Building a restaurant of any type is a significant undertaking - that’s not new knowledge. You need to account for dozens of moving parts and manage them daily. As if that weren’t enough, even with dedication and a love for the craft, a painful number of restaurants fail every year. The truth is that 80% fail within five years, on average. However - if you make it through that gauntlet and establish your business correctly, new questions arise.
What’s next? Where do you go from here, and how can you increase your restaurant sales?
Some people opt to pursue franchising, others aim for a food truck, while more still go with the more modern route - the ghost kitchen. Regardless of how you’re thinking of expanding your restaurant, there are a few points that you’ll need to consider if you want to grow safely.
Now - how can you expand your restaurant’s business? Keep reading for a step-by-step guide to a successful restaurant expansion strategy.
A Simple Restaurant Expansion Strategy (Step-by-Step)
First things first, we need to discuss something crucial:
One success does not equal a guarantee of a second success, a third, and so on.
This makes planning ahead of the utmost importance - especially considering that there are several approaches you can take. So, what’s step number one?
#1: Think Ahead; Plan Carefully
Before we dig into the first step, let’s engage in a thought experiment. When you began your restaurant, did you just… dive right in? Did you assume that your funding and passion were enough and that your market would “catch up”? Of course not! You planned, plotted, and schemed; you likely consulted marketing, financial, and legal firms, and carefully determined the best plan of attack.
Your second restaurant (and any that follow) should be no different. To even begin the process of planning a restaurant expansion, second location, pop up, or side hustle, you need to know your market. And perhaps more importantly, you need to have a fully-established web presence before beginning.
If your restaurant is doing well, but you don’t have online ordering (or you rely on a poor ordering system), a functional website, and social media presence, you’re shooting yourself in the foot. The 21st century revolves around the internet, and you do not want to be stuck playing catch up after your grand opening. So, in short:
Who is your competition? Does your market want what you’re offering?
2. Have an online presence before beginning.
Build a website, establish social media, and (if you can swing it) consult with a marketing agency - you’ll thank me later.
3. Have a plan.
This means a plan for everything. A financial plan for how you’ll fund the operation, a list of staff, your menu, seriously - start from ground zero as you did with your first business.
Ultimately, while this may seem like common sense, it’s crucial to success. Knowing precisely what you’ll be doing and how allows you to eliminate unpleasant surprises from the already busy opening process. And that brings us to step two: making the decision.
#2: Making the Decision
This next step boils down to one decision: what will this new business offer? You generally have three approaches to this:
- Franchising
Everyone in the industry knows this term. If you’re positive that your business model can be plopped down anywhere in the country and find success (ala McDonald’s), then this is likely for you. While the franchise sector is a bit… busy, the right concept can easily break into new markets - if executed properly.
- Another location
If you want to expand but don’t want the corporate-level headache of managing multiple businesses with your name, this option is likely for you. Opening another location allows you to expand local reach to new areas and find new customers without needing quite as much investment (time and money) as franchising.
- Ghost Kitchens
This new trend has gained loads of popularity over the past several years. Ghost kitchens (defined here, if needed) allow you to serve something new without investing in a traditional brick-and-mortar location. You can often get far better rates in a commissary or host kitchen than you would with leasing and can eschew both a lobby and serving staff. This frees you up to get creative and try new things without the stress of trying a new brick-and-mortar concept.
No matter which direction you go, you’ll need to have a business plan - and (totally coincidentally), that’s the next step!
#3: The Restaurant Business Plan
This is something you should be intimately familiar with - after all, you’ve already done it with (at least) one business. The main parts you’ll want to cover in any restaurant business plan are your:
- Menu
- Target market analysis
- Competitive analysis
- Financial (revenue) projections
- Marketing plan
- Restaurant concept description
- Executive summary
With those out of the way, you can figure out where you want to set up shop.
#4: Find Your Spot
No matter your plan, you’ll need somewhere to actually do business. Whether the concept is a food truck, commissary kitchen, or brick-and-mortar location, having the space is kinda essential.
