Expanding to multiple locations offers numerous benefits, if the timing is right and both will and cash flow are strong.
Delores Crum didn’t see that she had a choice. Sure, her party, tent and wedding rental store in south Austin, Texas, opened in 2000, was doing well. But up in north Austin, another rental company was becoming a direct competitor. Only about 20 miles separates the two areas of the city, but the trip from north Austin to her store could take as long as 90 minutes in traffic—a drive many potential customers weren’t willing to make. Which is why in 2009, Crum, president of Premiere Events, decided to open a second store.
“The decision to expand to north Austin was purely market-driven. It was glaringly apparent that we had to do this to compete,” says Crum, whose core clientele are caterers, although she
also works with event planners and individual customers.
She didn’t stop there. In 2013, she opened a boutique-style store called Premier Select in central Austin. This January she established another Premier Events location in Dripping Springs, an Austin suburb known as the “official wedding capital of Texas,” Crum says.
Her first location houses the showroom and warehouse, which delivers to the north Austin and Dripping Springs stores Tuesdays and Thursdays for individual pickup. Premier Select has a small showroom displaying mainly upscale tabletop settings and is open by appointment only. There’s no customer pickup and orders have to be at least $5,000 for individuals (caterers and event planners have much more flexibility).
The expansion to the second location went smoothly because she had plenty of time to lay the groundwork, Crum says. She knew the market and that she wanted to be in relative proximity to her primary competitor. She wanted a location that was accessible and easily visible, and ideally she wanted to own the space (she built the south store from the ground up). However, she ended up leasing a spot just off the freeway in an office and warehouse complex, retrofitting and redesigning the space. Her other two expansions went just as well, with both stores opening in existing retail spaces. In fact, says Crum, the only real surprise was how big of an impact these expansions had on her business: “More than we ever anticipated,” she says.
Benefits of bigger
Crum’s experience illustrates one of the most obvious benefits of an expansion done right—increasing your customer base and market presence. But there are other potential advantages, says Gary Stansberry, president of The Stansberry Firm LLC, a San Antonio, Texas-based rental industry consulting firm.
As he explains, an expansion can provide growth opportunities not just for business but for employees within the business as well, giving them a chance to move up. Another advantage is the potential to realize greater inventory utilization.
“For example, a second location can help you gain additional rentals on high ticket items that may be a little underutilized in your first location,” he says. “Renting these items out between the two locations can bring better returns.”
These were some of the factors prompting Ian Menzies, chief events officer (CEO) for Colorado-based RC Special Events, to expand. Menzies acquired his Fort Collins store in 2005 and added his Boulder store in 2007. (He has a third location in Longmont, between the two stores, but this is currently used for storage.) Both locations, which are about 42 miles apart, had been previously existing event and party businesses.
In 2008, he combined the two under one umbrella, creating RC Special Events.
The first business wasn’t providing “sufficient personal challenges,” Menzies explains. “So, it was either sell or develop a business that had the ability to gain real traction in the market.” He also wanted to:
- Reduce spending on subrentals.
- Increase inventory and labor utilization.
- Enable financial support of the leadership team, improving retention and providing the ability to offer benefits such as healthcare and IRA plans.
Now, spending on subrentals is a fraction of what it used to be, and the leadership team has more than 70 years of combined event experience.
“Expansion was necessary,” he says. “Whilst the single location was seeing very good growth, there was more to be gained. The second location offered the fast-track route for speedier growth.”
Making it work
Both stores offer identical products and services—same pricing, single business system, single website, same crews, uniforms—to simplify operations, says Menzies. Even the telephone system is integrated and will roll over calls to one store if sales personnel at the other location are engaged with clients.
Accurate inventory management becomes even more critical in an expansion. “Find a business system that allows control of the inventory transfer process between stores,” Menzies advises. “We’ve tried several methods, none perfect, but implementing a rigorous set of inventory transfer processes, then finding the closest business software that will support these processes is essential.”
Stansberry says the ideal scenario is having experienced people—preferably upper- to mid-level managers—whom you can move from the existing business to the new one.
For example, Crum has 40 showroom and warehouse employees at her first location. She began hiring and training employees for store number two three months ahead of opening and transferred one of her experienced event consulting employees to this location, which now has a staff of about five. In the case of the Dripping Springs store, Crum acquired the staff and inventory of an existing event rental business. The by-appointment-only Premier Select store requires just one person and is staffed by a longtime employee.
Three people—the CEO, COO and HR/administration manager—have overview for both of Menzies’s stores. “We operate a four-week detailed rolling view of the business—forecasting is a longer timeline—detailing the labor required by week,” he says. “If a store requires additional labor, the other store is the first call between the operations managers. Temporary labor use has almost completely disappeared.” Additionally, customer service teams review and adjust set-up and take-down dates, warding off conflict.
An expansion isn’t right for every business. Rental operators considering such a move should ask themselves if they really want the added challenges of another location. They should also take a deep look at their current business, says Stansberry.
“Are you hitting on all cylinders?” he says. “Is every component performing and succeeding? If not, then it may make more sense to work on your current location before expanding and adding more to your plate.”
Pamela Mills-Senn is a freelance writer based in Long Beach, Calif.