Restaurant Expansion Strategy: Steps to Growing Your Business
Your restaurant is the talk of the town. Foodies in the area are snapping photos left and right of your tasty cuisine to share on Instagram. You have a great staff that seem to love their jobs and keeps the customers happy. Sales are booming and overall, business is great. You love what you do and want to continue to grow. You might be thinking it’s time to expand your business. It could be a great decision but only if you’ve done your homework.
If you’re uncertain where to start and are in the beginning research stage of opening your next store, this article is for you. Whether you have one restaurant or 20, expansion takes careful planning and consideration. We’ll start from the beginning to help you decide if another restaurant is for you. Then, we’ll go through a restaurant expansion strategy that’ll help set your next location up for success.
Measure the Profitability of Your Current Location
The first step toward restaurant expansion is understanding why you want to do it. Measuring your current success is the number one priority before opening another location.
Before you start planning your restaurant expansion, ask yourself these questions:
- Why do you want to open another location?
- What has made your restaurant successful?
- How much of your success is due to the actual location of the restaurant?
- Who would run your new location?
- Can the same success be transferred to another location?
Funding Your Restaurant’s Expansion Strategy
If you feel like your first location is successful and another location is warranted, it’s time to move on to the next step – securing funding. If your new location will be similar to your first restaurant (or the exact same), then you can expect to spend around the same on equipment.
An important exception to consider, however, are fluctuating rent costs and/or mortgages based on location. For example, a suburban location may come at a lower rate than a lot in the central business district.
Also, will you use your own capital, take out a loan, or use outside investors? Be advised that it is never recommended to rely on your existing location to fund the new one. Consider the new restaurant as a separate business venture.
If you are planning on obtaining funding through a financial institution, here are a few types of restaurant loans available.
These are short-term loans that can cover any of your restaurant expenses. Typically, the maximum loan amount is $250,000.
Small Business Administration Loans
A small business administration loan can sometimes allow you to borrow up to $5 million. Interest rates tend to be low on these loans and the payback period is longer than some loans. However, there are two disadvantages to this type of loan – down payment and long funding period. You should expect to put 10% down on this loan. Also, while some loans take only a few days to receive funding, SBA loans can take several weeks and even months.
Merchant Cash Advance
This is an advance against your restaurant’s future sales. You’ll be provided with funding, which will be repaid by taking a percentage of your daily credit and debit card receipts. Two great perks of merchant cash advances are that funding is usually quick and credit scores aren’t a major determining factor.
Lines of Credit
Think of a line of credit like a credit card. Whenever you need to access a pool of funds, you can do so through your line of credit. Once you pay off what you took out, your credit line will be replenished to the original amount.
Restaurant Equipment Loans
What restaurant equipment you need depends on the type of cooking you plan on doing. There are loans available to help cover some or all of the cost of restaurant equipment. Typically, you will need a down payment in order to obtain these loans.
Don’t forget to also consider what you’ll need in terms of restaurant hardware and software. Some restaurant technology companies now offer SaaS pricing so you can pay a monthly subscription rather than making a big purchase all at once.
Restaurant Brand Replication
What makes your brand special? Can it be replicated at another location? Do the location and the audience in a new area assist with the desirability of your first location?
Let’s say you’re the local watering hole where everyone packs in after a hard day for a round of beers. You’ve been around for decades and anyone could spot your sign from a mile away. It’s always been popular to the neighborhood but would it work in another part of town?
Get clear about what makes your restaurant appealing and determine if it can be duplicated. Consider that sometimes you don’t always have the same success opening a new location in a different area. Occasionally, the area and the people in that area are one of the biggest factors in making a restaurant successful. If you’ve determined that your restaurant can’t be duplicated, a new concept could be another option.
Determine Your New Restaurant’s Location
The location of your first location was a slam dunk so it’ll be important to make sure you pick the right location for your new restaurant. Start by spending time in a few potential restaurant locations to evaluate how your restaurant could perform. Before implementing your restaurant expansion strategy, it’s important to examine the flow of traffic and eating patterns in the location you’re considering.
Here are a few questions to ask yourself when checking out each area:
- Who will be your competition?
- Are restaurants doing well in the area?
- Would your concept be unique in that area?
- How many restaurants are in the area?
- Does the area need another restaurant?
- Does this area fit my ideal audience?
When you start to view potential buildings to rent or buy, think about how visible your restaurant will be from the street. Will it get much foot traffic? Is there adequate parking? These are all important factors that are vital to the success of your new restaurant.
You may be thinking you want to open your new restaurant in close proximity to your first restaurant. If it’s the exact same concept, this could be tricky. Although it could be easier to manage two locations close to one another, it might limit your customer pool. If the concepts are different, having two restaurants near one another could be successful – but considering the audience for each concept can’t go overlooked.
Review Your Menu
Will there be any variation in your menu at the new location? You’ll have different consumers, demographics, food taste, etc. Pricing and menu options will have to be taken into consideration when opening a new location.
