Should I Add A Second Location?
Business is booming, loyal customers are keeping you busy, and you ask, “Is it time to expand?” While there are a lot of factors that come into play regarding the question, and there is no one right answer for every situation, my general response when asked by the dealers we consult with is a resounding “No!” I say that based upon my experiences over the last couple of decades. I have found that few second locations ever work out and, in several cases, end up severely hurting the first location.
Over the next few weeks, I will lay out a series of questions that you need to answer before you make the decision to expand. Here’s the first question:
Who is going to run the current location?
You might think, “Well, I plan on staying and running this location and either moving or hiring someone to run the second!”
A high percentage of the second location failures I have witnessed happened when someone other than an owner is brought in to run the new location. I personally believe that a second location requires almost the same level of owner participation it took to make the first location successful. Without direct day to day interaction from an owner, the second location will burn though cash like a drunk in Las Vegas.
Second locations that have had success in most cases are ran by the owner who has made the commitment to make the new location their home for the next 3 years. That means that the distance from the first to the second location must be in a reasonable driving range, an hour or less to make it a workable situation for the owner. If you are not willing to take on the demands of driving an hour or two every day for the next three years – then in most cases, opening a second location is not a good decision. On the other hand, if you are and you feel confident you have a person that you can trust with keeping your first location successful, then maybe you are ready to consider making the jump.
Next week I will focus on my next two questions that involve the financial considerations involving expanded floorplan and credit lines, along with setting realistic 5-year goals that would involve either negative weather or an economic event.