Opening up a second location has crossed your mind, but how do you know if your business is ready? Start by answering these 3 questions.
1) Can you replicate it?
Opening up a second location requires duplicating the business model of your first location. You shouldn’t open another location just because you think it’s a good idea. You need to have a successful and profitable first location that can run without you being present. You should also take your menu into consideration: it will be difficult to replicate your restaurant if you have a unique menu that requires a skilled chef. You cannot simply hire anyone to work in the kitchen. You need to find a chef and adequate support staff for the kitchen to produce the level of food your customers are used to. Next, think of your remaining business processes. You should have the managers write down their business processes because this will give you a good idea of how complex it might be to train new staff and keep the location running – without you having to be there the entire time.
2) Have you looked at the R.O.I?
Analyze your sales to investment ratios along with food and labor costs. This will allow you to determine if you can afford the second location, and how long it will take you to become profitable. It is not advised to solely depend on capital from your first location’s profits as startup costs for the next location. You should look at the next location as a separate business venture. Experts say that you should target for a return on investment of at least 15%.
3) Why a second location?
It’s such a simple question, yet it might be hard to answer. You should also think about expansion options as an alternative to opening another location. There are other ways to expand your business such as menu additions or opening a catering division.
Expanding is a big decision that comes with a lot of risk but potentially a lot of reward. Make sure you take the time to plan and weigh all your options before deciding.