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Growth in hospitality rarely arrives with perfect timing. When margins are tight, teams are stretched, and operators are already juggling more than enough, stepping back from growth feels sensible, necessary even.
That instinct is understandable: the urge to slow down, hold cash close, and tell yourself you’ll think about expansion later. But that pause can quietly shape the future of a business. Because how, and when, you choose to grow has consequences, whether you’re actively planning for them or not.
In the latest episode of Science of Service, host Rachel Stainton sat down with Gina Cavendish, MarginEdge’s CFO in Residence, to discuss why the way you approach growth matters just as much as the result. Opening more locations and moving fast is one thing, but real growth means taking charge of complexity, defining the direction of your business, and making decisions that actually make sense for your operation.
Whether you’re running a scrappy startup or managing a multi-unit enterprise, understanding the mechanics of growth, the timing, trade-offs, and discipline required, is essential. Let's dive into the strategies behind building successful hospitality businesses and why waiting for the "perfect moment" might cost you more than you think.
There is a delicate dance between growth, capital, and timing. These three elements are always intermingled, and misaligning them can lead to significant setbacks.
Most often, operators find themselves with a brand that has a lot of excitement around it. There is buzz, customers are lining up, and the revenue is flowing. But despite this momentum, there is often a lack of a cohesive plan on how to get from point A to point B. It sounds simple enough: acquire real estate, develop it, and open up restaurants. But anyone who has opened a restaurant knows there is so much execution, fine-tuning, and planning involved.
Sitting down and really thinking about where you want to put your cash is critical. How you want to grow is just as important as the growth itself. Do you want to grow through franchising, which is less cash-intensive but requires more upfront strategic thought? Or are you going to own and operate all your locations?
Logistics also play a huge role. You might spot a market that fits your demographic perfectly, but if it’s a five-hour flight away from your home base, have you considered the supply chain? Have you thought about how you are practically going to operate that business from a distance?
This is why a "mapping exercise" is so valuable. Take a map of where you want to expand and ask yourself: Where do you want to see yourself? How are you going to get there? Breaking it down into bite-sized chunks prevents the process from becoming overwhelming and ensures you allocate capital wisely rather than just throwing money at the next new store opening.
When margins come under pressure or operations stall, it’s tempting to hit pause. But waiting comes at a cost.
Momentum is fragile in any industry, but especially in hospitality. When a brand is on an upward trajectory, slowing or halting growth can send it back down. It’s like a heart rate monitor: it goes up, it goes down, and there are small gaps of rest in between. If you disrupt that flow by not capitalizing on the interest in your brand, you risk losing that steady trajectory.
While you shouldn't drive yourself crazy opening 20 locations in a year without the infrastructure to support them, keeping that momentum going is vital. A prolonged pause doesn’t leave things neatly on hold; it shifts the trajectory, affecting team energy, market perception, and long-term confidence.
Opportunity rarely waits for perfect conditions. In fact, some of the best opportunities appear during periods of uncertainty. Perhaps a second-generation site becomes available, a landlord is suddenly flexible, or a location that once felt out of reach becomes viable.
The operators who can act on these moments are the ones who have done the thinking ahead of time. Any opportunity, especially when opening new outlets, is complex. There’s capital, people, and systems to consider. But with a growth plan, that complexity becomes manageable. When that groundwork is done early, you can move decisively when the right opportunity appears—knowing that the same opportunity is likely on a competitor's radar too.
Having a plan of attack is non-negotiable. How quickly are you going to grow? But more importantly, how are you funding it?
Are you using cash flow from operations? Are you taking out debt, like bank loans? Or are you going out into the market to look for a partner? Determining funding early prevents you from hitting a wall mid-expansion.
For smaller startups, private equity might not be an option yet, as they typically invest when a business is more established. However, some companies do seed financing, and there are always creative ways to fund growth if the plan is solid.
The most successful businesses combine planning with a sprinkle of spontaneity. You need a plan that is flexible enough to allow for moments of coincidence. If a location comes up that is a great opportunity and fits your market, you need the financial readiness to say "yes." But you must always circle back to the brand piece: Does it align with our mission? Does it align with our values?
