Whether running a restaurant or a boutique coffee chain, successfully scaling a multi-unit hospitality business means investing in managers today to ensure effective leadership tomorrow, says Christopher Muller Ph.D, author of The Leader of Managers
Inset: Christopher Muller Ph.D, author of The Leader of Managers
Research shows the single biggest variable in the success of a restaurant unit is the general manager. The closer you can get a general manager to a five year tenure, the more profitable the restaurant will become.
Having interviewed many managers in my time, I’ve realised that the key to keeping a general manager for five years is having a well-trained district manager – the leader of managers. A restaurant is a highly structured organisation – it’s like a machine. You start it in the morning, you turn it off in the evening, and it basically carries out the same functions every day, even though customers present tremendous variability.
Successful general managers often get promoted to manage three, four, maybe up to eight, units. The problem lies in facing the reality that the skillset of a unit manager differs significantly from the demands of the district manager, who essentially focuses on leading other managers to success.
In simple terms, they go from being a player on a winning team to being the coach. Instead of shooting and scoring goals or making defensive plays, they’re now planning so that other people can succeed. Once the game plan is in place and they turn on the machine, there are very few levers to pull after it starts.
Our research has found there are five phases of multi-unit manager development. Firstly, they must be proficient at operations and understand how to run a unit, so it’s preferable to have general manager experience. They also need to be experienced at facilities management, which in a modern restaurant is the ability to take care of the physical brand and maintain standards as simple as keeping the back door locked and ensuring signs are lit at night. These two elements go together and actually build “brand” recognition, but they’re not exactly the same skillset.
Once you master these skillsets, it is important not to get stuck at the level we call a ‘super operator’ or the person who continues to operate multiple restaurants as if they are just one single entity. The challenge is to make the leap to understanding the finances of a group of units, which in a corporate restaurant environment can range from $1m-10m a year.
"The key to keeping a general manager for five years is having a well-trained district manager"
The difference is that those running a single store really don’t need to know much more than the top two-thirds of the income statement. For district managers, the jump in understanding can be huge and changes the entire focus of the role.
District managers need to analyze and then decide whether they should spend $100k installing a new kitchen in one unit or repaving a parking lot in another. They need to make decisions across a broad range of entities and understand not just simple profit and loss statements, but cash flow statements and balance sheets, and how these affect the business. They effectively become Chief Financial Officer for their district.
This is a skill that most independent restaurant managers are never trained for, and I’ve found that many corporate board members secretly lack understanding of how those three elements relate, as well.
From there, they will need an understanding of marketing – not simply advertising and merchandising – but building the business for a future customer. Peter Drucker famously said that the sole purpose of a business is to create and keep a customer. District managers are faced with multiple demand curves and each unit has its own customer base, targets and demand structures influenced by location.
When I was at Cornell University, there were three McDonald’s in town, same business model but each with completely different demand structures. The downtown store closed at 7pm every night, the mall location was busiest on Saturday mornings and the highway restaurant was busiest on weekdays. Despite selling the same products, managing and marketing those three restaurants required an understanding of the natural unit demand to create new customers for each local market.
The final phase is human resources. Hospitality businesses do not spend enough time teaching people how to manage people. Hospitality is often described as a people business – but staff were often treated as expendable. The pandemic has certainly challenged that traditional mindset and the industry is now facing a global staffing shortage because many employees have rejected the status quo.
“Hospitality is often described as a people business – but we often treat people as expendable”
In addition, in a typical year, a district manager with eight units may face a senior management staff turnover of 25-50%. That means at least two unit general managers will likely leave within a year – with two weeks’ notice if they’re lucky.
Replacing those staff immediately means promoting two or three assistant managers from the district. A business with eight units has: eight general managers; 16 assistant general managers; a chef or kitchen manager; shift supervisors; and a dining room manager. All of which means the staff member who moves from managing one restaurant to eight will need to transition from managing two people to a group of 25-50 individuals with ‘management’ responsibilities in their job description.
We recommend that hospitality businesses invest 40% of their time developing assistant managers, because they are the future of any business. Progressing from a unit manager to a great multi-unit manager can take up to two years. Many people can do it much faster, but if they’re not “getting it” by the end of 24 months, they’re never going to get it – that’s the break point.
There are many metaphors for the restaurant business, and one of them is similar to being in a battle every day. While we love them, the customers are a confrontational adversary putting employees under incredible stress.
The entire system is trying to just get through lunch or dinner – and no matter what gets done today, there’s no way to make the restaurant perfect because tomorrow is going to be another day with a whole set of new customers who are never going to have, or make, the same demands.
Restaurants are a highly predictable, but highly random business. We know lunch is going to be busier on Wednesday than on Monday and we know dinner on Saturday is going to be busier than on Sunday. But we don’t know exactly by how much, and that’s why we build complex systems of support. One job of the general manager is to run through the trenches keeping spirits up and, every once in a while, to go over the top to play that all-important leadership role by saying, “follow me!” Knowing when that time comes is what makes all the difference.
This article first appeared in Issue 8 of 5THWAVE magazine.
Dr Christopher Muller has clocked up over 50 years in the restaurant industry, managing distinguished restaurants before choosing a career in academia. A founding member of the Rosen College of Hospitality Management in Orlando and Dean of Boston University’s School of Hospitality, Muller is also the author of ground-breaking book The Leader of Managers