What to consider before expanding your restaurant

Here’s everything you need to consider before expanding your restaurant

Here’s everything you need to consider before expanding your restaurant

After years of planning and hard work, you’ve finally made it – your restaurant is thriving, your staff is happy, you’ve built a community of loyal customers around your brand, and you’ve got a strong, reliable stream of cash flow. But now that you’re on top, you might be wondering what’s next. Should you renovate your existing location? Try out new business models? Expand your brand into new markets? 

Is your dream to grow your restaurant brand into a reputable business that’s enjoyed by multiple cities and communities? If so, one location might not cut it. If you’re aiming to reach a larger audience, increase your revenue, and become even more involved in your restaurant community, it might be time to open an additional location. But the decision to open a second, third, or tenth restaurant isn’t an easy one. It takes a lot of thought and careful planning to ensure a successful launch and stable operation. So before you start pulling out loans left, right and center, here’s what you should consider before expanding your restaurant.

What to consider before you start planning a restaurant expansion

The idea of owning multiple (successful) restaurant locations is surely appealing, but expanding your restaurant is no walk in the park, especially while you’ve got at least one other location to run. Before you start planning your restaurant expansion, ask yourself a few critical questions:

  • Why do you want to open another location?
  • Is your current location profitable?
  • If so, what has made your current restaurant location successful?
  • Can the same success be transferred to another location?
  • How big is the customer base at your current location?
  • Would existing customers visit your new location?
  • Is there a large enough market for a new location?
  • How much of your restaurant’s success is due to the actual location of the restaurant?
  • Would the new restaurant be in an equally opportune location?
  • Would you be able to finance the new location without impacting your existing one?
  • Will existing suppliers and vendors be able to support your new location?
  • Will the processes and systems you currently use work in your new location?
  • Who will manage your new location? Will you need to hire more staff?

While these questions are a great start, every situation is different, so it’s important to look for key evidence that your business model could support a new location.

Key indications that you’re ready to expand

If you’ve gone through the list above and came to the conclusion that you want to move forward, here are three key indications that you’re ready to expand:

Your restaurant is profitable. Restaurants take a long time to become profitable, and many don’t ever reach that point. Before considering a new location, it’s important that your current one is stable and profitable, otherwise you expose yourself to even more risk.

There is demand. Even if your restaurant is profitable, it’s important to consider how you generate income. Does the majority of your revenue come from delivery? If so, you might want to consider running a ghost kitchen instead. Do you get lots of inquiries from potential customers outside the area your restaurant serves? If so, you could consider a new location in that area. Do current customers love your menu and trust your team to provide a great experience? If so, there’s a good chance they’d be happy to visit your new location.

You have a proven model. Running a restaurant is difficult, and nearly impossible without help. In order to maintain a successful restaurant operation – existing or new – you need processes, systems, and teams that work well for your business. If you don’t have your model perfected at your current location, you might want to work on that before committing to a new venture.

How to prepare for restaurant expansion

Now that you’ve decided that expanding to a new location is the right choice, it’s time to start planning. As you already know, planning and executing a successful restaurant business is extremely difficult, so it’s important to cover all your bases before you move forward. While this isn’t a definitive guide to everything you need to do, getting these tasks done will give you a strong head start that can propel you forward:

Find the right location

Location is everything. While restaurants can thrive in a number of different environments, it’s essential to find a location that will set your restaurant up for success. You’ll need to ensure that there is enough foot traffic to support walk-ins, that it’s easily accessible by both public transit and car, and of course, you’ll want it to be in a desirable area. While it’s great to build your restaurant in a busy area surrounded by events or other attractions, only you know what’s best for your business model, budget, and brand.

Create another business plan

Even if you’ve created a business model that works for your existing location, you’ll need to start fresh when you expand and create a new location. While you can certainly adapt your existing business plan for your new restaurant, there’s no guarantee that it will work the same way. It’s important to do your research and due diligence to understand what will make your new location successful, then put those ideas into a formal business plan that will be used to get investors and lenders on board.

Secure funding

With money to bring your plans to life, your new location is only an idea. In order to bring your new location to life, you’ll need to secure funding for equipment, permits, staff, utilities, and beyond. There are many ways you can go about this, but the best route will depend on your current financial situation, the state of your existing restaurant, your risk tolerance, connections to funding sources, and more. A successful business plan is key here because it lays out exactly how much funding you’ll need, the profit you aim to generate, the time frame for repayment, and so on. 

Build the right team

Every good restaurant has a great team behind the scenes. Without a solid team that understands the hospitality industry, your customer base, and most importantly, your business, it’ll be really difficult to get – and keep – your new location up and running.

Loyal staff from an existing location can be instrumental at helping you plan, set up, and run a new location. However, this route isn’t always possible, especially if those key staff members are essential to the smooth operation of the existing one. That said, newer staff that are familiar with how your business works, but not a core part of your operation, provide a solid foundation to build your team upon.

Get a restaurant POS system

No matter how big or small, it’s nearly impossible to run a successful restaurant without a good restaurant POS system. The right system helps you streamline every aspect of your restaurant operation and reveals insights about your business that you can’t find anywhere else. It leverages your sales, labor, and product data to help drive informed business decisions that both increase profit and improve customer satisfaction. 

By combining almost all aspects of restaurant management into one platform, the right restaurant POS software will help you create and optimize processes, manage and mobilize your data, and ensure that your operation runs like a well-oiled machine, right from day one.

Develop a marketing plan

Last but not least, you need a plan to raise awareness and generate buzz about your new location. Having a great first location is a huge head start, as you already have a place to advertise your new spot, happy customers that are eager to try (and share) your new location, and a presence in at least one market/area. 

But if you really want to launch your new restaurant with a blast, you’ll need to put in some additional work online to get people talking about your new location. Start by crafting a social media strategy, then make sure you’ve ironed out your approach to restaurant SEO, and top it all off with some of our best tips for post-covid restaurant marketing.

Final thoughts

Running a successful restaurant is a pipe dream for many, and a reality for only a small few. If you’ve been able to get one location up and running, you’ve proven that you have what it takes to make it in the restaurant world. If you feel ready for the next challenge, it might be time to start thinking about opening a second location. But before you jump in, just make sure you know what you’re getting into.

Have any questions? We are happy to help!