Should You Open a Second Restaurant Location? 3 Things to Consider
Being a restaurant owner has its ups and downs (what career doesn’t?) You get to do what you love every day, but also face responsibilities of being in charge of the whole show. Still, you’ve found success in opening and maintaining your first location, so much so that you’re considering a second. Because of the prosperity of your first restaurant, you may be excited to bring on a new addition. But, because of this success, you may also be fearful of how the introduction of a second restaurant location will affect business.
There are numerous factors to contemplate when toying with the idea of a second restaurant location and we’re discussing three important considerations to make today.
A Steady Cash Flow
Before rushing into opening another restaurant, consider the cost. You’ve already done the legwork of opening one location, so you know the amount of capital that’s needed to get a business off the ground. You’ve been profitable so far, but do you have enough to do it all over again?
If you have enough cash flow to be able to fund the second location without having to look elsewhere, you’re likely prepared to open a second location. But, be wary of utilizing funds from your current restaurant to break ground on a new one. You don’t want to sacrifice your current profits when taking this risk.
An option is to seek out funding from an external source, especially from investors who are more focused on growing your business than seeing immediate returns. But taking on debt with high rates of return is always risky, especially when your new location likely won’t be turning a profit for the first couple months to a year.
It may have been a little while since your first restaurant’s opening, so consider all of the costs you’ll have to face:
- Building rent or purchase & ongoing maintenance
- Equipment & supplies
- Staff salaries
- Food inventory
The takeaway: Be confident in the cash before taking the leap.
A Smart Location Choice
You know the old saying location, location, location. But, in this situation, we’re talking about where you’ll open up shop in relation to your first restaurant. Being too close to your flagship poses a risk of depleting your customer pool. Conversely, opening up a second location nearby might be an option if your product is trending and competition is low.
If it’s too close for comfort, consider moving further out from your current restaurant where you might get a slightly different crowd. Of course, you’ll have to consider the population of the area as well as the competition. If you’re considering opening an Italian restaurant in a town where there are already 5, you’ll probably want to look elsewhere.
We love the idea that Entrepreneur.com gives regarding market research: [pilot test sales of your products and services in the proposed new target market.]
If feasible, test out a “pop-up shop” in the location you’re considering. You can gauge the audience, demand, and popularity to see if it’s a good fit.
When starting the pop-up, you can either make it a mobile kitchen or rent out an empty space that previously housed a restaurant. Set up a dining space (if it’s in a physical location) and market the pop-up in a way that makes its limited-time factor clear.
Make sure your staff explains the purpose of the pop-up to your guests and asks for their feedback in a survey. You can get honest opinions on whether or not customers would like to see your pop-up restaurant become a permanent staple. From there, you can make a decision on whether you should open up there or keep hunting for a new spot.
The takeaway: Do your research on the location before making a determination.
The Manpower and Resources Necessary
You have the cash flow, you found a perfect location, now consider the long-term. You’ll need a stellar staff to be trained and maintained if you want your second location to prosper. As the owner, you can’t be in two places at once (unless you have superhuman powers) so you need to make sure the people who will be running your restaurant are ones you can trust.
At the beginning of your second location, you’ll want to be as involved as possible. By now, your first restaurant should have a staff that’s a well-oiled machine, thriving enough on its own that you can trust it does well with the current management team in charge. You’ve already set the standards for quality at your first location so it’s important to set your second location up to have just as much success. Being heavily involved, as the owner, in the beginning stages can help ensure your operations are running as they should be.
During the early stages, dedicate your time to the new locations so you can be hands-on in training your new staff for success (of course, you’ll have to put in the effort to hire them first).
Oversee each area of the restaurant, from front of the house to back, to ensure things are running as smoothly as possible. If there need to be adjustments, it’s better to get those out of the way early. Focus your efforts on this new location to make sure you’re giving it the attention it needs as it takes off.
The takeaway: Plan strategically to execute successfully.
With the success of your first restaurant, you may be considering opening a second location. This is an exciting venture to consider, but it also comes with some potential risks you must face. Before jumping into anything, make sure you think everything through to ensure you’re making the correct decision. And if you do decide that all systems are a go, we wish you much success with your new restaurant location!