Five Things To Know Before Scaling a Concept

Mar 18

Your hard work has finally paid off. Your restaurant is a booming success. Customers are lining up to enjoy your popular menu, and your employees are thriving. You could sit back and watch the money roll in, but you have bigger dreams. You've paid your dues. Now, it's time to strike while the iron's hot, and capitalize on your success with expansion.

Not so fast. Before you get ahead of yourself, you need to take the time to fully prepare for the journey ahead. It's easy to think that one success automatically leads to another, but the hospitality industry can be tricky. Repeat customers account for about a third of your income, so you must understand the reasons for their interest. Before you jump into any type of expansion, it's important to do your homework. Timing is everything. Starting too early could mean sacrificing the success you're currently enjoying, but waiting too long could mean never taking the leap. So, how do you know if you and your restaurant are ready to expand? Taking the time to research your current success will reveal whether it's time to scale your concept. Here are five things you should take into consideration before expanding your operation.

YOUR PLAN TO SECURE FUNDING

Whether your idea of expansion is enlarging the borders on your current operation or opening a new restaurant at another location, you'll need significant funds to get started. While you've probably managed to acquire a nice savings account with your current restaurant, it might not be a good idea to sink everything into a new location. Even though your current restaurant is successful, opening a new restaurant in another location is a considerable risk. Spending your earnings will give you the advantage of avoiding debt, but may leave you out in the cold in the case of an unforeseen emergency.

Seeking funding from an external source is a common way to expand any successful business. However, it's important to work with investors who are interested in the long term growth of your entire franchise since the new location will likely take months or even a year to become profitable. You already know how much it costs to open a second location that mirrors the one you have, so calculating the costs of a business loan will be easy. If you've already used a loan in the past and are comfortable paying future interest rates, a loan is likely the fastest way to get started. However, it will still require extensive planning and an assurance that you won't sacrifice your current cash flow from the original restaurant.

A BRAND AUDIT

Your current customers know your brand, but is it memorable enough to take root in another location? A thorough understanding of your customers' dining habits is vital to understanding why they frequent your restaurant. There are countless reasons new restaurants fail, and the menu is rarely the issue. Location is a biggie, and poor management is a close second. Understanding if your brand is successful to thrive in multiple areas can help you avoid these traps. Here are some things to look for when considering if your brand is ready to scale:

A healthy mix of repeat and new customers
A confident staff who can continue to provide exactly the same service in your absence
Your current business rate is predictable
Your staff can barely keep up with the flow of customers
You can replicate your current system
Out-of-town customers who ask for a new location
A host of great reviews online

Your scalable brand isn't only about a great menu and a catchy name and logo. It defines everything that your customers encounter on the premises. If you look at your restaurant through the eyes of a guest, does it measure up to your expectations? Even if you have a top-rated menu, your guests will remember everything they encounter during their experience. Unfortunately, bad experiences are often more memorable than good ones. In fact, 91% of unhappy customers won't go back to a business again after a bad experience, and evidence suggests that it takes 40 good reviews to undo the damage of a bad one. Four main categories to consider are service, engagement, food, and facility. In other words, a less than friendly staff member, a missed drink refill, crumbs left on the table, or an overcooked entree could detract from your guest's overall experience.

SCALING YOUR STAFF

An expansion is a stressful busy time. Your involvement in your growing business will take your focus and time away from your current location. To reach success, you've hired and trained an excellent staff. However, you must know if they're prepared to take control in the event of your extended absences. You can't be in two places at once and your new location is likely to take up the bulk of your time for a while. Before you get started with expansion, it's vital to ensure you trust the employees who will be running your business while you're gone.

Hiring staff for your second location is another important step in repeating your initial success. One consideration is to take one or two trusted employees to train new staff at the second location. Another common way to expand is franchising. This option would allow you to open a new restaurant that mirrors the first with minimal personal supervision. You will simply be allowing a new owner to purchase and run a restaurant under the umbrella of your successful brand. Franchising is usually considered a good idea for restaurant owners with an established brand who have the ability to work out a teachable system they can replicate at each new location. However, it's important to remember, a franchisor must be able to turn the business over to a new owner. This means you wouldn't have a hand in the daily operations at your new location.

CUSTOMER ANALYSIS

You know your money comes from your customers, but do you know who these customers really are? Understanding why your loyal customers keep coming back is a vital part of understanding whether you'll thrive in another location. Your current customers aren't only a source of income, they're your brand ambassadors. Happy customers are a form of free advertising. In fact, 94% of U.S. diners visit a new restaurant based on reviews they read online. Here are a few things you should know about the customers in your successful restaurant.

How often they visit: Loyal customers are a vital part of any business, but to thrive in the future, you always need to be bringing in new guests. Your customer base should be a healthy mix of both types. Guests who come from out of town to visit your restaurant are a good sign that a new location could be successful.
Favorite menu items: Do you have one item on your menu that sees considerably more orders than anything else you offer? It's important to know whether your current customers enjoy traditional meals or are interested in an ever-expanding variety of options and that you're satisfying their needs.
Why they choose you: There's no doubt that a great location is a big portion of what makes any restaurant successful. However, it can't be the only thing you depend on. Do your customers visit you for lunch every day because there's no competition in the area who can serve them within a short break from work? Does your menu offer unusual choices that attract new customers? Knowing what attracts your guests will help you understand if you can repeat the process.

A NEW BUSINESS PLAN

Your initial business plan was likely a roadmap for your success in one location. Your new business plan will divide your focus between the marketing and management of two locations. Whether your new location will be a duplicate of the original restaurant or a similar eatery with a different name or menu choices, you will need to prepare a plan for success. Adopting the same organizational structure and staff policies is one way to ensure the success of your original location is passed to the new restaurant. A clear business plan will help you avoid surprises that could derail the success of your new restaurant.

Marketing and cash flow will be essential to the adapted business plan. Since your new location will take a few months to become profitable, it's important to ensure your plan includes funds for inventory and marketing to potential customers in a different location. An effective business plan will allow you to make the necessary changes you're currently experiencing and leave room for growth in the future.

Expansion in the hospitality industry depends on so much more than current success in one location. Your brand, your menu, your staff, and most importantly, you, must be ready for the changes that will be in store for your current and future location. If you're certain that a restaurant expansion is in your future, you don't have to do it alone. Reach out to Simmer Group today to learn more about making the necessary preparations to ensure your repeated success.