Expanding Restaurant Business: When and How to Do It

There are many factors to consider when expanding restaurant business. If you're thinking about making this important decision, think about whether you have the space to accommodate more seats, the funds to change your location or buy a second location, or the staff to support more customers. All too often restaurant owners put the pedal to the metal when it comes to growth and expansion, but is this the right choice for you? Determine if you're ready to scale up with these expanding restaurant business tips.

Maximize Your Revenue

Before considering a restaurant expansion, make sure you've maximized the following three key methods of increasing revenue:

  1. Invite your customers to come more often.
  2. Convince your customers to spend more per visit.
  3. Attract more customers.

Imagine a sponge sitting in a sink of water. Remove the sponge and about 80 percent of the water naturally falls out. Give it a light squeeze and you may get another 10 percent out. Wring it out hard in your hands and you'll get all the water out.

Most owners capture the first 80 percent of revenue in the three methods above just by conducting normal, everyday business, but few will take the time to squeeze and then wring it all out before they look to expand. However, with little or no capital and some intentional and specific effort, you can increase revenues and profits with what you already have. Consider some new marketing campaigns and take a good hard look at your operations to determine how to get all the water out of the sponge.

Consider Other Important Factors

If you're at capacity and have squeezed that revenue sponge dry, then you can likely benefit from a second location, expanding the current one, or moving to a larger location. If you're contemplating the decision, consider these three factors: access to capital, time to dedicate to additional work, and whether you have solid systems in place.

Capital is the biggest determining factor in opening a second location. You need to heavily compare the upside of an additional location to the risk involved. The only way to get to three locations is to have two, but two locations can also lead to the death of the first one. Plus, a second location is not your only option for increasing profits.

If you already work long days, a second location is not going to help with that either. Consider the time you want to spend with your family and friends, as well as other personal needs.

Rock solid systems and a talented staff in your first location are the foundation which will afford you the time and freedom to oversee a second location. You can test your systems by turning off your cell phone and taking a two-week vacation from the restaurant. If after two weeks you return to an even better restaurant, then get the capital and start working on location number two. If not, then keep building your foundation before considering an expansion.

Conditional Situations

If you find that you need more physical space during busy times, like on weekends, it's worth bringing in a designer to find out if you can layout the floor differently in order to accommodate more seating. The designer may suggest that you switch out a few booths for tables, reconfigure the dining room, or invest in smaller tables. There are typically more options than you first think when it comes to utilizing your current space. You can also consider taking over a neighboring space and expanding your dining room that way.

Through this process you may decide it's time to move to a bigger location and shut the current one down. While there is a capital expense and a time element similar to a new location, you're only operating one unit, so you can take your staff and equipment with you, and you'll know exactly where to put everything this time around. It's also a fresh start and a great way to get tons of press to cover your grand reopening.

Ultimately, it's not a decision of "to scale or not to scale," but instead, it's a decision of "how." Look to your internal operations first, then to data for answers. Hire professionals to help you explore your options and do everything you can to squeeze that sponge dry before committing resources to expansion. It's fun to go fast when thinking about expansions, but you also want to make sure that you're making the right decisions for your restaurant.