Imagine for just a moment.
You look out across the restaurant floor, all the tables are full. You see customers enjoying their meals. Your staff are running things like a well-oiled machine and your reservation list is full. You feel like you are at the top of your restaurateur game.
But it may also lead to questions. Namely, is it time to expand your busy, successful restaurant so you can accommodate more guests?
Expansion can be one of the biggest decisions a restaurant owner can make.
Expanding to a second location, for example, doubles your costs — and doubles your risk.
Whether you’re just beginning to wonder about expanding your restaurant, or you’ve already made the decision to go full steam ahead with a larger space or second location, this guide will help you with important considerations you need to think about — as well guide you towards what steps to take next.
STOP! Before You Even Consider Expanding - Do These Things.
Expanding your restaurant is a huge step. Just like when you opened your first location, if you’re not well prepared for the rigors of running another business, you could be dooming it to fail.
Ensure you’re ready to take that big next step by doing these things first.
1. Determine if it's really the right time to expand
Before you even consider expanding, you need to know if your restaurant is ready for that next step. First and foremost, you need to be financially secure, with a good profit margin that remains steady or grows each month.
You should also consider whether you’ve maximized your profit at your current location. Some key ways to maximize:
2. Know your customer base, both here and at the new location
You need to analyze both your existing customer base and your prospective customer base. You should collect data about what menu items they’re most likely to order, demographics in new locations you’re considering, and what restaurant trends are popular in your area and where you’re planning to expand.
Before you decide to expand, you should know exactly what type of customer loves your restaurant, and whether that demographic is prevalent in a possible expansion location. You should know exactly what your demographic of customers wants to see on a menu and how much they like to spend. And utilize your key demographic to do some qualitative research, too. Ask for feedback, like whether there are more menu options your customers would like to see, or if they have any complaints about wait times. All this information will be used later.
3. Use that data to create a site plan
With all the data you’ve collected, you should now know what customers love about your restaurant, and what they’d love to improve about it. Now, use that information to develop a site plan for your new or expanded location.
Maybe your current location only serves beer and wine, and customer feedback indicated they’d love to see a full bar. That’s something you can add at your new location. Or maybe they’d love if your breakfast spot served brunch and lunch as well. That feedback can be used in designing a bigger kitchen to support an expanded menu.
Maybe customers at your full-service establishment wish there were a way to pick up a grab-and-go lunch during the workweek. In this case, a pickup window, carside to-go service or even a kiosk rather than a full second location might be what your customers want. Consider Orange Leaf, a popular frozen yogurt chain that has focused its expansion efforts on adding quick-service, outdoor kiosks that are cheaper than full stores, and allow customers to quickly get a sweet treat on the go. Maybe your restaurant can do something similar.
4. Know your accounting, inside and out
How much cash does your restaurant earn each month? Where is that cash coming from? How much do you spend on supplies and ingredients? What’s your cash flow growth percentage month-over-month?
These are all things you need to know going into expanding or opening a second location. Having as clear a picture of your accounting as possible will help you set realistic goals for your new venture, including when you expect to break even after opening. It will also give you a chance to evaluate things like vendor partnerships, and make changes if you can get better prices elsewhere or by renegotiating with your current vendors.
5. Do a SWOT analysis
Lastly, have you considered a SWOT analysis for your business before you head into expanding?
SWOT, which stands for strengths, weaknesses, opportunities and threats, is a great tool for any business looking to make changes, and it can help you get organized and see your situation realistically before you go ahead with you expansion dreams.
Doing a SWOT analysis will give you a template for laying out all those factors that need to be considered first.
- What are the strengths you have in your current restaurant?
- What are its weaknesses?
- What opportunities do you have in expanding or opening a new space?
- What threats might your business face in expanding to a new area or taking on the cost of another location?
Think You're Ready to Expand?
Keep This in Mind Throughout The Process.
If you’re leaning toward expansion, there are still more considerations you should take first.
As you make your plans for a larger space or a second location, ask yourself these questions to ensure, throughout the entire process, that it is the right path for your restaurant.
What kind of expansion is best for your restaurant and its customers?
Expanding doesn’t have to mean opening a second location that’s just like your first. Expanding could simply mean moving to a bigger space that can accommodate more guests. Or it could be even smaller than that, like adding banquet or catering services, or launching a food truck to take a taste of your menu to local events.
There are tons of options for expansion, so consider what you and your customers really want and need.
Can you maintain a consistent and excellent experience after expansion?
What if your favorite restaurant opened a second location closer to your home? You’d be stoked, right? But what if that second location just didn’t run like the first? The food is just a little less quality. The ambiance that makes the first location so nice wasn’t replicated in the second. The staff seems inexperienced, resulting in order mistakes and long waits for food.
Understandably, that experience might leave you with a bad taste in your mouth, even for the first location of the restaurant, which you love.
That’s why it’s vital to ensure that after expanding, you can provide your guests with an experience consistent to what you already offer them. If a second location can’t hit the exact mark that makes your first location successful, you’ll lose loyal customers.
The same goes for during the expansion process. If readying a new location is demanding so much of your attention that customers are feeling neglected at your first location, you’re not starting off on the right foot. Make sure you can take good care of your customers throughout the expansion process — they’re responsible for your success, after all.
If your restaurant is ready to grow, expansion could be a great challenge (and, potentially, a profit maker).
Staying cognizant of growing pains and challenges throughout the process will ensure you only expand when your restaurant truly is ready, and that the expansion results in more customers and more success.