If you are opening the same concept in a nearby area, you might want to start off with the exact same menu as the first location. Over time, you can compare menu item popularity and adjust as needed.
Write a New Restaurant Business Plan
This shouldn’t be too hard since you should already have a restaurant business plan for the first location and some of the same information will apply. However, there will likely be sections that will need to be tailored to the new restaurant such as the competitive analysis, target market, location, market overview, and financials.
Some items in the restaurant business plan will probably remain the same such as human resource practices, accounting, technology, etc. Keeping these systems across all sites will create consistency and quality control.
Create a Restaurant Marketing Plan
Your marketing plan should be unique for each location. Each location could have a different concept and target market that will require you to craft a custom marketing plan each time. You’ll want to outline your strategy for your new location, especially for the grand opening.
Here are a few items you should add to your restaurant marketing plan.
Social Media Strategy
How will you get the word out about your restaurant on social media? Leading up to the restaurant grand opening, make teaser posts about the big day. Post media coverage, share customer posts about the grand opening, etc. If it’s in the budget, create a drawing for a free meal at your restaurant if you share a grand opening post and your names drawn.
You’ll need to decide if you’ll have an individual social media account for each location or if you’ll have just one page per platform representing your brand. When you don’t have a page for each location, the brand message can feel more consistent. Instead of consumers having to follow multiple pages on one platform, they can get your brand message from one page.
Below are a few examples of what other restaurants have done on social media for their grand opening.
Update your website with information about your new location. This should include address, phone number, hours of operation, etc. If you have a blog, write an article about your grand opening and post it on social media.
If you have a guest management system that has a loyalty program integration, reach out to current members about the grand opening. Once you generate loyalty program members for your new location, reach out occasionally with coupons, event information, restaurant updates, etc.
Soft Opening Event
Some owners choose to have a soft opening before the big grand opening. This will give your staff a dry run for the big day and allow you to get feedback before the restaurants open. What you need for your soft opening will depend on how large of a party you want it to be. Some items you’d want to include are entertainment, samples of the cuisine, giveaways, invitations, decorations, etc.
The more media coverage you can get for your new restaurant the better. Create a list of the best outlets to target and create a press kit to send to each outlet. The press kit should include an introduction to the restaurant, restaurant photos, press release, logo, invitations to upcoming events, chef information, and any other information you think would be useful.
Hire the Right Restaurant Staff and Management
You can’t be in two places at once so you need to hire management you can trust to handle day-to-day operations. You need to ensure you have someone you can trust to run the show at the original location. You’ll be needed at the second location quite a bit in the early stage and you don’t want business to start tanking because you don’t have good leadership in charge.
Great staff is probably one of the reasons your first location was successful. Evaluate the qualities that have made your staff successful and look for the same in your new hires. Ask some of your staff to come over to the new location to train the new staff and vice versa.
Even when you have great employees, you’ll still need a way to track what’s going on without actually being at the restaurant. With a restaurant analytics app, multi-unit operators can monitor restaurant performance without stepping foot through the door. This tool helps provide peace of mind that your restaurant is running smoothly, even when you’re not there.
Restaurant Technology to Deliver Consistency
Customers expect the same quality and consistency, no matter the location. The best way to do this is through restaurant technology. These are some of the essential tools needed to build consistent guest experiences across every site.
Kitchen Display System
Paper tickets are inefficient and can cause costly errors. A kitchen display system (KDS) will reduce ticket times, improve order accuracy, and increase the speed of service. This reduces kitchen stress and ensures that your guests have the best experience at all of your locations.
A recipe viewer is a centralized portal to hold all your restaurant’s recipes, prep instructions, and procedures so your dishes are prepared accurately and efficiently. When a recipe is added or edited, it’ll be updated to recipe viewers across all sites. This provides your staff with accurate recipe information and consistent food quality.
Reservation & Waitlist System
A reservation & waitlist system will allow you to provide accurate wait times based on current volume and reservation slots. Since you’ll be more organized, this helps enhance the guest experience before customers even walk in. Also, reservation & waitlist system will allow you to develop custom table maps, creating a consistent look and feel across sites that your customers will notice.
Ready to get your new restaurant up and running? Just remember – great restaurants don’t happen overnight. Give yourself plenty of time to research and prep and you’ll be in good shape. If you’ve created a great restaurant once, you can do it again.
What comes to mind when diners think of your restaurant? From mission statements to menu design, we’ve covered everything you need to know about crafting a restaurant brand identity.
About the Author
Emily Elder was a Content & Social Media Specialist at QSR Automations. Emily was born and raised in Louisville, but considers herself a die-hard University of Kentucky fan. For college, Emily attended Indiana University Southeast and obtained a degree in Communications with a track in Advertising. In her free time, Emily enjoys just about every water related activity, but she is partial to kayaking and whitewater rafting.