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Once your restaurant garners a loyal diner following and proves to be a profitable operation, it’s natural to start thinking about growth. But opening a restaurant business – even if it’s a second location of your existing brand – is no small decision. Rather than act on gut instinct, look out for these five telltale signs that now might be the right time to expand.

  1. Business is booming. If your diners are regularly subjected to extreme wait times, or your reservations are constantly overbooked, you may want to consider adding a new location. It’s always better to be busy than empty, but that popularity shouldn’t come at the expense of the dining experience (or your servers and kitchen staff).
  2. You have reliable funding. Opening a restaurant business requires significant upfront and ongoing capital investments. To get a new location up and running, you’ll need enough funding to devote to a lease, potential construction or interior design, equipment, inventory and a second set of employees. If you’re in a position to cover these expenses and sufficiently maintain your first location, now could be a wise time to finance an expansion.
  3. There’s strong market demand. Expanding your business is a strategic move if there’s demand for your restaurant’s food, service or format that can’t be fulfilled by a single location. The goal of adding a new location is to increase profits and diner volume, not disperse current diners across multiple spots. Keep an eye on competitors and research local diner trends for clues about whether or not the market is heading in your restaurant’s favor.
  4. You have the stamina (or support) to facilitate expansion. Committing to a restaurant expansion often forces owners to split their time across maintaining the old location and launching the new. Carefully assess whether you’re willing to make that personal energy investment, and if you have a manager or other employee who’s ready to step up and start running the original location while you focus on the second.
  5. You’ve already optimized cash flow at your current location. Before starting all over again, make sure that you’ve exhausted all possible options for increasing the profitability of your existing operation. Rather than take on the burden of a new lease or larger payroll, evaluate other cost-effective ways – from partnering with an online ordering platform like GrubHub to offering delivery – to improve revenues in the near-term. Once you’ve successfully checked off every tactic on that list, it may be time to think about physical expansion.

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