The Bottom Line
How to Nail Restaurant Expansion
Expansion is a happy problem for most restaurateurs. You opened up shop and business is booming to the point where your four walls can no longer contain your success. Now comes an entirely new decision process that goes beyond your current spectrum. Managing staff, inventory, execution, and of course customer satisfaction is not twice as hard with two restaurants—it is exponentially harder. A happy problem, nevertheless.
If you are set on expansion, take the following factors into account. Critical thought up front goes a very long way in the end.
Location, location, location
Your first restaurant likely owes a good deal of its success to its real estate, and your second will be much the same. You should ask yourself a myriad of questions to determine location viability, of which there will be some overlap from your first establishment:
• Does this location serve my target customer?
• What is the local competition here? Will neighboring restaurants drive my prices up or down?
• Based on foot traffic and neighboring establishments, what are my projected sales?
• How does rent compare to my first location, and can I afford it based on projected sales?
• Will I be able to easily travel between here and my first restaurant?
Of course there are many more factors to consider, but the overall themes are whether this location caters to your restaurant’s identity, how competition will challenge and help you, and how easily you will be able to manage this location from a logistical standpoint.
Some establishments choose to own their locations outright, which turns the restaurant investment into a real estate investment. If you have long-term plans, are looking at a high-growth area and are in the financial situation to do so, owning your location outright can ease pressure early on and provide an even greater payoff in the long-term.
One at a time
No matter how much success you see in your first location, limit your openings to one restaurant at a time. You hit it out of the park at your first location, now do it again before even thinking about expanding further. Il Fornaio, a wildly successful Italian fine dining chain, which has expanded one location at a time since 1972, attributes its success to growing slowly, but perfectly.
Big chains are a big exception; they expand rapidly because they have massive management teams and a corporate headquarters to provide large-scale direction. The vast majority of restaurateurs should focus on getting it right one step at a time.
In order to get it right every step of the way, it is imperative to set up clear infrastructure and communication channels to maintain consistency between locations. At the ground level, many restaurants will bring veterans from the first location to open the second location, so that they can train new staff to mirror best practices. Note that training should allow each restaurant to create the same feel and experience, and not necessarily make each restaurant a carbon copy of one another. Plan Check, a burger powerhouse with locations across Los Angeles, adapts its menu to each neighborhood it serves.
At the management level, the owner should establish set points of contact and a routine check-in schedule that keeps all parties aligned. Understanding differences in inventory and item demand, peak hours, staff needs and other factors on a regular basis will allow owners to make informed decisions that do not always treat each restaurant the same. Different locations have different needs, and arranging meetings with each restaurant’s management is crucial to understand those needs.
Eye on the prize
A restaurant’s success, at least at the granular level, is ultimately determined by its profitability. Before you expand, set an ROI goal and quarterly benchmarks. Make these benchmarks realistic, based on your first location’s performance in its opening quarters, and monitor them closely.
If you’re not seeing the results you want, and you’re following all the same practices at your first location, it may be due to the new surrounding area. Observe what the restaurants nearby are doing to attract customers, as well as their menu mix, pricing and other factors. If that’s been taken care of and you’re still not in winning territory, it may be best to close up shop and move to another place. You may not strike gold every time, but the most important thing is that your restaurant is successful at heart.