When you first open a restaurant , you can be so focused on daily operations that you don’t take the time to take a step back and realize it might be time to expand. It’s exciting when you recognize that your business – something that had been an idea in your head, a dream – has caught on with customers.
That has been the case for Toronto-based Lambo’s Deli, which opened during the pandemic and grew sales by 2.5 times since then. It has now expanded into a second location and a thriving catering business. “I found there was a real hole in the marketplace and there wasn’t anything like that in Toronto,” says Lambo’s Deli co-owner Justin Leon.
According to the Canadian Chamber of Commerce, being based in food services bodes well for business. It’s one of the most common characteristics of small businesses that are likely to experience high growth. But as thrilling as this type of success can be, growing your business can be just as scary as starting it. You want to make sure that you’re doing things the right way, at the right time, to avoid mistakes that could jeopardize your company.
For CHAR Restaurant Group, its expansion journey has been focused on growing at a comfortable rate and keeping operations efficient when opening new restaurants. “As we progress and grow, we’re looking at ways to be smarter as a business and streamline things, and we see ourselves using Square more and more,” John Jackson, co-chef and co-owner of the Calgary-based restaurant group.
There are a few signs that your business may benefit from opening another restaurant or broadening your offerings. Here are five indicators that it could be time to expand your restaurant business.
1. You can’t keep up with demand.
The decision to expand should never be prompted by a desire to stick to an arbitrary growth plan when you don’t have any real justification for doing so. Before you even consider expanding, ask yourself if there’s a need. Do you have more orders than your staff and facilities can handle? Can you accommodate the number of customers that you’re attracting? If your numbers warrant growth, that’s the first step.
Your point of sale (POS) system can be a great place to get an accurate pulse on this information. The Square Kitchen Display System, for example, tracks order wait times, and the Square Dashboard provides advanced sales reports and syncs with your accounting software for a complete overview of your restaurant’s performance.
2. You have a solid team in place.
A strong group of employees is essential when you’re considering expanding. If you’re planning to open new locations, you’re going to be spending a good deal of time getting things up and running in those areas, so you need to have people you trust to hold down the fort. If you don’t have confidence in your team, make some changes and key hires before moving forward. Also, ask yourself if you need to hire more employees. Before you expand, you’ll want a competent, well-trained team ready to go.
3. You have enough cash.
Expansion takes money. So, even if you have a stream of orders coming in, you’re not in a position to grow unless you’re actually getting paid enough capital. Only when you have strong, positive cash flow should you consider taking the next step.
Not sure where you stand? You’re not alone. Over half (60%) of small and medium Canadian businesses have experienced challenges managing their cash flow, according to Canadian Western Bank.
Performing a cash flow analysis on a regular basis is key. And so is reducing your operating expenses to maximize profits. “The only way for a business to be successful, in my opinion, is to limit those monthly costs and fees,” says Jennifer Flynn, co-owner of The Grove Hotel and its offshoot businesses, which include two locations of the JOE Hot+Cold café.
4. You’re running out of space.
Whether you’re working in a restaurant, a manufacturing facility or a commercial kitchen, you obviously need enough room to operate comfortably. And if the number of customers visiting your business has spiked or you’ve increased staff but are still in the same space, everyone is going to get frustrated.
Don’t be hasty about leasing a larger space or opening a new location. First, make sure that your growth is consistent and not just a seasonal spike. Also, don’t get ahead of yourself. Expand gradually to avoid investing in a space that’s too large or expensive for your business to sustain.
5. There’s a demand for more products and services.
If you’ve created a recipe that has taken off, think about variations you could make. This could involve new flavours and size options. For example, Snowbank Brands’ OAKBERRY has been dominating Western Canada and boasts over 700 restaurants worldwide. Its hero product is simple: an açai bowl. But customers can choose from three different sizes and personalize their bowl with unlimited toppings.
If it’s an item of clothing like a t-shirt with your restaurant’s logo on it, consider more colours and fabric. Also, take your customers’ input seriously. If they’re consistently asking for something you don’t offer, or if they have an interesting idea for a new flavour or product, it might be something worth pursuing.
Reference your restaurant data to know when to grow
The upfront costs involved in expansion can be a barrier to growth. As a restaurant owner, you know that profit margins are tight and every dollar counts. Using an expense-tracking tool can set you on a path to success. Square for Restaurants helps you stay on top of labour and inventory costs so you can keep more profit in your pockets.
When considering whether to open a new location or invest in a new revenue stream, your existing business data can help guide your decisions and prioritize where to allocate resources. For The Grove, having on-demand access to data through Square Dashboard provides critical insight into business performance and the confidence to grow as a multifaceted business. “I get reports emailed to me every day. I can log in at any given time to see what the sales are,” says Flynn.
“With so many businesses and products, it’s important to me that I can have a view into all locations and assess where I’m needed.”