Opening a second location is a tempting idea for many shop owners, and why not? Twice the sales, twice the profits, and a chance to go through the process again and do everything right the second time around!
If only it were that easy.
Doubling your sales and profit isn’t guaranteed, but doubling your expenses certainly is. Twice the locations means twice the stress, twice the headaches, twice the payroll, twice the parts issues and twice as many opportunities for breakdowns in production or customer service.
Of course, if you are determined to open a second location, none of these things are a deal breaker. Maybe your first location is in a bad part of town and a second location is key to your growth. Maybe your capacity is maxed out and you can’t grow car count until you have more bays.
The reason why isn’t as important as the things you consider and execute before you open that second shop.
A brief note: Everything that follows assumes you want to build a successful, sustainable operation. When we were considering opening other locations, we found a lot of people who would say whatever we wanted to hear. Usually this meant them telling us we could open locations easily, and that we would instantly be successful.
The truth is, however, that it takes a lot of hard work to create something sustainable, and it’s that sustainable success I want to cover.
The first step in opening your second location isn’t scouting locations, but writing procedures.
That’s because you need to be able to reproduce your success in your second shop. If your growth so far is the result of a superstar employee rather than superstar policies and procedures, then the success in the second shop will hinge on lightning striking twice as you find another superstar.
Or, perhaps, you’re at the opposite end of the spectrum and your success isn’t because of an employee, but because of your hard work. If you’re the secret sauce that makes your team excel, then one shop will always be sliding backward simply because you aren’t able to be there to micromanage.
And that’s only after the second shop is open. Before that happens, you have a full-time job on your hands: scouting locations, buying equipment, planning layouts, moving and interviewing. Your existing shop will have to go on autopilot long before the second shop is taking up half of your attention every day.
Superstar or not, policies and systems can’t wait until after the new location is open. You need measurement, training and accountability now, so that you can start the process of opening the second location without things falling apart.
And if you think you can simply tough it out until the new location is open, consider how things will look after the second location opens: jetting between locations putting out fires as things fall apart wherever you’re not looking.
The solution? Do what other successful multiple-location owners do: create a culture of accountability. Create a shop where employees measure daily and report back to you so that you don’t have to micromanage multiple locations to be successful.
Of course, measurement is only half of the battle. Because for as critical as it is to have employees who are measured and held accountable daily, the employees in both shops also must want both shops to succeed. They must be willing to train, help, manage the shop in your absence and hit benchmarks even when you’re not there to look over their shoulders.
And all of these things come with incentive-based pay plans.
Pay plans are the key to getting your entire team to pull in the same direction: they get your service writers to be good stewards of your customer service even when you’re not there watching; and they get your technicians to do thorough inspections even when you’re not there to check their work.
Beware of cookie cutter pay plans, however. Incentives should be built for individual shops and individual employees, and designed to make the team work together toward the same goals. If you try to plug the pay plan for your existing shop into your new location, you’ll create disincentives and ruin your team before they ever get started.
Once your team is ready to go through this transition — because they have the policies, procedures, measurement, benchmarks and incentives to be successful — the last thing to consider is where.
First And Second Can Be the Best
A Kansas City shop’s team was working hard to deliver exceptional customer service, but the location would always prevent the shop from reaching its real potential. Armed with policies, procedures, incentive pay and measurement, the owners found a second location in a better part of town and set up shop.
The first month of sales in the new shop surpassed the old shop, and because of the groundwork done by the owners to make sure the team was measured and accountable, neither shop suffered.
It would be irresponsible of me to give advice that is too specific; after all, every market is different. But speaking broadly, and in our experience, here are a few tips:
1. Don’t cannibalize your market. Don’t consider opening a location within seven miles of your existing shop, for fear of stealing customers from your existing shop.
2. Understand your customer base. Who makes your best customers and why? This isn’t a study to be done quickly or lightly. A basic study will tell you what kind of cars they’re driving. A deeper study will tell you their income, the vehicles they drive and their ages. Understanding your customer loyalty numbers and what has fostered them will start to give you a real picture of how to recreate your success.
3. Use those findings to scout. Now that you know what has made you successful, you can start to find a new neighborhood. Research traffic patterns and the city’s plan for the area. Just because your street is busy today doesn’t mean it will still get the same amount of traffic after the planned lane expansion a mile north is complete.
4. Make use of your marketing company. Don’t try to go this alone. Money spent on demographic studies is critical at this step and can help ensure success as your second location opens. Involving the marketing vendor now also means they can help you plan for your grand opening. It takes months to create excitement in the community for a grand opening and the sooner you involve your marketing company, the better.
What about after the grand opening? Having helped many owners open a second location, one of the most important pieces of advice I can give is: start planning for your third location. You don’t really get the benefits of scaling until three locations. After all, three locations is where you get to start negotiating price with your parts vendors so that you can create an economy of scale and reap the benefits of being a larger operation.
Of course, there’s a lot of work before you can get there, and none of it is worth undertaking unless you’ve got the policies, systems, measurement and accountability in place to ensure your shop can find sustainable success.