How to Make the Big Decision to Open Store No. 3

There’s much more to think about than just adding more of everything. A small-business advisor and two local dance retailers who’ve made multiple storefronts a success offer insights about taking the leap.

Footlights Dance & Theatre Boutique’s first storefront, in Frederick, MD. Owner Joy Ellis now has three stores, opening the third in Alexandria, VA, in 2016. Bill Adkins

Dance retailers often open a store to create a living for themselves that fulfills their passion for dance. Many are former dancers or dance teachers, after all. Then, once they’ve found their footing as a storeowner, some grow bigger ambitions. They open a second location and may, at some point, consider a third. As a path to growing revenues, it can make sense. “To make money and have an impact, you have to expand locations,” says small-business advisor Rieva Lesonsky, CEO of GrowBiz Media. “People tend to shop locally, with a radius around where they want to drive, so it’s advantageous to spread out to be found.” 

When Joy Ellis opened the second location of Footlights Dance & Theatre Boutique, she had already had a successful 20-year run as a dance retailer in Frederick, MD, attracting customers from an expansive area. So when a big dancewear store in nearby Silver Spring closed after 50 years’ operation, she seized the opportunity. “We wanted to make sure we could service a different community but still be semi-close to our main base,” says Ellis. The second store provided a presence with schools that hadn’t been shopping with Footlights, and Ellis was able to expand her customer base. Four years later, recognizing a need in northern Virginia for a full-service dancewear supplier, Ellis opened her third location, in Alexandria. Each store is a half-hour drive from the other.

Is the Time Right? Am I Ready?

Knowing when to make the leap to store number three—and whether you’re both mentally and financially ready for it—requires thoughtful preparation. By the time you have a third store, says Lesonsky, “it’s no longer a lifestyle, it’s a business operation. You can’t get to know everyone in all your locations now. You must enter with a different mind-set.” 

It’s important to recognize that what makes you successful as a dance retailer—a deep relationship with customers and commitment to a local community—will be impacted by opening a third location. Perhaps you already comfortably delegate to superb managers. But with location number three, you’ll be relying even more on others to manage and uphold the level of service your customers have come to expect; you’ll be trusting others with your business. 

The business will also demand more of your time. Are you ready to make that commitment, while relinquishing control of perhaps some of your favorite aspects of running your stores? “As when you go to two stores, [with a third] you’ll have to implement more structure and give up more control,” says Ellis. 

Think carefully about how comfortable you feel managing multiples, advises Kelli Widener, who owns three En Arabesque stores in Bucks County, PA. “If you’ve managed two stores for two years and things are going great, then go for three.” 

A Financial Base

To be on solid financial ground, you’ll need enough money set aside to carry you through 12 months at the new store, recommends Lesonsky. Otherwise you’re taking that money that supports two stores and stretching it into the third. “Don’t even think about expanding to a third location unless sales at your present stores are growing consistently for an extended period,” says Lesonsky. Otherwise, you could be basing your move on a fluke, such as one busy season or a particularly popular product line you just added. 

Widener opened her first En Arabesque store in Perkasie, PA, in 2005, right after college, putting together financing from her own savings and help from family. She knew from the beginning that she wanted to build a dancewear retail business with stores in upper, central and lower Bucks County. Ten years later (now with a husband and child), she opened her second location, in Doylestown, her hometown. The Feasterville store opened in July 2017. For the second and third stores, she estimated costs in advance with her accountant, then accumulated savings to cover each of the other stores for a year. “Startup costs in the first year represent a huge amount of cash,” she says. “As long as I was breaking even by second year, I knew the new store was progressing.” 

A third store will flush out the weaknesses in your organization—flaws that may not have been obvious with a simpler operation. Don’t find out the hard way. Consult with your accountant and/or a small business advisor to make sure all systems can fully support “go”: a location you’ve vetted, an inventory plan and forecast, and money or excess cash flow to cover additional rent, utilities, salaries, insurance, furnishings, etc., before you start to make a profit. 

“Don’t assume everything will go exactly as before,” says Lesonsky. For instance, the balance sheet in each store may be different, she points out. Or you may need to determine if any laws or regulations differ in the new locale. With two stores in Maryland, Ellis’ third was in neighboring Virginia. “Getting all the paperwork together for a different state took much more time and effort than previously,” she says. 

Choosing the Third Location

Identifying a successful third location will involve the same criteria you used to open your first store—near studios and in an established shopping destination. “Analyze information on current customers—zip codes—and if you see a cluster from a certain area, there might be a customer base there,” says Lesonsky. While you don’t want your new store to be so close that it cannibalizes sales from the others, being in neighboring towns can have advantages. “Expanding into an area where your initial store already has some name recognition can boost your chances for success,” says Lesonsky. You may identify a town with demographics similar to your present customers, or you may decide to expand your merchandise mix to fit slightly different demographics in a new locale.

The Bottom Line

Be certain the conditions in your existing locations allow you to get away to start your new location. Invest in a skilled manager for each store, knowing she or he will cost you more than sales-floor staff. Some costs, such as inventory and marketing, may be spread across all three stores. Track your progress. Widener advocates creating a timeline for meeting goals for your third location, then sticking to it. If the store is not showing a profit by your deadline, it’s time to seriously reevaluate. Each retailer has to find her own comfort level. It won’t be the same as running a single business, but that’s not what you’re going for, is it? 

Charlotte Barnard is a writer in New York City who often reports on retail trends, design and branding.