Opening a new location? Here are five things to consider

It isn’t surprising that most restauranteurs want to eventually expand beyond their original location. But what are the most important things to consider if you are going to open a second restaurant? Are you ready to expand? While you may have the desire to open a second location, you must ensure that you are actually ready. But what does being ready consist of? Let’s delve into this and help you prioritize the critical things you need to consider to open a new location.

The top five

Step 1:

Take an honest look at how your original restaurant is performing

Step away and examine your restaurant’s performance objectively. Are you happy with your concept? Your menu? Your financial performance? Your management and staff? Your guest satisfaction levels? Your online presence and reviews? If the answer to any of these questions is “no,” take a step back and set some measurable performance goals for each area of your restaurant that needs improvement. You want your first location to be sound before diluting your attention with the pursuit of a second location.

Step 2:

Develop and implement an operations manual

Your operations manual is a core necessity for achieving strong, consistent results in every area of your restaurant. A good operations manual contains the standard operating procedures for nearly every aspect of running your day-to-day activities. This becomes even more important when you are not going to be spending as much time there during the process of finding and opening a second location. Make certain you have clear-cut standards for all of your procedures for both food and service. If you want to be able to step away from your first restaurant, you must have the tools in place to allow your managers and staff to continue to operate that restaurant successfully in your absence.

Step 3:

Define your brand and what it stands for

One of the challenges you will encounter when opening a second location is being able to convey to potential new employees and guests exactly what your restaurant brand stands for. Perhaps you have already done this with your original restaurant. If so, great. But you may still find you need to update it. Here are the critical parts of defining your brand and building your brand statement:

Define your target audience

• You must understand who your ideal customers are and make certain that your restaurant brings (and delivers) the things they value during their dining experience.

Identify your “One Big Thing”

• Often referred to as your “unique selling proposition” or USP, this is that one thing that you do that sets your restaurant apart from the competition. Saying you have great food and great service is not enough – after all, your competitors can make the same claim.

Identify your brand values

• These are the core values behind your restaurant’s culture. They might include community involvement, innovative menu offerings, a dedication to sustainability, and/or authenticity.

Determine your brand personality

• Is the personality of your restaurant family-friendly or adventurous? Do you offer classics or a trendy menu?

Write (or update) your mission statement

• Before opening your second location, you should re-visit your mission statement to make certain that it adequately reflects your values and goals.

Create (or update) your vision statement

• This is where you describe your long-term goals for your restaurants. You can address your future growth and the evolution you envision for your restaurants and brand in your vision statement.

Develop your key messaging points

• These are the main messages you want to communicate to your potential guests. They should highlight your One Big Thing, your values and what guests can expect from their dining experience.

Craft your brand statement

• Blend the key elements that you have outlined above into a comprehensive, compelling and cohesive brand statement. This should be clear, concise and memorable. Make this be your “Brand Promise” to your community, staff and guests.

Step 4:

Conduct market research and select the right location

The choice of a location is one of the most critical decisions you will make when opening a second (or any future) restaurant. The wrong location may stop your growth dead in the water. Choose your location wisely – not just the location with the lowest rent. Your market research should include:

Demographic analysis

• Assuming that your initial restaurant is performing well, consider creating a “model” by getting all the demographic data about your current location so that you can use this as the “bar” in which to compare other possible locations. Your end goal is to make sure the potential new location has a sufficient customer base that matches your target market.

Competition

• Get to know who the competition is that you will be facing in a potential new location and identify gaps in the market that will allow you to differentiate and exploit your restaurant’s strengths.

Visibility and accessibility

• Even if a location meets other criteria, you must choose a site that is easily accessible and visible.

Step 5:

Develop a detailed business plan and make sure you have adequate financing

A comprehensive business plan is useful even if you are not seeking outside loans or other means of financing for your second restaurant and even more critical if you are in need of financing.

Financial projections

• You will want to have realistic, detailed startup costs identified along with operating expenses, projected revenue and projected profit. This includes identifying your breakeven point.

Marketing Strategy

• This portion should outline how you will market the new location and attract guests. And should also identify the competitors in the market you will be entering and how you plan on addressing the competition.

Operations

• The operational portion of your business plan should cover supply chain management, cost controls, and the “people” side of the business – including staff and management. Are you hiring new managers or promoting talent from your original restaurant? It is critical that you have the right team in place!

Financing

• Opening a second restaurant location will be a sizeable investment. Make certain that you are realistic in your financial projections and if you are seeking a loan, be sure to include funds to support operations for the first few months. Many restaurants fail due to being undercapitalized.

In order to devote a large portion of your attention to opening a second unit, you must have the peace of mind that comes from knowing that you can be away from your original restaurant without its performance suffering in your absence. How do you accomplish this? Be sure your first restaurant is operating at a peak performance level. Make certain that you have systems (and people) in place – systems for nearly every part of your operation – purchasing, hiring, inventory, scheduling, training, labor and food cost control, customer service and more. You absolutely need these systems in place in your first restaurant in order to expand into a second location.

You need a brand that both employees and guests can relate to – and a culture that fulfills your brand promise.

Choose your location carefully. It can make or break you. Be objective and be able to walk away from a potential lease or purchase if that location doesn’t match your needs.

Create a realistic business plan that can help you secure financing. Make identifying your human resource needs a priority and address this in your plan.

Don’t feel like you have to do it all alone. Engaging the services of a strong accounting firm and an experienced restaurant consulting team can help you avoid the pitfalls when opening a second location.

For more information on this topic, or to learn how Baker Tilly specialists can help, contact our team.

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