Opening a Second Restaurant Location? Consider These Important Things First
November 6, 2019
To be a restaurant owner brings its highs and lows (what profession doesn’t?) You can do what you do every day, but you also have a huge amount of responsibility on your shoulders. Nonetheless, you have found success in establishing and operating your first restaurant, so much so that you are planning a second.
Due to the success of your first restaurant, you might be excited to add a new one. Because of this success, however, you may also be afraid as to how the business will be affected by the arrival of a second restaurant location.
There is no simple, clear way of knowing whether you are prepared to open a second (or 20th) restaurant location. However, before you begin planning, here are some essential questions to ask yourself.
- Is your restaurant so busy it’s difficult to deal with crowds?
- Are your customers driving long distances to visit your restaurant?
- Do you have plenty of cash flow?
- Do you believe that opening a second location will increase your capital?
- Are you ready and able to put in long hours to launch the new restaurant?
If yes is your answer to all of these, then congrats! You’re likely prepared to open another restaurant. Before you do, though, here are some important things to think about.
Do You Have Steady Cash Flow?
Consider the cost before you jump into launching another restaurant. You’ve already created the groundwork to open a venue, and you know how much money is required to get your project off the ground. So far you’ve been successful, but have you time to do everything again?
When you have enough cash flow to finance the new location, you are probably ready to open a second location. But beware of using the profit from your existing location to break new ground. If you take this risk you don’t want to lose your existing profits
When you have enough cash flow to finance the new location, you are probably ready to open a second location.
One choice is to obtain capital from an outside source, particularly from investors who concentrate more on expanding their investments than on making immediate profits. But debt with high return rates is always risky, but even more so when your new location is unlikely to turn a profit for the majority of the first year.
Have You Found the Right Location?
You’ve heard it said, time and time again, location, location, location. But in this case, it’s important to consider where you’ll open your second restaurant in relation to your first restaurant’s location. Opening too close to your flagship could weaken your customer base. On the other hand, it could be an ideal solution to open a second location nearby if your product is trending and there is low competition.
If it’s too close, consider opening further away from your existing restaurant to attract a slightly different audience. As always, the population of the area, demographics, and market will need to be weighed. You’ll likely want to look elsewhere if you intend to open a Mexican restaurant in a town that already has 7 competitors.
If possible, try a ‘pop-up restaurant’ where you are considering to open your next location.
If possible, try a ‘pop-up restaurant’ where you are considering to open your next location. This is a great way to test the concept in a new market. This allows you to measure the audience, demand, and popularity to see whether it fits properly.
You can either make it a mobile kitchen or rent an empty space that once held a restaurant when you launch the pop-up. Arrange a dining area and advertise the pop-up in a way that clearly indicates its temporary aspect.
Have your employees explain to your guests the purpose of the pop-up and ask your guests for feedback. You will get opinions as to whether or not people want to see your restaurant become a more permanent location in the area. From this point, you can choose whether to open up there or to start searching for a new location.
Do You Have the Right Team & Resources in Place?
You’ve got the cash flow, you’ve found a suitable location but now think about the long-term. If you want your second location to succeed, you will need to train and retain a quality team. You can’t be in two locations at once as the owner (unless you have magic powers) so you have to make sure you can trust the people who operate your restaurants.
You’ll need to be as involved as possible at the start of your second location. By this point, your first restaurant should be a well-oiled machine, thriving on its own enough that you can trust the current staff in charge is doing well. You’ve already set quality standards at your first restaurant, and setting your new location up for equal success is just as crucial. In the early stages, being highly involved as the owner can help ensure that your operations run as they should.
During the early days, devote your attention to the new locations so that you are hands-on in preparing your new employees for success.
To ensure that things are operating as efficiently as possible, monitor each area of the restaurant; front of house and back. When changes are needed, it is best to get these out of the way quickly. Spend your energy on this new location and ensure that you give it the attention it needs to run successfully and grow.
Is it Time to Rebrand?
You may get too large and grow beyond the previous brand identity of your restaurant. This is often a good thing! But if you never invested the time to create your brand with a vision of the future, it can cause problems for you as you expand into new markets with your second restaurant.
Let’s imagine you’re a little Italian restaurant. Your first location has been established and the restaurant has been successful. Fast forward a few years, and you’ve launched three new locations in your area. At this point, you’ve been presented an opportunity to expand your restaurant into new states/cities beyond your current market.
Your name, unfortunately, is ItalianKitchenOhio.com. This could be a major issue and a valid reason to rebrand.
This is a fairly regular occurrence in businesses that grow rapidly. Your business that started with humble beginnings has now outgrown itself. Suddenly, you moved from the small local cafe to an up-and-coming restaurant enterprise. Ensure that you are setting your business up for long-term success with a brand refresh, or complete brand overhaul.
Because your first restaurant experienced so much success, it’s common for restaurateurs to consider opening another location. It’s exciting to think and dream about it, but it also means many possible risks that you have to face. Before you step into it, make absolutely sure that you’ve thought through all the details, and every scenario to make sure that you make an informed decision. And after all of those considerations, if you believe you’re all set, I hope you experience huge success with your new location!
Chief Marketing Officer, Longitude°
Jeremy is an author, speaker, and partner at Longitude°, with well over a decade of experience and expertise in brand strategy, business development, customer behavior insights, and marketing. His career has centered around helping leaders build influential brands by telling more compelling stories in order to connect on a deeper level with their audience.