There’s a lot more to building a franchise than hiring an architect and breaking ground. Jewelers and business experts offer tips to opening-minded retailers on going from a one-store to a two-store operation.
It may seem counterintuitive to expand your business in the midst of an uncertain economy. But as Barbie and Mark Edwards know, conventional wisdom doesn’t always hold true in the unpredictable world of retail. In 2011, at the peak of the recession, they opened a second location of their thriving jewelry store. Today, both shops—Created Gems in Gold and Silver in Siesta Key, Fla., and Created Gems II in nearby Sarasota—are in growth mode.
“We were a little concerned about the economy, but we have a lot of foreign tourists and we ship all over the world, so it hasn’t been an issue,” says Barbie. Their biggest concern, she says, was finding the right employees.
Partners Amedeo Scognamiglio and Roberto Faraone Mennella outside their newest outpost in Capri, Italy
Hiring competent salespeople is one of the many challenges you will face when opening a second store. But it’s not the only one. JCK spoke to jewelers and retail business experts about the biggest issues facing retailers looking to branch out—and identified six key questions to ask yourself before you take the leap.
Is the Timing Right?
The Edwards weren’t the only jewelers expanding in an economic downturn. Roberto Faraone Mennella and Amedeo Scognamiglio—the co-owners, founders, and designers of the upscale Faraone Mennella brand—opened their second and third locations within the past three years.
Having begun with one store in New York City 12 years ago, the twosome opened a London outpost in fall 2010 and a Capri, Italy, location in spring 2012. “The economy was a little iffy worldwide, but that was our push to do it,” says Scognamiglio. The pair noticed that luxury sales were booming, so they thought the market was ripe for new stores.
Jerry Amerosi, owner of Gerald Peters Goldmine Jewelers in New York City’s Staten Island Mall, also expanded at the height of the recession in 2009.
“I was able to get better deals and advertise and get market share because no one else was advertising,” he says. His second store, a Pandora boutique, is located just 100 yards away from his first.
How Is Your Business Doing?
Before you begin drawing up the blueprints, try to pinpoint what makes your first location successful, says Michael A. Levin, assistant professor of marketing at Otterbein University in Westerville, Ohio.
Created Gems owners Barbie and Mark Edwards in their Siesta Key, Fla., store
“You need to have a successful business model that you can replicate, as well as systems and procedures in place that can be copied,” says Rebecca M. Turner, an attorney with Maddin, Hauser, Wartell, Roth & Heller in Southfield, Mich.
“You won’t make a profit on day one and you have to put some money into your second location and into training the employees and the customer base because they won’t know who you are,” she says. “It will be a while until you see a return on investment.”
And be sure your original store is thriving; opening a second requires all (or almost all) of your focus. Says Levin: “You will neglect and almost ignore your first location for one to two years, until you feel the second location is meeting its goals and objectives.”
Can You Poach Your Own Employees?
Opening a second store will always go more smoothly if you take some of your current employees with you, says Matt Bear, a principal with Avison Young, a Toronto-based real estate services company.
Barbie in front of Created Gems II in Sarasota
“You are taking your culture with you,” he says. “Employees take your history and your story. Take as many as doesn’t hurt your existing store.”
If possible, bring a veteran general manager from your first location who is ready to oversee a store on his or her own, says Turner. Amerosi took one employee to his Pandora store “because she knew the product, the way I operate, was good with marking up merchandise, banking, etcetera,” he says.
Consider how you’ll split time between your stores. “It’s critical the owner be seen in both locations,” Bear says. This, he adds, is for the employees more than anything else. “It helps them feel the store is important and that you’re there for any questions.”
And make sure staffers in both stores can get by without you. “If your employees have difficulty closing the sale when you’re not around, your sales are probably going to drop,” says Levin. “You need employees who can provide that level of service.”
Can You Be Hands-Off?
You may need to change the way you work. Multiple-store owners are relatively hands-off; you’re working on your business, not in your business,” Bear says.
You have to be prepared to spend more time in the back of the house. And, Bear adds, “if you want to run a business that has a significant market share, you have to let go of what you may love the most—which could be making and selling jewelry.”
Of course, says Amerosi, two stores mean double the work. So unless you want to give up life outside work, learn to delegate. “You have to be there for leadership and taking care of problems,” he says.
Levin offers some words of warning: If your management style is very hands-on, if you do not trust your employees, if your turnover rate is high, then do not open a second location.
Is Your Business In Order?
Before you expand, your back-of-house needs to be in place, especially if your business is a partnership. This includes your business documentation, any buy-sell agreements, management, and succession plans—“so everyone understands their roles as you take on this additional obligation,” Turner says.
“We see so many disputes come up because partners become overextended or become involved in different businesses,” she says. “So if you have those responsibilities and expectations defined up front, it will make the transition much smoother.”
Are You Building Your Store Into A Brand?
That was one of the reasons Faraone Mennella and Scognamiglio opened locations No. 2 and 3.
“If you don’t have your own stores, you’re not a brand,” Scognamiglio says. “You can only control your brand when you can control your image, your presentation in terms of merchandise, and the environment you design to house your jewelry.”
And when you are a luxury jeweler, your female customer wants to buy from a brand that represents her lifestyle, he says. “So your stores, the design, and where the stores are—they are all choices that are crucial because they identify you and position you. That’s why we opened our first stores outside the U.S. in London and Capri—because we feel they are incredible luxury hubs.”
The expansion also gave Faraone Mennella fresh perspective. “It gives you the opportunity to direct your design for different sensibilities, while keeping your core brand DNA in place,” Scognamiglio says.