Choosing the right location for you depends on a few factors. If it’s a brick-and-mortar location, you’ll need a spot that has decent foot traffic. And if it’s a second (or franchised) location, you need them to be far enough apart that your own stores aren’t competing against each other!
Ghost kitchens make this slightly simpler by operating on a to-go-only business model. This allows you to pick a location based on cost and space (rather than traffic and location), as all orders are made online.
No matter your final business model, you’ll need to take the following into account when choosing a location:
- Visibility & Location
Does it have foot traffic (i.e., downtown), or is it more… rural?
- Accessibility & Parking
How easy is it to find and enter the location? Will customers be able to “stumble upon” it, or do they need to be looking for the shop to find it?
- Competition
Let’s say you’re a pizza shop - are there other pizza shops nearby? If so, how close? And importantly, how does their food compare to yours (cost, quality, etc.)?
- Zoning & City Shenanigans
Even if you find the perfect spot, you’ll need to deal with the city (we’ll get there soon). Is your location legally capable of operating as a restaurant?
- Cost
This one is obvious. You should have a business plan by now, so you will likely know your location’s projected revenue. Do that projected revenue and the cost of your lease even out? If not (even if the spot is perfect), you’ll need to find a more affordable location.
#5: Funding & Staffing
Finding funding isn’t a fun job, but it will make or break your restaurant expansion strategy. You have three broad options for finding financing:
1. Small Business Administration (SBA) Loans:
- This (U.S.) federal agency offers up to $5 million to open a new restaurant, buy a pre-existing restaurant, or gain business capital. They usually come with an interest rate between 5-10% (generally around 8%) and necessitate a 10% down payment.
2. Commercial Loans:
- These come in several forms, but it all boils down to a private entity or bank investing in your business with a loan. You can acquire loans from banks and credit unions to purchase equipment, as a cash advance, or as a capital loan. They vary heavily in interest and will (usually) require a higher down payment than their SBA equivalents.
3. Private Investment:
- This is the least common option, though entirely possible with the right connections. More often than not, private investment consists of an individual or business buying into your business (rather than providing a loan). If you’re willing to share ownership, this is an excellent (and debt-free) option - though it’s not possible for everyone.
After finding funding, you can establish a final menu (if you haven’t already) and hire staff. While it’s entirely possible to move staff from your first business to the second, you’ll eventually need a full roster of employees at both locations - so you might as well get started now.
#6: Licensing & Permits
Remember how we said you’d have to deal with the city? Yeah - that’s this step.
While you already know the process (after all, you already got the proper licenses and permits for your first shop… right?), it’s worth mentioning briefly.
Remember that these will vary based on where you live on a national, state, and county/city basis.
The most common permits and licenses that you’ll need to acquire are:
- Liquor and food service permits
- Food safety certifications
- Business license, registration, and Employer Identification Number (EIN)
- Building health permit & inspection
- Sales tax license
- Live entertainment and/or music license
- Valet parking permits
- Dumpster permits
- Seller’s permits
It’s best to reach out to your local licensing board to see what all you’ll need, as some of these can take quite a bit of time and work to acquire. You’ll want to start early.
#7: Ghost Kitchens & Cuboh
We’ve mentioned ghost kitchens a few times briefly here but now is the moment to discuss them more carefully. Ghost kitchens are kinda Cuboh’s specialty, so we’ve discovered quite a few things in recent years.
Ghost kitchens help restaurateurs cut costs on labor and leases and allow the opportunity to expand your business in a far more scalable manner. When paired with Cuboh, ghost kitchens are incredibly simple. Cuboh users gain access to a swathe of tools to monitor their business’s health, adjust their menu(s), and manage their online presence in one super simple spot.
Best of all, ghost kitchens allow you quite a bit of creativity and flexibility, meaning if you just want to make tasty food without the hassle of a lobby, you’ll be in your own personal heaven. And suppose the time and financial investments tied to traditional brick-and-mortar locations (or franchises) are too much. In that case, ghost kitchens let you carefully expand your restaurant step-by-step rather than all at once.
No matter which direction you try to go, Cuboh is sure to serve you incredibly well with our broad range of tools designed for operators just like you.
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