Open a Second Restaurant
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When to Open a Second Restaurant on Another Location

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When to Open a Second Restaurant on Another Location

Your new restaurant is a great success and now you want to open a second restaurant. Before you rush into a decision, you’ll need to take a serious look at your finances, your restaurant model and your infrastructure. Can you open a second location without diminishing your guests/ experience at your first restaurant? We’ll share some successful models of expanding to a new location, and discuss ways you can expand business in your current location.

Finances

The initial euphoria of opening a new restaurant makes restaurateurs feel so good, they believe opening a second restaurant will bring them even greater success. The thought is, if my one deli makes $1,000 profit a week, then two will make $2,000 a week. But your initial success must be quantified before you venture into opening a second restaurant. Is your restaurant a bone fide success? Restaurateurs are notoriously optimistic, and they’re salesmen. But you need to examine whether there’s a history of your restaurant making a profit, and whether it’s sustainable. Just because last month was good doesn’t mean that this month will be good. Many restaurateurs implode their first success by opening a second restaurant.

Wait a Year

The restaurant business is cyclical. A new restaurant owner needs to go through one complete year to understand what to expect in all the seasons, holidays and vacations. For example, when Jody opened a second restaurant based on a successful restaurant he’d opened in another town, he thought the location, on the harbor, would be a lively area in summer. He learned that there was no scene in summer because so many people leave town for vacation. You need time to get over the honeymoon of being the owner of a new restaurant. It takes six to nine months for the smoke to settle – for you to have a real understanding of your restaurant’s success. Restaurants can be full of hype and backslapping. But in such a volatile industry, you shouldn’t hurry to open a second place. After your restaurant has been open a year, meet with your accountant and get a real reconciliation of your restaurant’s finances. (Have you paid your taxes?) You need to remove the emotion from this decision, and the accountant is usually a pail of cold water. But that’s what you need. Discuss your plan with a business associate, rather than a friend or family member who will be caught up in your enthusiasm. Don’t discuss it with your significant other after one of your restaurant’s successful Saturday nights – you’ll get caught up in the high. Instead, have a business meeting. You almost want to discuss this with a contrarian who will challenge you. You might not agree with everything you hear, but when you hear a good point, think about it.

A Replicable Model

If you determine that your restaurant is making a strong profit, and you want to open a second and have the financial backing to do so, you’ve got to step back and consider whether your success is derived from a situation you can’t replicate. For instance is your successful restaurant in a location where there’s no competition? Can you replicate a situation and town like that? If your restaurant is located in an office building and you do breakfast, lunch and dinner, you may be able replicate that model in similar office buildings in similar markets . Is your success based on you? Do people come to your restaurant to see you, be taken care of by you, be cooked for by you? When you aren’t at your restaurant, does the customer’s experience decline? We’ve all seen plenty of restaurants that are terrific when the front-of-the-house partner is there greeting guests and when the chef-partner is in the kitchen cooking. But when they’re not there, the experience declines. This is one of the reasons that Jody creates restaurants based on a concept rather than an individual personality.

Infrastructure

Many restaurateurs overlook the important of infrastructure, but it’s essential. Do you have the staff to double down at both restaurants? That’s why traditional family businesses work. A family pizza place could expand to give the kids their own place to run. Partnerships are also an effective model for expansion. If you’ve got two guys working behind the counter, they can open a second restaurant, with one of them taking over the new and the other at the helm of the first success. Successful restaurant empires have been built by expanding in the neighborhood. In South Beach, Miami the success of Prime 112 (making over $25 million per year) was added to by opening Prime Italian across the street, then Prime Annex next door, then Prime Hotel in the actual building next door housing Prime Annex. It’s much easier to keep an eye on the empire. Drew Nieporentdid the same thing in TriBeCa, putting his Nobu, Tribeca Grill and Montrachet all within walking distance. We’ve seen restaurateurs walk the neighborhood, greeting customers like they’re the mayor. That’s the thing about super successful restaurateurs. They show up at all their restaurants every night. Jean Georges Vongerichten is famous for it, walking through the dining room in his crisp white chef’s coat and entering the kitchen to see how things are going. It’s amazing when you realize his restaurants are uptown, downtown and out of town, but everyone sees him everywhere. Jody also saw Wolfgang Puck pull up to Spago in Beverly Hills the morning after Christmas – a day most civilians would think he deserved off. Puck goes to all his local restaurants every day. The original star chef still doesn’t sit back and relax. He realizes this business requires constant care and attention. You need to take care of the equipments, machines, appliance and utensils. You may also need a restaurant hood cleaning services to deliver and serve quailty and clean food. You’ve also got to think whether you can make the hurdle between being the hands-on person to having a management role. The path from chef to restaurateur to entrepreneur is trickier than one imagines.

Expanding Business

Our advice is to look at ways of expanding business in your current restaurant before leaping into opening a second. An outdoor patio can increase business. So can extending off-premises catering. A food truck can be a good marketing tool and way to expand, but be sure to give it a “home,” a place your customers know you’ll always be. Many food trucks move around daily and send their locations out on Twitter or Facebook, but it’s unlikely customers will follow you around like that. If your seating is limited, you can also look at expanding your take-out operations. Within a three-mile radius you can keep your food hot and vibrant. To expand to a five-mile radius, you’ll need to invest in travel packs with heated compartments. (They’re called ‘trucks’ but it’s a confusing title.) The best way to expand is to get more people in the door on busy Friday and Saturday nights. Review your menu for how popular each dish is, how long it takes to make and what the profit is. Then refine production to make it more efficient. Refine front of the house procedures as well, so you can move more people in and out of the restaurant efficiently.

Never rush into opening a second restaurant – it could bring down your first restaurant. After you’ve watched your business cycle for an entire year, meet with your accountant to get a realistic view of your finances. Examine whether the success of your first restaurant is replicable. How will you staff and manage a second restaurant so that the guest experience remains the same high quality at both restaurants? Partnerships and expanding in the same neighborhood have proven successful. Before opening a second restaurant, look for ways to increase business at your current restaurant.

Kirat Author

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