Every hospitality business is different, and no two growth plans will look the same. Gina outlines several phases of growth, each with its own "personality" and challenges.
This is the "baby" phase. It’s scrappy, often involving multiple founders wearing multiple hats: dishwasher by day, fundraiser by night. The business is lean, and cash is generated almost entirely from operations. It’s rare to see a single unit go to four units without ambitious plans to expand further. Funding usually comes from family, friends, or small investors.
This is the awkward middle school phase, arguably the most difficult part of a restaurant’s journey. You might have five to 15 units. You’re a successful brand, but you’re trying to operate like a mature business without necessarily having the cash or in-house expertise of a corporation.
This is where you move from being scrappy to establishing structure. It is critical to tighten up efficiencies here. If you are operating a few percentage points off where you should be in terms of costs, you need to fix it now. If you don't, you simply grow the problem.
You’re now in your twenties. You’re not the new kid on the block anymore; you know what you’re doing. This phase (10 to 30 units) is where strategic hires come in, perhaps a COO or a CFO. You might bring in institutional investment. The focus shifts to scalability and replication. How do you open faster? How do you get to your budgeted numbers quicker?
This is the corporate phase (30 to 100+ units). You have a board, a C-suite, and powerful systems like ERPs. You are looking at systems that can scale across multiple organizations.
The danger lies in getting stuck in the "growing up" phase, behaving like a teenager when you should be an adult. To graduate from this phase, you need to invest in systems early.
It seems counterintuitive, but when there is a downturn, it is not necessarily the time to hunker down and stop growing.
During economic lulls, you might find great deals, especially with second-generation properties that you can pick up much cheaper than previously. Brands that have cash reserves and backers comfortable with continued growth can acquire property and come out of a downturn in a significantly stronger position.
It’s about balancing caution with opportunism. If you have the capital and the plan, a downturn is simply a market correction that might work in your favor.
As you scale, the complexity of your operation compounds. Small inefficiencies that were manageable at three locations become growth constraints at twenty.
Let's use a hypothetical "Rachel's Steakhouse" as an example. Say the steakhouse has 10 units and runs at a 35% cost of goods margin, but its theoretical cost should be 30%. That 5% gap might not seem like a crisis at one location. But if that group does $20 million a year in revenue, that 5% represents $1 million.
That is $1 million walking out the door, money that could open another restaurant or be reinvested into the team. If you duplicate that problem across 20 units, you are losing $2 million. This is why getting systems in early, like a good Restaurant Management System (RMS), is an investment in protection. It allows you to see your theoretical costs versus actual costs before the waste becomes a line item on your P&L that you can’t fix.
So, what tech stack is essential?
Fundamentally, systems are important, but the most important thing is the culture of the business. It’s easy for the culture to live in the founder's head when you’re small. But as you scale, you have to be dogmatic about maintaining that culture.
Consumers today, especially younger generations, look for a connection to the brand. They want to know your personality and what you stand for. If you say one thing and behave another way, there is very little tolerance for it.
Every decision, from who you hire to how you post on social media to how you make financial decisions, must pass the brand filter. If your brand is about sustainability and sourcing locally, you can't scale aggressively using generic vendors just to move faster. You have to accept that opening locations will take longer because you have to find local partners. That conscious decision preserves the brand equity, which is ultimately what holds value if you ever decide to sell.
Growth rarely gets derailed in the big moments. More often, it slips in the small ones: the system upgrades put on hold, the questions you keep postponing, and the problems that quietly scale right alongside the business.
The most successful operators understand that real growth requires intention. It doesn't require perfection, but it does require awareness. It means having the discipline to monitor performance weekly, not just monthly. It means hiring for roles like finance before you think you need them, because those are the roles that guide wise decision-making.
Whether you are in the scrappy startup phase or the awkward "middle school" years of your business, the key is to put the groundwork in early. Define your path, secure your capital, and build the systems that will protect your margins as you expand. That way, when the right opportunity shows up, whether it’s a new market, a perfect location, or a chance to acquire a competitor, you aren't just willing to take it; you’re actually ready for it.
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