you’re ready to open restaurant number two.