How do you know when you’re ready to expand your restaurant business? These top indicators show it could be time to grow.
Table of contents
- 1. You can’t keep up with demand
- 2. You have a solid team in place
- 3. You have enough cash
- 4. You’re running out of space
- 5. There’s a demand for more products and services
- Reference your restaurant data to know when to grow
When you first open a restaurant, daily tasks take up so much attention that it can be easy to forget to step back after a while and consider whether it is a good time to expand.
Restaurant owners scale their footprint for good reason: Growing can help you reach more customers, maximise your revenue potential, and diversify your risk in the market. That’s been the case for The Happy Pear, which began as a local fruit and veg shop in 2004 and has since expanded to a retail shop, cafe, sourdough bakery, a four-acre regenerative farm and branded food range.
It’s important to approach the opportunity to grow at the right time and make informed decisions during the process to avoid jeopardising your restaurant, however.
How do you know when it’s time to grow your business and open another restaurant? Here are five indicators.
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 restaurant technology can be a great place to get an accurate pulse on this information. The Square Kitchen Display System, for instance, tracks order wait times, and the Square Restaurants Point of Sale data logs live sales counts.
2. You have a solid team in place
A strong team of employees is essential when you’re considering expanding. If you’re planning to open new locations, you’ll 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 ton of orders, 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. Ming-Tai Huh, Square Head of Food & Beverage and multi-restaurant owner, says, “Pay attention to your prime costs and your bottom-line profit.”
Regularly reviewing these figures helps maintain financial stability and manage expenses. As a guide, it’s recommended to keep your prime costs under 65% and your margins in line with reports from the Restaurant Association of Ireland and Failte Ireland—which often show profitability ranging around three to seven per cent for many Irish restaurants.
4. You’re running out of space
Whether working in a restaurant, a manufacturing facility, or a commercial kitchen, you 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 will get frustrated. Don’t be hasty about leasing a larger space or opening a new location. First, ensure 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 too large or expensive for your business to sustain.
5. There’s a demand for more products and services
If you’ve created a restaurant that has taken off, consider variations you could make. For example, for food truck businesses, it might make sense to take on more orders before expanding their physical locations or offerings. Your customers’ input can seriously help here. 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
One of the biggest barriers to expanding to another location can be the costs involved in the process. Owners know the restaurant industry’s margins are razor-thin. After weighing your opportunity to expand, logging your costs using an expense-tracking tool can set you on a path to success.
Your existing business data can also be a huge help in making sure you grow the right way. For On the Go Coffee, having on-demand access to their numbers through Square Online provided critical insight into top sellers and the confidence to expand their menu accordingly.
“It’s so intuitive and simple to use,” founder Andrea Kelly told Square. “It’s definitely helped our business keep track of sales and shows us what’s selling best, our busiest/quiet times of the day. The reports are great.”