Perhaps the greatest misconception in the restaurant industry is that a high percentage of establishments fail in the first year. You’ll find “experts” who claim that from 60 percent to as many as 90 percent of restaurants close in their first year of operation. Such long odds for success would be enough to discourage even the most enthusiastic restaurateur from getting ready to open a second restaurant.
In fact, restaurants fail at a rate that is lower than the percentage for all new businesses: Forbes cites a study that found the first-year failure rate for restaurants is only 17 percent, while the rate for all service-providing businesses is 19 percent. By comparison, 21 percent of real estate agents and brokers fail in their first year of operation, according to the economists who conducted the study, and 19 percent of landscapers and automotive repair shops don’t survive their first year in business.
If you run a successful restaurant, it’s natural for you to be thinking about opening a second location. However, as restaurant supply vendor Tiger Chef points out, the key to duplicating a restaurant’s success in a new venue is knowing when the time is right to expand. The first question to ask before you open a second restaurant is whether your first one is doing well enough to support both operations until the second one can support itself. Only after you’re convinced the revenue numbers add up are you ready to begin planning for your restaurant’s second location.
How Planning Your Second Restaurant Differs from Planning Your First
The most important distinction between your first restaurant’s business plan and your plan for the new establishment is the need to devise a timeline for the second location that won’t conflict with your ability to keep the first restaurant running smoothly. Retain the features of the initial restaurant plan that worked well and replace the rest based on what you’ve learned, and on the research you’ve conducted about the market for the new restaurant. This includes staffing, competition in the new area, and other aspects of the location, such as parking, foot traffic, and the characteristics of the facility.
There are several aspects to consider when preparing to open a second restaurant:
- Be sure you’re ready to commit the time, energy, and financial resources required to make the second location a success. If you’re not enthusiastic about the possibilities for the new restaurant, it may be best to wait until you feel more confident about its prospects.
- When selecting the location for the second establishment, choose a spot that’s neither too close nor too far from your existing restaurant. If your primary goal is to address the overflow from the first restaurant, it may be best to keep the two close. However, if you want to attract new clientele, opening the second location across town or further away will be more appropriate.
- Don’t think you can simply duplicate the business plan of your first restaurant for planning your second venue. While some aspects can be repeated, most of the plan will be new based on your research of the second location and its unique budget requirements.
- Use the same type of kitchen equipment and technology in the second restaurant that you use in your first location to ensure the same quality of food. While the two operations can’t be exact duplicates, strive for consistency in the dishes that each prepares and in the quality of service you provide to customers.
- Consider updating the menu for the new location to ensure it will hit the right notes with customers. The second restaurant will likely have different kitchen facilities and other physical features (more or fewer tables, more seating at the bar, etc.) Make sure to adapt your menu to the second restaurant’s unique characteristics.
- Decide how similar or different you want to make the second establishment’s decor from that of your first restaurant. The style and layout of the building may dictate a new look, although you may want to use the same style of light fixtures and dinnerware as in the first, for example, to maintain some consistency and minimize costs.
How to Integrate Management of Two (or More) Restaurants
One of the advantages of operating multiple restaurants is the ability to integrate many vital management tasks over two or more sites. For example, it’s much more efficient to centralize sales reports, inventory tracking, employee schedules, payroll, and other financial and management duties for all locations. This allows servers and kitchen staff to use the same IDs and PINs at all locations.
Other aspects of multi-restaurant operation that can be combined across sites include honoring gift cards, coordinating menus and daily specials, and tracking sales tax rates at various locations in situations where VAT changes per location.
The U.S. Small Business Administration’s SCORE program offers tips for managing a business with multiple locations:
- Maintain standard operating procedures for all the restaurants you manage to ensure consistent customer experiences across establishments.
- Make an extra effort to train managers you can trust to handle the day-to-day functions of the restaurants so you can focus on “the big picture.”
- Establish clear lines of communication between managers and employees at various locations, whether via email, phone, or chat, but also make regular in-person visits to each restaurant, whether weekly or biweekly and request reports from managers on a set schedule.
- Bring together the staff working at various locations on a regular basis to help instill a sense of camaraderie and teamwork, whether by holding fun activities for them or implementing friendly competitions between restaurants to keep employees motivated.
- Apply technology to connect the two locations and help workers be more productive, such as by using cloud-based time-tracking, inventory management, training, scheduling, and other applications.
The most important tip for opening a second restaurant is to take advantage of the experience you’ve gained in making your first restaurant a success. Emphasize the factors that worked with the first establishment and drop the aspects that were less successful. Avoid the temptation to take a cookie-cutter approach and create an exact duplicate of the first location. Rely on a well-researched business plan that considers the unique aspects of the second operation while preserving and building upon the features that worked so well the first time around.
Learn more about how the talech POS system helps restaurant owners and other retailers prepare for the future while meeting today’s needs with features that optimize their business processes. We work with you to determine the best ways to meet the needs of your customers and employees so your business can thrive. We take the time to learn your business so we can balance your specific needs with your budget and comfort level in a custom POS system implementation. The result is a valued investment that will pay for itself in short order. Reach out to us today to sign up for a free demo and learn more about how talech can be your valued partner in the POS world.