So your restaurant’s been building a buzz, and the customers keep coming in. Lots of them have been asking if you’re planning to open another location closer to where they live. Should you leave a good thing alone, or is it worth considering expanding by opening a new branch?
When weighing up the pros and cons of expansion, here are some key questions to consider:
Do you have the capital?
Opening a second location will require the same financial investment as your first location. You’ll need to think about shelling out for equipment, furniture, rent, supplies, salaries, and more. While you may have a rough sense of a profit-loss ratio from your first restaurant, make sure that you have a good financial buffer zone so that you don’t lose control of your whole business if things don’t go as well as you’d hoped.
Do you have the right location?
When choosing a spot for a new location, you’ll want to make sure that the rent and terms of the lease make sense for your business — consider reviewing any contracts with a property lawyer before making a long-term commitment. It is also important to make sure that you’ll have access to the right customer base in your new location, so research area demographic data, and study the foot traffic patterns of nearby shops. If you cater to a young, trendy crowd, and most residents are in the 60-plus category, you may have trouble finding the right audience in your new location.
Sometimes it can work to cater to different demographics, but you’ll need to make sure each location supports its target market. For example, while the original Tupelo Honey Café in Asheville, North Carolina caters primarily to tourists, a second location in a residential area is aimed at locals, and has local-friendly hours (no breakfast, and an earlier close).
Do you have the right management strategy and team?
Obviously, you can’t be in two places at once, so if you’re opening a second location, you’ll need a great chain of command at each restaurant. Before considering expanding, make sure that you have a highly capable manager or partner who can handle any issues that may arise, and can be responsible for training and overseeing employees. It’s also important to streamline your business operations as much as possible: For instance, by shifting from a traditional point of sale system to an iPad cash register, you can cut down on complexity and staff training time. You’ll also be able to manage multiple locations more efficiently through real-time data on your mobile device.
Making the decision to expand can be a difficult one, but, by ensuring that you are both financially and operationally prepared to grow, branching out may be the key to greater success for your business.
Image Credit: John Hoey