Lessons learned: growing a hospitality group

21 October, 2019 by
Hamish Watts

Like most of you reading this, I love hospitality. It’s the people, the pace, the banter, the food, the music, booze and hard graft.

Every morning I wake up and check our nightly reports on my phone before my pupils have had the chance to adjust to the morning light.

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I was recently asked about the ‘key’ attributes required to successfully run a hospitality group and the advice I would give my younger self if I was just starting out. You need to love the game and all that goes with it. When you open your first shop, you are chained to it till death do you part.

Jumping in at the deep-end needs much consideration, no different to a marriage proposition. If you think you are ready to launch your own hospitality group, here’s some advice, some of which we did well, other parts not so much.

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Partner up, but don’t water it down
Having a buddy in your corner with skin in the game makes for bolder decision-making and turbocharges creative processes. Like all relationships, it takes a lot of work and patience, but having the right partner to bounce ideas off and celebrate the good and not-so-good times has been a critical part of Applejack’s success.

But it’s super important not to water down the shareholdings. Having multiple investors with small shares is not only irritating, it can be uncomfortable, complicate the decision-making process and slow things down. It obviously also makes the rewards that much slimmer.

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Have a clear vision and growth strategy
You need to know where you are going. Without a road map to where you want to be in the next three, five or 10 years means you are directionless.

At the start, we set ourselves the goal of opening five sites in five years. A simple enough idea to put on paper, but it really unlocked myriad questions. How do we actually do this? How the hell are we going to fund it? When will we require a head office team? And so on.

We now review our goals every 12 months and set ourselves objectives for the upcoming year. We also revisit our vision for the
following three to five years.

Keep it lean
Ensure debt levels are as low as possible, particularly at the start. Hire-purchase deals and overly generous leasing agents are about all that’s available to new operators starting out, but avoid them as much as you can.

Be humble, buy decent secondhand equipment and don’t over-invest in your fitouts. Don’t commit to unnecessarily large salaries. You need to be a jack of all trades and be willing to do a bit of everything. I spent hours scraping, painting, hammering and cleaning as we set up our first venue.

Understand when the time is right to take on ‘executive level’ people; they add value, but are expensive and require management. Keep it tight, don’t splash the cash and avoid large repayment plans as they will kill you. Remember, cash flow is king.

Understand who you are
Culture is easy to maintain at the start when you’re super hands-on, but you should have a clear understanding of your values and beliefs along with your ‘why’ from day one.

It makes it easy to recruit the right people, tells your punters what you are about and drives the heart and soul of your business. Understanding your purpose is a critical step if you want to grow and maintain a positive culture while expanding.

Pay for good advice
We learned the hard way that having the wrong accountants, bookkeepers and lawyers at the start can be costly. Pay for the best advice you can afford and make it a non-negotiable part of your setup costs.

Structuring the back end of your business properly from day one along with avoiding onerous leases and license conditions is priceless — well, almost.

Have rock-solid procedures and know your numbers
If you don’t know how to control your stock, manage your COGs and labour, produce a reliable set of numbers and hit your budgeted KPIs, learn about it before you do anything else.

The old KISS method of keeping it simple with your procedures is critical. Make them watertight, easy for others to follow and effective. Working in a group environment prior to starting out will certainly help with this.

In saying that, some of the best practices I have learned over the years have come from independent operators.

Have fun and look after yourself
Being in hospo, I’m sure you enjoy the good times, socialising, a tipple or two and eating too much. I certainly enjoy my fill. It’s really important to enjoy yourself and have fun in your business, but it’s also important to keep fit and look after your relationships.

It’s easy to over complicate the hospitality game, but a few fundamentals certainly go a long way if you plan on getting off the tools every day and expanding. Horses for courses of course. Go get ’em guys …

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