Chain Reaction

Open a store . . . open a store . . .and so on . . . and so on . . . and so on . . .
Magazine Contributor
9 min read

This story appears in the August 1999 issue of Business Start-Ups magazine. Subscribe »

Fortunately for most people, a big family usually doesn't materialize overnight the way it did not so long ago for the McCaugheys of Iowa who one day had just one child--and the next had seven more. Big families generally develop over a period of years, with each new addition joining the bunch after the older ones are well on their feet and somewhat self-sufficient.

While it's never easy to juggle the needs of several children all at once, most parents eventually figure out how to manage. Some even find advantages to having a larger brood: Siblings can be each other's playmates, role models and even baby-sitters, lightening their parents' load.

For the entrepreneur hoping to expand one or two locations into a chain, there may be no better model to study than that of the large family. Indeed, entrepreneurs who have successfully gone through the process, as well as expert observers, all agree that growing a company into a chain is strikingly similar to raising a large family.

The key similarity between the two is this: "The more of them you have-- children or stores--the less attention you have for each one, so you have to empower them more and trust them more," says Earnest Edward Lacey, regional director of the Tennessee Small Business Development Center at the University of Memphis. "They won't all turn out to have the same personality, but if you raise them right, they'll each do you proud in their own way."

Dennis Rodkin is a business writer in Chicago.

Are You Sure You Want to Do This?

Like the parents of six who think back to the years when it was possible to lavish unlimited love and time on the first child, chain owners often cherish sepia-tinted memories of their start-up days. When they had just one location, they could easily have close relationships with, and keep tabs on, every employee. Having more locations means sacrificing some of that closeness.

But as no parents of six would voluntarily send away five of their kids just to recapture memories, neither would Jim Petr, 36, consider closing 16 of his 17 Milwaukee PC retail stores in Wisconsin to go back to the good old days when he was personally assembling custom-built computer systems for buyers in his single store.

"One of the biggest advantages to growing is credibility," Petr says. "Once we started opening more stores, it seemed as if overnight, customers and suppliers started looking at us as an established player, not some little ma and pa shop. The first thing people used to ask was, `Will you be in business next year when my computer needs service?' They don't ask that anymore."

Although various forces may push an entrepreneur to grow a chain, the major one cited by those who have built them is that there's strength in numbers. Petr says he realized a single store in Milwaukee would never last against the national computer chains. "Growth was the only way we could survive," he says.

The growth of companies that become chains also boosts visibility and purchasing power with vendors. "There are companies I wasn't important to 12 years ago that I'm an important client for now," says Bryan Collier, 43, who, in 24 years, has expanded Gardner-Collier Jewelry, a family-owned jewelry store in Kirksville, Missouri, into a four-store chain. That leverage, of course, makes for the kind of quality and prices that retail customers notice.

Links in the Chain

It's not just vendors and customers who feel more comfortable--employees often view expansion as beneficial, too. In some cases, growth enhances your ability to hold on to good people by providing additional opportunities for them. When employees see there's a range of jobs within your company they can grow into, they might take a longer-term view of their tenure with you.

Staffing is, in fact, the central issue for the head of a growing chain. Business owners and experts are unanimous in their belief that stocking expansion locations with the right people is fundamental to a budding chain's success.

"In the computer business, I've seen a lot of people who have one store and haven't been able to expand because they haven't hired the right people," Petr says. "If you hire people who work hard and give them an environment in which they can succeed, you'll grow."

Nevertheless, for the entrepreneur who has built a successful operation by single-handedly juggling the roles of chief salesperson, accountant, personnel manager and who knows what else, staffing--and the delegating that comes with it--can be a very high hurdle.

"Suddenly you have no choice but to delegate authority," says Donald Hoy, director of Executive Education at Milwaukee's Marquette University. "If you're [opening multiple] sites that might be pretty spread out, you have to face the fact that one person can't be everywhere at once."

