Finding success in the restaurant industry takes a plethora of capital, a hint of luck, and a great deal of determination. Those who’ve found success with their first restaurant investment are often enticed by the idea of continuing on with proven success by opening a second location. However, this business decision can be a bit more convoluted than a first glance might suggest and many restaurateurs have discovered this the hard way. Before deciding to open a second restaurant location, ask yourselves the following questions and answer honestly to help determine whether you’re ready to take the leap.
How Strong is Your First Location?
There’s a distinction to be made between doing well and doing well enough to justify the opening of a second location. Take a look at your restaurant net earnings; can you sustain that business and use the excess money to cover the costs of a location? You’ll need to use your current successes as a road sign for your new venture, so determine the most profitable areas of your business and plan to emulate those as closely as possible.
Do You Have the Right Funding?
Opening a restaurant isn’t cheap, as you’ve likely already ascertained from your first successful foray into the restaurant industry. With that knowledge in your arsenal, consider the funding facets you’ll need to deal with. Will you open in a more pricey location? Will your permits cost you more? Consider San Francisco as an example: A highly saturated, populous area like Frisco (be careful calling it that century old nickname around city residents) will likely present itself as a much more costly endeavor. In a city like this, know that your lease will be beyond expensive, and you’ll likely pay hundreds of thousands for the right permits and zoning issues (securing a San Francisco liquor license might feel like an impossibility). Unless your first restaurant is currently producing more profits than you know what to do with, you’ll likely need to procure a loan. Will you approach traditional lending options? Or will you secure the right financing from a hard money lender? There’s much to be said about peer to peer lending, but if you’ve enjoyed your fair share of independence and freedom in business decisions, this may not be the best route for your second location launch.
Where Should You Open a Second Location?
When it comes time to choose your second location, you’ll need to take market research into consideration, and have a look at the costs associated with each locational endeavor. Consider the demographic you currently cater to. Will you be able to find other patrons with similar spending habits in your newly proposed area? Is there strong competition that might render you unable to harness the same clientele? It’s also important to consider your ability to hire trusted staff in the area, so take a look at detailed analyses of each potential location spot before putting your money into one place. When it comes to finding a venue, consider using a restaurant real estate company that knows the ins and outs of the business as well as you do to find the perfect space in a shorter amount of time.
Can Your First Location Handle Your Absence?
Is your presence critical to the success of your business? Do you have a hand in the daily goings on, and does your staff require micromanagement to maintain the level of profitability you’ve achieved? If you answer yes to either of these question, it might not be in your best interest to move to a new location. If you feel like you’ll need to apply all of your attention to a new location to succeed, make sure your help won’t be necessary to keep your first location running and on its feet. It can be hard to delegate responsibilities out to other employees and partners, but without trusted individuals on your team, a successful second location is a mere pipe dream.
So you’ve found success with your first restaurant—don’t make the mistake of assuming a second location will be a walk in the park. You’ll need to do a great deal of research, consider financing options, and determine your personal time commitment required to make lighting strike twice. One success doesn’t guarantee the next, so be sure you’ve examined all facets before beginning the process.
Track All Your Accounts With Personal CapitalPersonal Capital lets you see all of your accounts in one convenient place. Sign up now for free.
More from my site
Latest posts by Mr. 4HWD (see all)
- Five Ways To Keep Your Business Finances in Check - October 19, 2020
- The Great Importance of Leverage in Forex Trading - June 23, 2020
- 4 Steps to Take When Starting a New Business (That Not Everyone Thinks to Do) - June 12, 2020