Going Places

MANAGEMENT SMARTS

By Jacquelyn Lynn

If you feel like you've captured as much of the local market as you can, it may be time to move on. But before you leap into an out-of-state market, have a thorough plan in place.

"We don't go into a market unless we're committed to dominate that market," says Michael Glauser, president and CEO of Golden Swirl Management Co., a Salt Lake City company that operates more than 80 frozen yogurt retail shops in the Western United States and has a thriving wholesale division as well.

Glauser saw similar companies taking a shotgun approach to nationwide expansion and decided on a more focused method. To see the wisdom of his decision, just look at the numbers: The last 50 Golden Swirl stores were funded by operating capital and required no debt or equity financing.

"Our objective is to go into cities of 1 million to 2 million people, build a region of stores as quickly as we can, and not jump around," Glauser explains. By putting a large number of units in a particular area quickly, Golden Swirl is able to capitalize on economies of scale in distribution, management and marketing.

Before launching an expansion plan, Glauser advises, take a look within. "Seriously look at your reason for expansion," he says. "You typically have to grow to satisfy your employees, to offer them career opportunities, to have cash for research and development and those kinds of things." But, he cautions, you may not see a significant increase in your net earnings-in fact, during a strong push for expansion, your personal income may even decrease. "So know what your objective is, and be sure expansion is the way to make that happen."

Once you've made the decision, choose your market carefully. Consider distribution issues-how you will get raw materials and products to your new location, and how the cost of transportation will affect your service and pricing levels. Don't skimp on market research; you have to know the market you're going into as well as the one you're already in.

Consider who will be in charge of the new site. "Those who run that operation for you in the new area have to be as committed, hard-working and enthusiastic as you are," Glauser says. "They have to duplicate what you're doing in your present market. That means either you're in the new location a lot, or you bring in a partner, or you offer sufficient incentives for someone to behave like an owner in that new market. If you hire without creating that feeling of ownership, your operations will deteriorate dramatically as you move out of your state."