October 29, 2019
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Do you plan to expand into a restaurant chain?
If you currently run a thriving restaurant, where customers are happy, staff are content, and profits are booming, you’ll be feeling pretty good.

So good, in fact, that the temptation might be to open a second location. After all, Maurice and Richard McDonald opened their first hamburger restaurant in San Bernardino, California in 1948, and look where things went from there.

But what seems like a natural next step needs a lot of thought, consideration and planning to ensure it goes well. If you’re thinking about growing and expanding your existing restaurant business, we’re here to help.

Let us take you through our guide to opening your second restaurant and expanding your restaurant chain.
 

When is the right time for restaurant expansion?

Restaurant expansion is a huge challenge – not far off the challenge of establishing a new business in the first place.

Look for the tell-tale signs that you’re ready to open a new location.

These include:
 
  • Consistently being so busy you have more customers than you can cope with
  • Having customers who travel from out of town to visit your restaurant
  • You are willing to put in the hours that opening a second restaurant will demand
  • You have the funding and know expanding your restaurant chain will increase your capital

How do you expand a restaurant?

A restaurant table set out nicely ready for customersIf you are ready to start growing your restaurant business, a well-thought out plan is going to be your key to expansion success.

The best thing about opening a second restaurant is that you are prepared for the challenges you faced when opening your first one.

The worst thing is that the things that may have worked first time round might not work again. Worse still, you might not even know why.

To help you with the planning process, here’s a handy checklist setting out everything you need to do before opening a second (or third or fourth) restaurant…
 

1 Have you secured funding and budgeted correctly?

Every new business needs capital, and you’re going to need funding to back up your new venture.

You might be funding the business yourself, or getting a business loan to get you started.

There are a number of options – but remember, you should only be considering them if your current restaurant is financially stable.

A business loan can help cover the cost of purchase, but you need to be confident you can pay back the loan (and the interest).

In terms of finances, you will already know roughly how much it costs to successfully open and operate a business, so this can inform your budget planning.

If you are planning to use funds from your current restaurant to open a new one, be aware that you could risk your current profits.

When you are budgeting, be sure to take into account all of your outlays, everything from the cost of equipment and recruiting new staff to making sure you have the right restaurant insurance in place to cover your business as it moves forward.
 

2 Where is the right location?

The right location can make a business; the wrong one can break it.

If your first restaurant is doing well, chances are you’ve nailed the location. But the pressure of finding another location for your new restaurant is going to be high.

There are a number of things to consider, including: making sure the new location is not too close to your existing restaurant; checking out the competition to ensure there isn’t already a similar restaurant in the area offering the same food at lower prices; and looking at the demographics of different areas and finding a new one with a similar demographic.

Once you have found the right location, you then want to make sure you pay the right rent for it, so get a surveyor who can advise on market rent for the area.

You also need to think about what length of term will work for you and the business.
 

3 Have you got a solid business plan?

A busy kitchen in a restaurantThe business plan you have for your first restaurant is not going to work for your second, third or fourth. You need to come up with a new watertight business plan.

However, seeing as your first business is a success, you can duplicate the system and scale up, so include most of the components included in the original business plan.

You may want to change the vibe or the food served in your new restaurant, but that doesn’t mean your commitment to customers or the customer experience has to change.

Craft yourself a solid business plan that can be adapted for future expansion to keep customers and staff happy.
 

4 Hiring the right people

You already know that employees are the backbone of your restaurant and key to its success.

Make sure you hire enough people and give them the training they need before the new restaurant launches.

Ideally, you want a team that can continue the legacy of your first restaurant brand, keeping the same values, consistency and quality.

While a brand name will bring customers to your new restaurant, only excellent food and service will keep them coming back.
 

5 Finding the equipment, supplies and tech

List all the equipment and supplies you and your team uses every day to create the perfect dining experience and source them for your new venture.

However, make sure your new restaurant space has the room for these appliances. You also want to find the right tools and tech to help your new restaurant grow smarter.


6 Check your insurance
Estimates suggest that 50% of the UK’s businesses are underinsured, meaning half of organisations are vulnerable if they suffer a loss.

Data also shows that the value of the UK eating out market was nearly £90 billion last year.

That’s a lot of customers eating and drinking in restaurants every week – and a lot of people your business needs to keep safe while they do so.

It’s vital that restaurant owners have the right restaurant insurance, not just to cover buildings and contents, but to protect them in the event of food poisoning, injury, loss of licence, lost profits, and business interruptions.

At Insurance Choice, we have been arranging competitive restaurant insurance for more than 20 years, tailoring restaurant insurance policies to the individual needs of a business.

Get in touch to find out more and get a quote today.