1. Why do you think the new expanded restaurant did not succeed?
2. What could the Morgans have done differently in their planning?

The textbook points out that one of the problems with small businesses is the inability to cope with growth. The following lecture describes a small business expansion that is typical of the experience of other firms.

Matt Morgan was the manager of a variety store that was part of a large national chain. The variety store was located in a small town of 10,000 in southern Florida. The small town was growing rapidly because tourists from the North had discovered the town’s beautiful beach on the Atlantic.

Matt had arrived in town at the start of a slow-building boom and reasoned that now was an opportune time for him to go into business for himself. He left his job with the variety-store chain. Locating an empty store space next to the variety store, Matt and his wife Nettie converted the area into an orange juice and hot dog stand with a long counter and high bar stools. Fresh-squeezed orange juice on hot Florida days seemed to hit the spot with locals and tourists alike. Matt put in a few tables and expanded the menu by adding some beverages, hamburgers, and soft ice cream.

Because Matt and Nettie had engaging personalities and tried to know most of their regular customers by name, their business blossomed. A very small breakfast menu was offered, and the business—called the Orange Connection—was a financial bonanza for Matt and Nettie.

Matt opened up at 6:00 a.m. for breakfast. Many people on their way to work in the growing town stopped by for coffee, juice, and a danish. Some retired people also stopped by for a plate of bacon and eggs. By 9:00 a.m., shoppers and tourists stopped by seeking nothing more than a cold drink. Around 10:30 each morning, the Orange Connection was jammed, with all seats taken and numerous people standing at the counter waiting to be served.

At 11:00, Nettie would join Matt in serving quick, short-order lunches. Even though many of the orders were to go, there was always a seating shortage for lunch, but crowds kept coming back.

In the afternoon, another wave of customers would come seeking just a cool drink. The evening hours saw a slight increase in orders of hot dogs and hamburgers. Business dropped off by 7:00 p.m., and Matt would close the Orange Connection at 7:30 p.m. The Orange Connection was closed on Sunday.

The town’s response to the Orange Connection had been overwhelming. The Orange Connection was frequently overflowing, and some customers had to be turned away. Matt and Nettie began to think about expanding to a larger facility. After a year of doing some simple surveying and talking with everyone who would discuss the matter, the Morgans decided to knock out their south wall and develop a restaurant with three times the space of the original Orange Connection. During the renovation and construction, crowds continued at their normal peak level.