What they thought the problem was
A restaurant group running five concepts, among them burgers, a bar, a sandwich shop and a gelateria, came to us with what looked like a structuring question. The instinct inside the group was to find short-term efficiencies and take cost out.
The detail that didn't fit
Each concept was tracked in its own spreadsheet. Legally, financially and operationally, though, they were one undifferentiated business. It was hard to see the economics of any one concept, hard to price its risk, and impossible to give any one brand the freedom to grow in its own way.
And they needed to grow in different ways.
Burgers could become a franchise.
Sandwich shops could open in the smallest of corners, and should stay agile, with cash ready to move when the right opportunity appears.
The restaurants should expand slowly and build a reputation over time.
A mature brand might eventually be sold or spun out. A newer one might need years of experimenting before its model is proven. Uncertainty needs flexibility, and a single entity makes those choices unnecessarily hard.
Looking closer
The question we kept coming back to was not how to save money this year. It was what the business needed to look like if its concepts were going to diverge.
Once the structure was on the table, two more things became visible. Chefs and unit heads were paid on broadly similar terms despite running businesses at very different stages. And there was no consistent discipline for deciding whether a new concept should exist at all. Ideas could move from instinct to investment without much scrutiny of the market they were entering.
What the problem actually was
A structure that could not let its parts behave differently, and incentives that assumed they wouldn't need to.
A mature concept preparing to franchise needs someone focused on consistency, margins and repeatability. A young concept still finding its market needs someone willing to experiment and take calculated creative risks. The people running those businesses should not necessarily be rewarded in the same way.
What changed
A separate entity for each concept, each with its own accounting identity. Higher compliance costs in the short term, in exchange for something more valuable: the ability to understand, finance, diligence, partner with or eventually separate each business on its own.
Legal separation did not mean operational separation. The central kitchen, sourcing and purchasing were already producing economies of scale, so they stayed as shared services, provided by the parent to each subsidiary under formal agreements with market-based cost allocation.
Once we had shared the thinking, the CEO saw a way to extend the same logic to research and development. The bar's drinks-development work had always belonged to the bar, even though much of the knowledge was useful to every concept serving alcohol. Her suggestion was to move it into the central kitchen as a shared function: a small cross-disciplinary laboratory where ideas and techniques could travel between concepts.
We worked with the group to develop individual agreements for key people, benchmarked to market and built around bonuses, profit-sharing or revenue-linked components that suit each concept's trajectory.
We are now helping the group build feasibility studies into its capital decisions, covering competitor pricing, addressable demand and the fit between a new idea and the opportunity it is meant to capture.
Separate the businesses where separation creates value. Share capabilities where sharing creates value. Let ideas travel across the group even when the businesses themselves are separate.
The broader point
The group can now let different businesses behave differently without becoming disconnected. Each concept has its own economics, incentives and growth path. The group still captures its purchasing power, its shared infrastructure and its knowledge.
The objective was never to make the businesses more similar. It was to give each of them room to become what it could be.
