Planning to Expand Your Restaurant Business? Here’s How to Do It Loss-Free

5 min readJun 7, 2019

Opening the first restaurant is hard. But the experience you get with it makes you think opening a second location will be no big deal. Unfortunately, that’s not always true. You need to have a robust expansion strategy that allows for growth of your business.

In this article we talk about main things you should consider before starting the expansion.

Mind Your Own Managing Recources

You need to make the decision of how you’ll be integrated into your new business.

Will you manage and run it full-time? Will you train someone else, or allow your current business’ manager to run your new operation!?

If you’re a very hands-on owner, you may find that your resources are very limited. You can only be in one place at a time, and if regulars expect to be greeted by you at your original restaurant, they may no longer go to your establishment because you’ve taken that personal touch away.

If your original business starts losing customers because you’re no longer overseeing it, you may need to return to the full-time work there.

There’s a lot to consider.

Be Careful With Financing

But most business consultants recommend that you seek outside funding.

So, to finance your new location, you can:

Use your own capital
Secure loans
Secure outside investors

The second business will need to have capital for:

Lease or building payments
Equipment
Furniture
Décor
Lighting
Inventory
Supplies

You also need a cushion so that you have funds to pay your employees. By running the operation like a separate entity, you’ll be able to keep your original restaurant running without any issues. If seasonal changes lead to a dip in sales, you’ll be able to absorb the loss by keeping each business separate.

Find New Suppliers Or Stick to the Old Ones

If you’re leveraging your business’s name and plan to open another branch of your business, you’re at an advantage.

Why?

If the menu is the same, you’ll be able to:

Use the same vendors
Discuss discounts with vendors

Since you’ll be ordering more product from the same vendors, you may be able to better control overhead and lower food costs at both establishments.

But let’s say that your first restaurant focuses on Italian cuisine and the second serves German food. Your idea may be well-outlined, but you’ll need to:

Create new menus to cater to your demographic
Find new suppliers for your new ingredients

You’ll also need to sit down with a chef and come up with unique dishes and recipes. It’s a lot of work, and you’ll also need to find what works for your demographic. There’s a lot of research and trial and error that went into making your first business a success.

Location and the Validity of Small Restaurant Chains

The restaurant business is competitive, and there are concepts that work very well in one location and not the other. There’s no doubt the location means a lot when expanding a business.

You should:

Research local habits and demand
Analyze competitors in the area

For example, some locations are very tight-knit communities. These communities support locals, and they’ll often go to an establishment because their friend owns it. But if you were to open up a better restaurant right next door, it may not work at all.

You need to determine if a small restaurant chain will work for your business.

You’ll want to:

Survey customers
Review the potential market

Sit down and make sure that you do all of the market research possible for your new, potential location to lower the risk of failure.

If the area is saturated by competitors or small local businesses, it may be a market that is too hard to enter. Market analysis will determine these risks and help you make a sound decision when opening another spot.

Remember: each location you open will add to the complexity of the business.

More Locations Mean More Stress

It’s stressful running one restaurant, but running two? Even more stress. Let’s examine a common scenario:

Location two’s manager is sick, so you go to fill the role.
Location one has an emergency, and you’re already at the second one managing.

You can’t be in two places at once. If managers get sick or employees quit, you may be dealing with the same issue in multiple locations.

Bad publicity can also hurt both establishments.

Reviews from one location may reflect on others, causing you to lose potential customers.
There’s more of a risk of food poisonings and accidents when a new location is opened.
Supplier issues can hit both restaurants at one time, doubling the potential loss in profits.

You have to be able to withstand bad publicity or issues at one or both locations. It’s riskier to open up a portfolio of businesses simply because more can go wrong.

Hiring is the Key to Your Success

If you want to be able to make your business less complex and sidestep many of the issues that others face, you can do so through proper hiring. If you start with the right staff in place, management can help you run your restaurants.

Traditionally, owners will:

Allow the first location to be managed by the current manager
Attend to the second business during the early growth stages
Check on the original location numerous times per week to ensure it continues running smoothly

You can ask your current staff if they would be willing to work at the second location on occasion.

Current staff can also help train new employees for the second place. When everyone works as a team, it’s easier to expand your restaurant.

Business owners naturally want to expand their operations, and opening a second location offers the potential to increase profits, bring in more revenue and reach more consumers.

Source: https://mcdonaldpaper.com/blog/things-to-consider-before-expanding-restaurant-business