How do you grow a service business when growing means adding locations? That’s always been one of my favorite topics in service operations. It poses interesting challenges on what must be standardized and where flexibility should be maintained. The Globe and Mail has an interesting profile of Toronto entrepreneur who has had to grapple with these issues as he has expanded his takeout restaurant from one location to four (Restaurateur creates winning recipe to manage multiple locations, Mar 8). They’ve gone the emphasize-standardization route.
Over the next seven years, Mr. Ross opened up three more Veda locations, two in buildings on the main University of Toronto campus, in 2007 and 2009, and one this past summer at University and Dundas, close to a group of hospitals. To manage across these locations, he pays close attention to as much standardizing as possible.
Since Mr. Ross believes food consistency to be critical, all the cooking is done in a central location. This means not only that food in all of Veda restaurants is cooked using the same recipes, but that it all comes from the same batch. The cooking takes place in the original, flagship Yorkville location and is distributed to the other locations each morning.
To ensure that the right food is at the right place at the right time, Mr. Ross needs to be able to estimate demand at each location on each day of the week. He has systems in place that allow him to predict that, and to tweak the prediction if there are events, such as large conferences, in the area. As well, he has a driver on call at all times who can deliver food to a location within 10 minutes if there is unexpected demand and something is running out.
Many of these decisions make sense. Centralizing production gives a lot of control over both the quality and consistency of the food but also of how new kitchen workers are brought on. New staff can work alongside experienced staff so changes in personnel should mean little or no change in the product. Minimizing the food prep in each location also reduces the amount of space and equipment needed. New outlets are then cheaper to rent and outfit.
The downside is a reduction in flexibility and the need to solve an inventory problem each day. Even that may be a bit overstated. They offer Indian standards like saag paneer and various curries. If those were prepared in the stores, they would still be produced in batches and have to be produced ahead of demand. Making more of these dishes will not be the same as throwing another burger on the grill. Hence, each outlet would have to solve its own little newsvendor problem and likely need to be holding extra inventory as a hedge against a busy lunch rush. As long as deliveries from the central location are fast enough, the magic of pooling inventory should allow them to provide better service with less waste.
The beauty lies in the eyes of manager (Mr. Ross) to separate standardization of food production processes at central location, whereas flexibility of distribution processes in delivering services to several locations. It drives Veda’s business while “growing means adding more locations in service business.”