The restaurant industry is notoriously competitive and physically draining; however, sometimes the hard work and financial investment pays off and your restaurant turns into a huge success. If that happens, and if you’re an ambitious and confident business owner, your thoughts might turn to opening a second restaurant based on the belief that doubling locations could mean doubling your success. However, before you jump into opening a second restaurant, read on for the some of the plusses and minuses involved in the expansion endeavor.
When is the Time Right for Opening a Second Restaurant?
In theory, if you are already running a successful restaurant, you remember what was involved in getting it off the ground. Based on that recollection you may come to one of two conclusions: if I’ve done it once, I can do it again, OR this has become more than a full-time job and there’s no way I can open a second location. In other words, the possibility of opening a second restaurant has a lot to do with attitude and energy level. However, even if the will is there to seek a way, it’s often unclear when the time is ripe to move from one restaurant to two. Nonetheless, there are signals that indicate that the opportunity is there; you just have to know how to read them.
Can Your Current Restaurant Support You?
Business.com suggests that you look for “5 Signs You’re Ready to Open a Second Restaurant.” One of the first questions you want to ask yourself is whether your current restaurant can support you through the transition of opening a second restaurant. If your restaurant is successful, if it’s full almost every night, if word of mouth has brought you a steady and loyal clientele with a constant stream of new customers, that could mean that you’re good to go. In other words, you have to take a super-careful look at the books and see if your existing restaurant can cover the costs of opening a new location while maintaining salaries and operations. If it can, and if you feel a renewed confidence reminiscent of the way you felt before opening your first venue, then proceed to the next step.
A New Business Needs a New Business Plan
You should start by developing a new business plan for your second location. Although you created a working business plan the first time around, don’t overlook this process, as a new business plan will keep you on a timeline amidst all the pressures of opening a new location. A business plans will help you to stay loyal to certain milestones and goals during the launch and over the first few months and years.
Analyze your initial business plan, keep what you feel is essential and what made the biggest difference, and revise the rest based on what you’ve learned since your first business was up and running. This may require research and extensive analysis of your location, competition, staffing, etc. Think about how you chose the current location of your restaurant and analyze why it works; then try to apply this information to possible new locations. Once you come up with a possible new venue, look at the competition in the area and compare it to the “rivals” that existed near your first restaurant.
Can Your First Location Survive Without You?
You may want to forget all the time and effort – and stress and pressure – that went into opening your first restaurant, but when you are considering opening a second locale, remember what it took out of you. More importantly, because you will probably have to dedicate yourself almost exclusively to the new business, at least at first, ask yourself if your first location can survive without you.
If you’re honest with yourself you’ll realize that the effort involved in opening up a new location means that you’ll be too busy to give your first restaurant a lot of time. If your presence is an essential part of your restaurant’s success – whether because you haven’t found the right manager to fill in for you or because your name is part of what brings customers to your door – it may not be time to open a second restaurant. On the other hand, if you have a strong and independent team in place, and you don’t need to be present and hands-on in the management of your restaurant, it’s a different story. If you believe that your restaurant can continue to operate effectively without your daily involvement, and if you are willing to relinquish a good amount of control to a trusted team, you can continue to consider opening a new restaurant. (More on staffing issues later.)
Can the Market Support You?
Location is one of the most important aspects of opening a restaurant, so you have to look at the demographics, just as you did the first time around. If you are expanding into a similar concept as your first restaurant, ask yourself whether your proposed location will be far enough away from the existing venue that you won’t split your customer base. Similarly, consider whether there are two areas that can support you and your expansion. If, on the other hand, your second restaurant will have a different theme and concept than the first one, the proximity to your existing operation is less critical. It’s a matter of your target markets, your niche, vision, and whether your general area can support two restaurants, either the same or different.
Opening a restaurant is a costly proposition and even if your first restaurant is going well, you’re still going to need capital to make the second one a reality. You probably won’t be able to swing it just with the profits from your first restaurant, which means you may need help in the form of investors or a loan. Be prepared to start paying two of everything: rent, utilities, payroll, insurance, permit fees, maintenance costs, etc. Plus you will have to come up with the initial costs of designing and outfitting your new restaurant.
With all that to consider, be sure to get good financial assistance and plot out all your costs to ensure that your new venture is financially feasible. Make sure, as well, that you set aside a certain amount for contingency, which can help you handle unforeseen costs in the construction stage, and cover shortages if your existing restaurant begins to struggle.
New Restaurant, New Technology
Even if you opened your first restaurant relatively recently, you may not be using the latest and most effective technology; therefore, you should investigate what is new in the market. There are tools that can put information at your fingertips about total sales, table turn time, gratuity and tip averages etc., which will help you make informed decisions that relate to both your restaurants.
As you grow, you’ll need a chain-wide restaurant point-of-sale (POS) system that will allow you to look at your locations, see the differences, and spot issues. You’ll also want to be able to produce stats that relate to your menu with the help of a comparison report program that features menu items that were ordered across both locations, allowing you to identify ordering trends, get ahead of inventory, and make pricing decisions. If your second location is a different concept, you’ll want to maintain separate menus across the different locations, but when you’re keeping the concept the same, the right technology will give you the ability to change your menu in one location and have it update across both establishments, which can save you a lot of time.
If you’re contemplating opening a second location, you may find that planning for staffing is one of the most challenging aspects you’ll face. In an article from the Toast website, “The Next Steps: Opening a Second (or 100th) Restaurant Location,” restaurant owner Steven Ansara says of opening a second locale, “Some parts get easier, like the build out, menu design, the setup of the bar, the flow of the kitchen; but managing the people at a larger scale, that’s what gets harder.”
The article recommends that you “steal” some talent from your first restaurant, i.e., promote from within. Turn to the most trusted staff members to support you in your new venture, and make sure that they have enough time to learn their new upgraded role before the Grand Opening (at least two months). Allocate responsibility and give them authority to make the decisions that will free you up. For many, the Toast article goes on to say, “this form of letting go can be the hardest part of opening a new location.” One restaurant owner admonishes that, “If you don’t feel like you can take two weeks off before starting your next restaurant, you’re not ready to open your next location.”
Don’t Neglect Your Other Location
This may seem elementary but it’s important to point out that, with all the excitement and effort that you are going to put into your new location, the biggest risk is neglecting your first location. This initial successful operation – your cash cow, as it were – is what has made you profitable enough to even consider expanding. You will have to continue to nurture your first “child” because if you abandon it you can lose an important source of income that will make the second location viable. This is especially important to keep in mind because it can take at least a year before your new location is profitable.
Opening a second restaurant takes a lot of hard work and planning… just as your first venue did. However, if you have the confidence, financial backing, and the belief that if you did it once you can do it again, go for it. Even if your first restaurant was a huge success, view it as a learning experience and consider what you want to do differently the second time around. Your experience means that you’re more prepared to open your second restaurant than you were with your first. Take your time, do your research, make a new business plan and only then should you decide if you’re ready and able to move forward with your second restaurant.