August 2019

Ready for Seconds? What to Consider Before Expanding Your Restaurant Enterprise

5 minute read

A successful restaurant concept can spur thoughts of expansion. Here are some pros and cons to consider if restaurant expansion is on the menu.

Whether you own a bistro that offers a modern take on comfort food, or a java shop known for its decadent pastries, achieving success with a restaurant concept can get your wheels turning about the possibility for expansion.

After all, food-away-from-home spending has grown 3 percentage points in Canada over the past decade, indicating potential untapped opportunity.1 And if one successful outlet is good, then two or three are better, right?

The answers is…it depends. Here are some pros and cons to consider if restaurant expansion is on the menu.

Pros

It can be easier to get financing with an already-proven concept.

When it comes time to secure a loan or ask about extending your interest-free grace period on a business credit card, referencing proven success can be a game-changer. With a venture already underway, vendors and other partners are going to be more willing to back you going forward.

In addition, a history of managing multiple suppliers, inventory and invoices, as well as complying with regulatory payments, such as liquor licensing, can be another selling point.

You can take advantage of marketing economies of scale.

All the work you did to create a brand identity, logo, menu design and social media presence when you launched your restaurant can immediately go to work for your second location. Both outlets will also benefit from any marketing dollars you pour into activities like sponsoring charity events or advertising on local radio.

You already know what works.

Most restaurants go through a period of trial and error in which they struggle with restaurant design and aesthetics, supplier issues or menu challenges. But with one successful concept under your belt, it can be that much easier to replicate without all the guesswork. A second location has the benefit of opening with all the kinks already worked out.

Cons

Even if there's two restaurants, there's only one you.

A restaurant owner's value expands far beyond just taking a concept and making it work. Greeting customers creates goodwill among your regulars. Being present at the location allows you to keep an eye on the day-to-day inner workings. Touching base with your staff can help motivate them and create a sense of purpose. When you expand your location, it can be harder to manage all the personal touches that might have been instrumental in your success.

You'll have to contend with double the employees and double the overhead.

Most respondents to the American Express survey 2019 Global Business & Spending Outlook, cite difficulty hiring and retaining talent as a challenge—and restaurants are notorious for a high turnover rate. With two or more locations, you'll have to hire, train, schedule and oversee that many more employees. You'll also have to double your investment in restaurant equipment and décor—not to mention rent.

While your current location might have sufficient cash flow to easily cover those costs, don't forget the expense that comes with getting all the pieces in place in order to open, before you've made a single dime.

The secret to success isn't always transferable.

Before you assume your success can be easily replicated in another location, take the time to consider exactly what has made your venue successful. Maybe your pub caters to the tourism contingency hitting Banff, or your coffee shop attracts workers heading to Eaton Centre in Toronto. It can be harder to duplicate a clientele that is location specific.

Or, perhaps you have a counter clerk who exudes positive vibes that keeps people coming back, or a sought-after outdoor deck. Doing a deep dive into any potentially rare qualities of your first location can help you uncover important data to inform the potential for a second one.

Ultimately, the decision to expand your eatery concept will come down to your appetite for a challenge. But putting as much thought into your second location as you did to your first should be the first ingredient in your plan.

1 https://aaronallen.com/blog/canadian-restaurant-industry