As your restaurant builds a loyal customer following and a profitable operation, it’s natural to start thinking about growth. It might seem like an obvious move, but opening another restaurant business — even if it’s a second location of your existing brand — is no small decision. As you contemplate this big change, take time to understand how the process works and learn how to identify the right time for restaurant expansion.

5 signs that it’s time to expand your establishment

As a restaurant owner, your instincts can play a vital role in selecting decor and crafting a menu. When it comes to creating a restaurant expansion strategy, however, it’s also important to assess practical factors. These five telltale signs can indicate that now might be the right time to expand.

Business is booming

Is your restaurant business doing better than ever? Are you noticing that diners are regularly waiting for long periods of time? Are your reservations constantly overbooked? It might be time to consider adding a second location, expanding your current building, or moving to a larger property. It’s always better to be busy than slow, but your restaurant’s popularity shouldn’t come at the expense of a positive dining experience.

You have reliable funding

You already know about the up-front and ongoing capital investments that are required to open and run a restaurant business. Before you consider opening a new location, make sure you have enough funding for a lease, potential construction and interior design, equipment, inventory, and a second set of employees. If you’re in a solid financial position, it’s easier to cover these expenses and sufficiently maintain your first location simultaneously.

There’s a strong market demand

A restaurant expansion could be a strategic move if there’s enough demand for your food, service, or format. When your existing restaurant can’t meet that demand on its own, adding a new location could help you serve more customers, increase profits, and boost diner volume. Keep an eye on competitors, and research local diner trends for clues about whether the market is heading in your restaurant’s favor. Your restaurant analytics can be a valuable resource; they make it easier to spot trends in orders and customer behavior.

You have the stamina (or support) to facilitate restaurant expansion

In many cases, expanding your restaurant business forces you to split your time; you’ll need to maintain the existing location and launch the new one. It’s a big undertaking — before you commit to a restaurant expansion, carefully assess whether you’re willing to make the personal energy investment. It’s also important to evaluate your manager and employees to make sure they’re ready to step up and take on more responsibility at the original restaurant while you focus on the new location.

You’ve already optimized cash flow at your current location

Before you start all over again, make sure you’ve exhausted all possible options for increasing the profitability of your existing restaurant business. A new restaurant can bring in more revenue, but it also comes with a new lease and a larger payroll. Take time to evaluate other cost-effective ways to boost profits and gain more customers: partnering with an online ordering platform like Grubhub, offering delivery and online ordering, reducing food costs, implementing customer loyalty programs, and optimizing costs, for example. Once you’ve successfully checked off every tactic on that list, it may be time to think about physical restaurant expansion.

How to expand your restaurant business: A step-by-step guide

All the signs are there — you’re ready for a restaurant expansion. Here’s what you can expect from the process.

1. Evaluate your business and the market

Going into a restaurant expansion, you have the benefit of experience. Use it to your advantage by assessing your existing location. Go through sales data, customer feedback, profit and loss statements, and financial projections. What works well? What would you like to change?

Don’t stop there — take time to analyze the market in your area. Are there any obvious holes? Are customers asking for something you can’t currently provide? What are competitors failing to do? With this information fresh in your mind, it’s easier to develop an informed restaurant expansion strategy and build a more resilient restaurant business.

2. Choose a business model and concept

Keeping in mind the needs of the local market, determine how your new restaurant business will operate. If you’re simply unable to keep up with the current demand at your first location, take a cue from major restaurant chains and open a second location with an identical menu and interior design concept.

In some cases, a different concept can help maximize profitability. Does your city host a large variety of festivals and outdoor events? A food truck could be a great way to boost profits while keeping costs down. If you run a fine-dining restaurant, you might consider opening a more casual establishment that attracts families, weekend brunch lovers, and diners looking for a quick weekday dinner.

3. Find a location

Look for a location for your new restaurant, evaluating each possible property based on a few key factors:

• Concept. The new space should be appropriate for your restaurant business concept. Make sure it can accommodate the service style, kitchen requirements, planned interior decor, and dining-area furniture. For example, a coffee shop requires a smaller kitchen area than a full-service restaurant.
• Market needs. Consider who you’re planning to serve, and look for properties that suit their needs. If your new location is targeted toward weekday lunches and after-work happy hours, for example, it’s important to choose a spot near the local business district. Looking to bring in families? Your new property should have convenient parking.
• Current location. Think about how the new restaurant will impact your current business. If you’re opening a new branch with the same concept, make sure it’s far enough away that it won’t eat into your existing customer base. If the second restaurant has a completely different concept or you’re targeting a new audience, it’s probably safe to choose a closer property.
• Budget. Unless you have unlimited funds, keep the budget in mind. Factor in lease costs, construction requirements, and utilities. In some areas, it may make more sense to build a restaurant rather than renovate an existing structure.

Don’t hesitate to negotiate the lease. Landlords may be willing to offer favorable terms to established local business owners with a track record of success.

4. Develop a comprehensive business plan

Write a business plan that details your restaurant expansion strategy. This document will act as a guide that keeps you focused — it’s critical, particularly when you’re splitting your time between two businesses. The format is flexible but should typically include:

• Executive summary
• Description of the new restaurant business and operational strategy
• Proposed menu
• Local restaurant industry analysis
• Audience analysis
• Marketing plan
• Financial projections

Writing a business plan is an opportunity to think critically about every aspect of your new restaurant and make adjustments as necessary.

5. Secure financing

If you’re like many restaurant owners, you’ll need funding to open a new location. Depending on your plans and your current restaurant’s finances, this might include:

• Small business loans
• Outside investors
• Personal savings
• Lines of credit
• Crowdfunding
• YouLend loan with Grubhub

Make sure to consider how each option will impact the financial future of both businesses. Outside investors might provide larger cash infusions, for example, but they’ll also require a stake in the profits.

6. Get necessary permits

As a restaurant owner, you know a new location will require a slew of permits and licenses. At minimum, you’ll likely need a business license, food service license, health permit, liquor license, and food seller permit. If the restaurant is in a different municipality, check with the local government to find out about any additional requirements.

7. Build out the new restaurant operation

Tackle all the projects you need to open a successful restaurant:

• Renovate the property. Buy equipment and furniture, decorate the interior, and complete any necessary construction projects.
• Hire staff. Hire and train kitchen workers, a cleaning crew, and front-of-house staff. If any of your current employees are ready for restaurant management, this is a great opportunity to promote them.
• Develop a menu. Work with your new chef to develop a menu. For a second location, you can keep the same menu. If your new restaurant has a different concept, find ways to leverage existing supplier relationships — increasing your order sizes makes it easier to negotiate better prices.
• Promote the business. Run marketing campaigns in advance of your grand opening.

Sign up for insights

With a careful, data-driven approach, a restaurant expansion can be a fantastic way to boost profits and build a successful business. When your second location is up and running, partnering with Grubhub is a great way to offer more services and boost revenue. Ready to reach new customers and grow your business with Grubhub? Sign up today!