The downside of having many more people among whom to divide the work is that you may start to feel like a kindergarten teacher, Hoy says. "You have 30 kids all demanding the same level of attention," he explains, "and especially if the chain is expanding rapidly, management isn't going to be in a position to provide all [of it immediately]."

Collier says that with stores, as with kids, "You tend to get stuck focusing on the ones with problems and not having the time to look in on the ones that are doing okay." Which in turn leaves the better-off locations with room to generate problems of their own.

Solution: Put each location in the steady, capable hands of an employee who will act like an owner. Give managers both the responsibility to make their locations work and the power to make it happen. Lacey suggests choosing people already working for you who are ready to take on more responsibility instead of bringing in new people.

Promoting from within is a smart tactic because it moves up the employees who have proved themselves to be both good at the work and supportive of the company's methods and objectives. "[They're] the kind of [people] you're going to trust to do things the way you'd do them if you were there," says Chuck Wolf, 56, who built a seven-store film and photo-processing chain into a nationwide network of 770 locations over the past 25 years. "You've seen them work, and you know they're up on the goals you've laid out for your stores."

For the small chain, however, Hoy warns that the most obvious staff source for the new location might not be the best. If the original location is bursting with motivated, effective employees, move some over to the new place, he says, but be selective. Moving too many people out of the original location can make it the weakest link in the chain--when it ought to be the strongest.

"It might be that store No. 1, because it's up and running, is easier to manage than store No. 11," Hoy acknowledges, "but if you hurt store No. 1, it will probably be harder to recover there than at the new stores because [its] loyal clientele are going to think they've been abandoned."

On top of that, employees of the old store might start to sound like the older kids griping that the baby of the family gets all the breaks. "They'll start to notice that they don't have new carpet or shiny new equipment," Hoy says. "They worry about their place in the chain."

Collier feels a good way to combat that attitude is to remind employees at the older location that they're the big brothers and sisters with important responsibilities now. "People working in our original store know that we make the merchandise selection for the other stores, so a lot of the success of the rest of the chain depends on them," he says.

It's also essential to keep in mind that a chain of stores need not be a string of clones. Trying to duplicate the existing business in a new location might render some subtle differences invisible. Collier found that out when one of his new stores wasn't living up to projections. He carefully examined which items at that store were selling and discovered he'd misjudged the local market. "Our higher-priced merchandise, which sells well at other stores, was out of reach for the people who shopped in the store," he says. After Collier did a little strategic reshuffling of its product line, the started performing as expected.

Homes Away From Home

After staffing, finding the right locations is the next most important aspect of expansion. Often, it's a matter of pinpointing the things about the original location that made it work and looking for other locales with similar features.

Wolf says once he'd opened a few dozen locations, he got to where he could quickly find the right spot in a new city. He wanted high-traffic sites in affluent neighborhoods with large numbers of families. With such a streamlined vision, "I can learn about any [small] city in two days, or a big city in a week," he says. Wolfe believes any good business idea ought to be easily transplanted to similar settings in other cities.

At the same time, Hoy warns against assuming that all similar locales are identical. Before expanding into an unfamiliar city, he suggests forging a relationship with a knowledgeable local who can help you navigate the new waters, whether it's at city hall or in the local ad outlets. And whenever expansion takes you across state lines, seek legal advice on how tax laws and other regulations differ from those in your home state.

Finally, Lacey reminds entrepreneurs who are looking to build chains that, as with raising children, each one is easier to handle than the ones that came before, if only because you're more experienced. Petr agrees. Now that he's built an infrastructure to support 17 stores and the three more he's planning, he says, "I don't see any limit to the number of stores we could have."

Contact Sources

Gardner-Collier Jewelry, 111 W. Washington, Kirksville, MO 63501, (660) 665-3052

Milwaukee PC, 4160 S. 108th St., Greenfield, WI 53228, (414) 427-6965

Wolf Camera, (888) 644-9653,

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