It’s a phenomenon and seems inevitable. A story played time and time again. A small business is built, grows with wild success, and then loses its tarnish. Every big business we consider bad was once a Mom and Pop.
When I mean bad, I don’t mean they necessarily are poorly run, or are bad to the environment, their employees, or otherwise. We just stop liking them.
(1) New Business, Single Location
An entrepreneur starts a business with hopes of being successful. It does well and is considered special… “a destination.” Customers LOVE it. They drive for miles and wait for hours to get in. Locals add it to their list of “must visit” places when friends and family come to visit. Reviewers laud it.
(2) Simple Expansion
It does so well, the owners open a second location on the other side of town just to keep up with customer demand. Everyone is happy. The third and forth location open… still busy. Word of mouth continues to pack ‘em in.
(3) New Markets!
They open a single location in Chicago, New York City, San Francisco, Boston, Seattle and Miami… Rave reviews. Lines outside the door. They open a few more in each city. Success!
Sometimes this growth can span 50 years (Krispy Kreme Doughnuts started in the 1930s, In-N-Out Burger the late 40s), or a decade (Starbucks grew incredibly in a 15-year period).
Then something starts to happen…
(4) A Shift
A few more locations open… and while they’re providing the same great service and the same great product… sentiment begins to change.
The initial customer group, come less frequently, and eventually… not at all. Their secret place has become too mainstream. Now that this business is in every city, it’s no longer special.
This shift is hard to notice since sales continue to climb as a result of the new wave of customers discovering the business.
And then…
(5) Then Big Becomes Bad
Slight shifts in the way the business operates. Slight automation here. Expansion of offerings there. A few things designed to keep quality and service up with customer volume. These work, but tarnish the brand. Mom and Pop long gone, replaced by “factory.”
This has happened, among others, to McDonald’s, Wal*Mart and more recently Krispy Kreme and Starbucks.
What is to come of our still darling Whole Foods Market and In-N-Out Burger? Whole Foods is in expansion mode…newly opened in the UK. In-N-Out has grown as well, but so far only regionally in the southwest U.S.
- Is something only special when there is scarcity? I know, if Christmas were everyday, it wouldn’t be special.
- Should a company create an artificial cap on its growth to prevent it from being considered common?
- Is the problem going public? Does being driven by shareholders require constant growth even if it means company demise?
What do you think?
What would you do? (Honestly? Would you have the discipline to stop your own growth?)
Tags: big and bad, growth, In-N-Out, Krispy Kreme, Starbucks, Tipping Point
***Is something only special when there is scarcity? I know, if Christmas were everyday, it wouldn’t be special.
Certainly that has something to do with it. The best place I’ve ever had Tex-mex is a single location. They’ve been open for something like 40 years in tiny city about an hour from where I grew up. I’m going to be back in the state in the beginning of June and a visit is already scheduled in!
I think a big thing is the welcoming feeling. They know my family at that mexican restaurant. When I lived in Orlando, the Chinese food lady would ask about my girlfriend (now my wife) and job while I waited for my carryout order. My wife and I had our reception in a Mom and Pop pizzeria because they were like family.
Though that’s not to say you can’t find that in a chain–the guy at the Chick-fil-a drive through used to know my order. It’s just less likely. Once you’re favorite place has 5 or more locations it’s not family anymore–at best it’s distant cousins or like that kid you used to be friends with before you got to high school and now only see in the hallway maybe once a week.
***Should a company create an artificial cap on its growth to prevent it from being considered common?
It depends on the focus of the company. I’d rather have the type of company that is envied for success in my product, not success in the marketing of my product. *ducks before being hit by the marketers in the room* So a cap is something I’d be more likely to place, but certainly some companies are all about growth. Like Starbucks. They grew and grew and grew, and now what are they? Pretty much a joke. They’re Wal*Mart or Home Depot. Big money-makers, no heart.
***Is the problem going public? Does being driven by shareholders require constant growth even if it means company demise?
100% going public is a problem. If you’re a great leader and all of a sudden your job isn’t to lead but to grow profits (there is a difference), you’re playing a different game. That’s not to say going public is bad. That just means, not all companies or CEOs are cut out for that type of scenario. If I owned a company, I’d rather focus on driving sales through better products and service than through cutting corners to increase profits on less volume.
Could the problem be that in growing an organization beyond the bounds of immediate owner control, many companies try to standardize their look and feel in order to maintain the original quality of the product. I think that it is the standardization that often puts people off. The place no longer has a local “feel” when it is forced into a cookie cutter mold in appearance and product.
For in-and-out shopping this may work, but in general people go to places where they are comfortable and where their personal preferences seem to matter. This is especially true in places where people go to relax, like restaurants.
I think that growing franchises should make more effort to identify which areas absolutely must be standardized, and allow more flexibility in local customization for other areas. You optimize results by providing easy access to information on best practices and encouraging a sharing of what works well, and what doesn’t, in each of the local units.
I’ll start with the last question first, because I believe it has the most influence.
Once you go public, you HAVE to get bigger, and there will never be an end in sight, simply because, even though the pie (your revenue) might get bigger, the slices (shareholders) are growing even faster. And they all want to make their millions off of you.
I actually think having a cap on growth IS a good idea. There’s too big a leap in overhead and added concerns from going small to medium and beyond. I don’t know how practical it is to implement that, but I have several clients who aren’t interested in growing a lot, just a little. Which is smart, I think.
VERY good points! It’s almost like a business has to meet halfway on expanding too much and remaining small but then again most business owners naturally want to expand and expand until they can’t anymore. This could eventually lose the overall personalized customer service that the company once had which could in turn result in being viewed as the “bad guy”. Interesting thoughts to mull over.
In Starbucks’ case they over saturated the market with to many franchises to close together. There second and largest mistake was signing a deal with pepsi and the big boxes for prepackaged cold coffee. Why pay $4.00 when you can buy it at a service station for $1.00.
3rd actually how good is starbucks brand and is it worth the money?
In the language of influence, this is “scarcity.” We value things that are scarce, and exclusivity applies to mindshare as much as it does for location. Once a brand goes “mass,” it’s no longer “scarce” or “exclusive.”
In this country, we love underdogs. As a result, we take great pains to tear down our leaders — whether they be market leaders, institutions or individuals.
The good news is that Starbucks doesn’t have to be “small” to win; they have to be “good” — and this definition changes over time with the realities of their business. They don’t need to be quirky and unique now — they need to consistently make great coffee, wherever in the world you are.
I think Gini made a very nice observation. Standardising (which is necessary to make brand more recognizable) brings down “localization”. McDonald’s can never be “Slovenian”, unless it becomes “Janez’s”.
Also I’m wondering… can a big business ever be so close to my selfimage as a small business? I’m a small thing in this world (1 in a 7 billion if you want). And small things are therefore something I can feel much closer to, then big?
@all
What great observations! Thanks for participating in the conversation! It’s way more fun when we discuss…
A theme I’ve noticed in your comments is something I have noticed as well… at some point… a shift takes place from single, small, and quality to… consistent, convenient, and quick…
Thanks again!
Paul