First off: congrats! If you’re considering opening a second location, you’re doing something right. You’ve beaten the odds and discovered a winning formula for a profitable, successful restaurant — and that deserves a round of applause.
You probably have more business than you can handle, which has got you thinking that another location would be a hit. And opening multiple locations can help you leverage the economies of scale that allow you to offer customers more for less.
Like any investment, a new site takes planning, foresight, and the tiniest bit of luck. We may not be able to do much about that last one, but this guide will put you in good shape with the first two. Here’s what you need to know.
Decide Whether You’re Ready for an Expansion
Before you jump headfirst into a second location, take the time to evaluate your current business model and decide whether it’s the best time to expand. Ask yourself exactly which factors are responsible for your success. Can they be duplicated? For instance, your location in a high-traffic shopping mall or business area could be contributing to your popularity. These factors might make it more difficult to conquer the second location without a few tweaks to your menu or concept.
This one might seem obvious, but you need to have the cash flow to open another location. If your first location is still in the red, you might want to wait until you have a little more breathing room.
Also, consider your market. Will you be able to tap new customers with a second location? For instance, if you already target the lunch market in your town’s central business district, opening a second location the next street over may not offer a lot of fresh patronization. You might want to investigate new cities and surrounding areas where they may not have tried your killer burger yet.
Weigh Your Financials and Raise Capital
You’ve done your due diligence and decided you’re ready to pull the trigger on a second location. Now what you need is capital and lots of it. Luckily, you have a few options here.
- Internal capital – If you’ve been in the restaurant game for a while, you probably have profits you can use to fund your next site. This option is always the least expensive route — no interest or fees to worry about — as long as you don’t deprive your original location of the capital needed to keep day-to-day operations in full swing.
- Business loans – Some financial groups specialize in loans for restaurants. Lenders typically administer these as one of three different loan types: equipment financing, inventory financing, or working capital loans used for a variety of various business expenses. Some restaurateurs even combine several loans to get the funds to open a new spot.
- Private investors – Many restaurants are made possible with the help of partners who receive shares of restaurant profits in return for their funding. Outside investors can be a blessing and a curse, so select them with care. A very vocal partner can have you tearing out your hair, and a family member partnership may strain your relationship. However, many restaurant owners successfully fund restaurants through their landlords, offering shares in the site in return for startup funds. That’s especially the case if you open a second location in a hotel or airport. And with a successful restaurant under your belt, you’ll be a lot more attractive to potential investors.
However you decide to fund your expansion, it’s a good idea to separate accounts between your first location and your second. Using profits from your first restaurant to make payments on a new loan can potentially put your financial resilience at risk.
Scout the Perfect Location
Location, location, location. That motto is as true for your restaurant as it is for a real estate broker. The right site is the secret sauce that will make your second location irresistible to its new customer base, so it’s important to do your homework before you commit.
A lot goes into this decision. Think about the physical space: Is it big enough? Will patrons be able to park nearby? What about access — are you located in a high-traffic spot, such as a busy street corner or an exit off a well-traveled highway?
How about the demographics: What kind of people frequent the area? Are they the type that would be attracted to your business? For instance, a neighborhood full of busy professionals may not be interested in burgers and a beer dive, but an upscale bistro may be right up their alley!
Of course, it’s not just about market potential. Rent may be a lot higher on that one trendy street downtown than it is in an upstart suburb with lots of potential. Overhead is something to take into account when you review locations!
Develop a Business Plan
Having a successful restaurant under your belt gives you an edge over new restaurateurs, especially when it comes to writing your business plan. After all, you’ve been in these shoes before, but now you have all the benefit of experience on your side.
Keep in mind that your second location is its own unique business. It needs a separate budget, market analysis, operational processes, and marketing strategy. You can borrow some content from your first plan, but don’t assume that your second location will be an exact clone of your first.
In particular, your business plan should articulate whether you plan to use the same concept and branding across both locations. Duplicating the same restaurant concept is easier since you know that you have a winning formula on your hands. But a different cuisine or ambiance may help you capture additional markets in the same region — if you duplicate, you’ll need to explore a new neighborhood or even a new city.
Purchase Equipment and Technology
There’s no restaurant without kitchen equipment. Just like when you were opening your first business, you’ll need everything from appliances to small wares. In particular, you want to keep equipment and business processes consistent across locations, especially if you’re duplicating concepts. Your customers will expect the same quality and consistency across all locations.
Your enterprise technology is an important key to restaurant success and is imperative as you expand to multiple locations. Point of Sale (POS) reporting features help you keep track of sales, employee clock-ins, refunds, taxes, and payments across different locations so you can tell without a doubt how well your newest venture is going.
Decorate Your New Location
No two spaces are the same, so it’s impossible to build a mirror image of your first location. While you might need to change some details to fit the space, you can still capture the same vibe across both sites. For instance, use the same color scheme, tables, or dishware to maintain a consistent feel. And naturally, you want to make sure menus, logos, and branding resemble one another in both spaces.
Hire and Train a Loyal Army of Team Members
Of course, you can’t do it all by yourself. When you open a new location, it’s that much more difficult to oversee minute details of your restaurant’s operations. But in the restaurant business, the devil is in the details — so you need a sharp, organized leader at the helm when you can’t be around.
Hiring a restaurant manager is no simple feat. It takes some thought about your roadmap: Where do you expect this location to be in the next five years? Identify the leadership qualities that have contributed to your success, and look for a general manager who embodies those characteristics completely. Restaurant staffing will fall into place once you have the right manager on your payroll.
Get the Word Out
There’s no use in opening a second site if no one knows about it. Just like your first opening, promotion is key to snagging new customers in those first days of business. Be sure to update your website, social media accounts, Google My Business, and Yelp pages, so people know about the new location. Draw your followers in with photos that document your progress — people love getting an insider look into an opening.
Remember, the viability of your new site depends on the thoroughness of your research and strategy. Your second location may be a whole different experience from your first, but once it’s up and going, the profits from a multi-location enterprise will make you glad you decided to expand.