Hey Fast Casual: Your Growth Strategy is Only as Good as Your Next GM

With the economy improving and unemployment rates low, the labor market for the restaurant industry is getting tighter and tighter. At the same time, many restaurant chains are planning for aggressive growth, especially in the Fast Casual segment. New store openings are key to driving that growth, but staffing those stores, especially finding qualified general managers, is becoming increasingly difficult. The supply of adequately prepared general manager candidates is at an all-time low. As a result, restaurant chains either have to wait longer for assistant managers to become GM-ready, or they promote assistant managers too soon. Both solutions dilute the strength of the management team, leading to missed sales opportunities, slower growth, increasing attrition and rising costs. These dynamics are working to create a “GM Wall” that many high-growth restaurant chains will hit soon, if they haven’t done so already.

Unprecedented Recruiting Difficulty

As restaurants are enjoying increased sales, they are also facing increasing difficulty in recruiting and retaining employees. According to the Q1 2015 People Report Workforce Index from TDn2K, recruiting difficulty is at an all-time high, with employment levels on the rise and turnover rates increasing. And the issue seems to be particularly prevalent for managers in the Fast Casual/Family Dining segment. In the first quarter of this year, 65% of companies reported an increase in Recruiting Difficulty at the management level, with the Recruiting Index for Fast Casual/Family Dining checking in at a whopping 91.7.

tdn2k

Meanwhile, the Fast Casual segment continues to be the leading segment in the restaurant industry when it comes to sales and traffic. According to TDn2K’s Black Box Intelligence, the segment’s same-store sales growth for the three months since November was 4.6 %, compared to 3.5% for the restaurant industry as a whole. And this segment doesn’t show any signs of slowing down anytime soon.

Help Wanted, Big-Time

So how will restaurants staff for all of this growth in the face of a tightening labor market? This is the key question that high-growth chains will have to face in 2015. With restaurant growth accelerating and management turnover increasing, manager vacancies are on the rise. The one position that is most critical to prepare for is the general manager role. Of all the roles in a restaurant, the GM is the most impactful one that can make or break the success of a new unit. Without a steady stream of strong general manager candidates, fast-growing chains will struggle to keep pace with their planned rate of new store openings.

DiscoverLink has worked with more than 100 restaurant brands over the past 13 years, including several chains that have grown by 10% per year or more. We’ve recently started to hear from chains that have had to curtail their expansion plans because they just couldn’t find enough qualified GM applicants. In talking with these chains we found a common thread: The lack of qualified GMs and the failures of newly promoted GMs always seemed to take them by surprise. They didn’t have a pipeline of ready-to-promote GM candidates in waiting, and they didn’t prioritize internal development of GMs in order to fuel their store growth. As a result, they often ended up having to put unqualified candidates in leadership roles just to get by in a crunch. But inevitably, these GMs failed at a higher than normal rate, and the chain suffered through the problems of this stop-gap approach in the form of poorly performing stores, high employee turnover and low guest satisfaction scores. Some of these companies ended up having to put the brakes on their growth plans while they regrouped to address their GM issues – a phenomenon we call hitting the “GM Wall.”

 Find Strength From Within

One way to avoid the GM Wall is to intensify efforts to develop staff internally. Providing ongoing training has always been a great way to keep hourly employees engaged and reduce turnover, and the same is true within the management ranks. All too often, however, the majority of management training focus is put on Manager-in-Training (MIT) programs, with very little training support for aspiring GMs. By providing well-defined training programs for assistant managers, restaurants can create a bench of GM-ready candidates necessary to support their growth plans.

Working with three major restaurant chains, DiscoverLink examined this situation and found that GMs who fail were missing key skills in critical competencies. We worked through a detailed task analysis for the general manager role with 20 regional vice presidents and 60 district managers, ranking them according to three criteria:

  1. Frequency: How often is the task done?
  2. Importance: How critical is the task to the restaurant’s success?
  3. Difficulty: How hard is it to complete the task?

We then organized the tasks into GM competencies and compared them to the competencies of an assistant manager or shift leader. Not surprisingly, we found significant gaps that pointed to a need for GM-specific training. By bolstering training in these areas, clients were able to improve success rates of newly promoted GMs from 65% to 95%.How did they do it? By deploying DiscoverLink’s AGM to GM program, a one-of-a-kind program focused on addressing the common deficiencies of new GMs. AGM to GM is a blended learning program of both online and experiential activities designed to help assistant managers make the leap to general manager. Designed to be completed in 9 to 18 months, the program gives assistant managers time to learn the material, apply it to their current position, and begin forming their own style of leadership.

Don’t Hit the GM Wall

If you’re in the middle of executing a high-growth strategy, don’t make the mistake of assuming your assistant managers can just jump into the GM role unprepared. The AGM to GM courses have just been rebuilt and redesigned for mobile devices with updated competencies, new content and enhanced interactions and activities, so there’s never been a better time to take advantage of this unique program. Whether you use DiscoverLink’s AGM to GM program or create your own GM curriculum, don’t overlook this critical part of your training program. It could be the difference between hitting your company’s growth targets and hitting the wall.