This may be one of the oldest statements however nothing could be truer today. Many restaurants, bars and coffee operations are disillusioned that their brand is everything. To an extent this is true but in a time where banks, private equity houses, venture capitalists and other financial investors are more in-tune than ever with the financial reality - it really is the numbers that count.
The food and beverage industry is a different world from the IT sector where loss making start-ups are valued at high multiples of earnings. In this industry, figures are based on the bottom line and the expansion potential.
Inevitably, brand awareness is crucially important to the success of a business. However, without strong resulting numbers to back it up the brand identity is useless.
It is imperative that a business implements a concept which works from the early stages; this will entice investors as they will not support a business based on thin air.
Brands such as Byron, Pizza Express and Cote have been sold on numerous occasions due to intrinsic profits and their strong brand identity. On the other hand, there are well known brands that are producing a fantastic turnover yet are not able to generate their profit. I believe these brands will eventually get caught out.
Our advice for start ups:
1) Get the first three sites right in terms of turnover, profit and brand. Once this has been successful, then consider accelerating.
2) Don’t rely on the brand value on its own; ensure it is a sustainable concept. This way you are more likely to attract the right investors who are sensible about investing based on real growth and a roll out plan.
3) Remember - any business that grows to quickly is likely to crash
We spend a considerable amount of time with operators discussing their long-term plans and how to succeed in their vision. There is much mis-information when it comes to valuing business and this is something that we have to work through.
We are always open to have a discussion with anyone who feels the need for assistance – please feel free to ask and we will try to do our best to help!
Regards
David Abramson
