The $15M Multi-State Retail Expansion

Successful regional retail chain with 12 stores in one state. Strong unit economics: $2M average revenue per store, 18% EBITDA margins. Approached by growth equity firm to fund national expansion.

Growth equity firm offered $15M to open 25 stores in 5 new states within 18 months. Financial models showed we'd reach $60M revenue and position for acquisition. I was intoxicated by the vision. We had one profitable model in one geography, but I convinced myself it would translate everywhere. We hired a VP of Expansion who had scaled a different retail concept. Opened 25 stores in 16 months—Miami, Phoenix, Seattle, Denver, Austin.

Store economics varied wildly by market. Seattle: high rent, low margins. Miami: different customer demographic, wrong product mix. Phoenix: strong start, then collapsed in summer heat. We were managing 37 locations across 6 states with systems built for 12. Supply chain couldn't handle it. Store managers had no local support. Quality control failed. Customer complaints tripled. By month 20, only 4 of the 25 new stores were profitable. We closed 15 stores, took $8M in write-offs on leases and inventory. Growth equity firm forced a CEO transition. I was out.

• Test new market with 1-2 stores for full year before committing to expansion
• Build infrastructure for scale BEFORE scaling (systems, training, support)
• Reject any plan that requires >50% headcount growth in 12 months
• Require stores to hit specific metrics before opening next batch
• Keep expansion to adjacent geographies first—cultural similarity reduces risk
• Raise 2x the capital you think you need for geographic expansion