The restaurant industry amounts to a nearly 8-billion-dollar market. From fast food to five-star restaurants, there is room for expansion. In the past five years, the number of multi-location restaurants has grown by 2.7%, and that number is poised to trend upward.
It might seem to be an opportune time to expand and open a second location, but how do you know if your restaurant is ready? Here are factors you must consider before investing into a second restaurant location.
Consider the Market
When contemplating expansion, you need to examine whether the market will support a second location. If customers are traveling from far away, and your current location can no longer support the traffic volume, it might be time to consider opening another location.
However, just because you hit all the checkmarks doesn't mean now is the right time. Here are a few other factors to consider.
Have You Expanded Your Current Offerings?
Opening a second restaurant is a substantial venture in terms of cost and time. Before you go all-in on a second location, consider expanding your current offerings to increase cash flow.
For example:
Add breakfast service for tourists.
Create a limited-menu lunch service for office workers near your location.
Offer a prix-fixe menu for special occasions.
Add catering services.
Book private events.
Partner with an online food ordering app, such as Menufy.
Remember, success isn't guaranteed. No matter how successful a first location is, your second location may stumble. A new market may have pitfalls you can't see until you are there. Missed financial goals could put a successful first restaurant at risk.
Instead of jumping straight to opening a second location, consider ways to expand your current location—a strategy that increases revenue so you can support a new location when the time is right.
Will You Find an Ideal Location?
All the demographic information in the world can't tell you the true potential of a new location. Sure, there are certain features a seasoned restaurateur knows to look for—adequate parking, high levels of foot traffic, and easy access, to start.
However, finding the right location requires the perfect mix of data points and good old-fashioned gut instinct. If you cannot find the perfect location, then it's not the right time to expand.
Instead, consider expanding your current offerings with catering, a food truck, or special events. These will increase sales so you can save and test new processes while waiting for the right location to become available.
Will You Need Funding?
Where will the funding come from if you need it? Can you fund in cash based on current profits?
What if you can't fund the expansion in cash? If the timing is right and you have the perfect location, it may be time to consider looking for investment partners or taking a loan.
However, don't let funding be the sole reason for opening a second location. If your current operation isn't a well-oiled machine, and you don't have a tried-and-true menu and reliable suppliers, the new location may fail.
Do You Have the Right Team?
A successful restaurant operates smoothly. You must have the right processes, but also the right people and the right culture. Does your team work well together? Do they believe in the business, and are they willing to put in the work to help you grow?
Without the right support team, you cannot build a successful second location. If the restaurant is struggling with a high turnover rate or a toxic work environment, now is not the time to expand.
Finally: Are You Willing to Invest the Time?
We've already mentioned making sure you have the time, people, and the right location. The final step in deciding whether to add a second location requires a bit of self-reflection.
Do you have a large amount of time to invest in opening up a new location and the desire to do so? If not, now is not the right time, no matter how successful your current location may be.