The restaurant industry is not easy to navigate. Whether opening a restaurant for the first time or expanding to another location, you must be well-prepared and strategic.
Many successful restaurants are profitable, and their owners are considering expansion. After all, why not repeat the success and increase restaurant sales?
What you’ll get from this article:
- Restaurant expansion strategy: Learn what a restaurant expansion strategy is.
- Expansion considerations: Discover when to consider expansion.
- Expansion methods: Understand how a restaurant can expand.
- Growth tips: Get helpful tips to grow a restaurant business.
What is a restaurant expansion strategy?
A restaurant expansion strategy is a comprehensive plan designed to grow a business by increasing its footprint, revenue, and market presence.
It includes writing a restaurant expansion business plan, securing funding, selecting a new location, developing restaurant marketing strategies, and ensuring operational consistency across all sites.
If you would like to grow your restaurant, consider the following factors:
- Profitability: Your restaurant consistently achieves a high restaurant profit margin and strong average restaurant revenue, indicating financial stability and readiness for growth.
- Customer demand: Your restaurant is popular among customers, with positive word-of-mouth and frequent requests for additional locations.
- Operational efficiency: Your operations run smoothly with efficient processes and systems.
- Market opportunity: There is an apparent demand and market gap in other locations or for similar or different concepts your restaurant could fill.
- Brand strength: Your brand has a strong reputation and recognition, making attracting customers to new locations easier.
- Resource availability: You have the capital, staff, and management expertise to support expansion.
Consider whether and which factors are met before you decide to expand.
How can a restaurant expand?
There are many strategies to expand your restaurant business. Get inspired by the restaurant expansion ideas we describe below.
1. Increase existing capacity
One expansion method restaurant owners may consider is enlarging the existing restaurant space. How do you do it?
For example, you can take over the premises next door and add a room to organize private parties and other special events. You can also build a patio to offer outdoor seating, enhancing the dining experience and increasing the number of guests you serve.
Additionally, you can explore ways to reconfigure the kitchen and storage areas to improve efficiency in restaurant operations, allowing you to serve more customers without compromising on service quality.
If there is no way to expand the capacity of your existing restaurant, you can consider other options.
2. Open additional restaurant locations
Opening additional restaurant locations is a great growth strategy, especially for those with a proven concept and strong brand loyalty. Expanding to a second location can be a smart move if you’re a business owner with a successful restaurant.
Keeping the same concept in your new restaurant ensures consistency and meets customer expectations. This helps you reach more customers and leverage your strong brand to attract new patrons while keeping your loyal ones happy.
3. Introduce new revenue streams
Instead of expanding the premises and opening a second restaurant, you could expand by adding additional restaurant revenue streams. What could this look like?
For example, if you run a restaurant without deliveries, you could enable online orders using an online ordering system. Another option is selling restaurant merchandise.
Yet another option is to start offering catering services for events and parties.
These additional revenue streams can help increase restaurant sales and profitability without physical expansion.
4. Create a delivery-only restaurant
Another idea is to create a delivery-only restaurant.
A virtual restaurant allows you to run a business at lower costs than a standard restaurant. This is because delivery-only restaurants, also known as ghost kitchens, do not require a traditional dining area, reducing overhead expenses such as rent and utilities.
Additionally, a virtual restaurant can operate from an existing kitchen, maximizing the use of your current resources. This model focuses solely on preparing food for delivery, catering to the growing demand for online food orders.
To make this work, you must create a restaurant site and enable online ordering. Using a restaurant website builder, you can design a professional and user-friendly site that allows customers to place orders easily.
5. Open a food truck
How about opening a food truck? A huge advantage of starting a food truck is its mobility. If there are no pedestrians in the park where you are currently stationed, you can simply move to a busier location, such as near office buildings where employees need a quick lunch.
Another benefit is that a food truck typically requires fewer employees than a traditional restaurant. This can significantly reduce restaurant labor costs while allowing you to expand your business.
However, remember to check the issue of business permits, as regulations for food trucks vary between cities and regions.
6. Form a hospitality group
Forming a hospitality group is another effective way to expand your restaurant business. You can own and manage multiple restaurant brands under one umbrella by creating a group.
For example, you might own a fine dining restaurant, a casual bistro, and a fast-casual restaurant, each catering to different customer preferences. It broadens your customer base, and leverages shared resources and operational efficiencies across your brands.
A hospitality group can also provide opportunities for cross-promotion and loyalty programs.
7. Launch a pop-up
Launching a pop-up restaurant can be an exciting and innovative way to expand your food business. Pop-ups allow you to test new concepts, menus, and locations without the long-term commitment and costs of opening a permanent restaurant.
For example, if your restaurant’s success is built on a particular type of cuisine, you can create a pop-up that showcases a new, seasonal menu or a different dining experience.
Pop-ups can also be used to explore new markets. If you are considering opening a new restaurant in a different neighborhood or city, a pop-up allows you to gauge local interest and gather customer feedback before making a significant investment.
Learn more about starting a pop-up restaurant.
8. Franchise your concept
Franchising your concept is a powerful way to expand your restaurant business to new locations without bearing all the risks and costs yourself.
For example, if your first restaurant has been highly successful, opening a franchise restaurant allows you to replicate this success in multiple new locations.
Each franchisee operates its restaurant under your brand and concept, following the established business model that made your initial venture thrive.
This strategy also helps you reach markets that might be challenging to manage directly. For instance, if you want to establish your next restaurant in a different state or country, franchising can facilitate this expansion while ensuring consistency in quality and service.
Another option is to buy an existing franchise, which allows you to leverage an established brand and operational system.
How to grow a restaurant business – 15 Helpful tips
1. Define your expansion vision
As you already know, there are various options for expanding your business.
To successfully grow restaurant business, you must first decide which option is the most attractive for you—whether it will be increasing the premises’ area, opening a new location, franchising, or creating a virtual restaurant or other options.
Give yourself time to analyze each solution’s advantages and disadvantages. Consider financial issues, such as the initial investment and potential returns, as well as the time and effort required for each option.
2. Conduct a customer analysis
Analyze the habits of your current and potential customers. Try to answer the following questions:
- What menu items do your customers choose most often?
- Have any trends recently appeared on the market?
- What does your competition offer?
This analysis is especially crucial if you plan to start a completely new restaurant concept with a different target market than the one you are used to.
Use the data you have in your restaurant CRM to see what customers spend the most money on, how often they order, and whether they prefer to eat on-site or order online for takeaway or delivery.
Use restaurant analytics to gain insights into customer behavior and preferences at your first location. The more data you analyze, the better equipped you will be to tailor your offerings to meet customer expectations.
3. Select the new restaurant location
Choosing the right location for your new restaurant is essential to executing an effective restaurant location strategy and ensuring its success. Consider the following factors:
- Demographics: Ensure the area matches your target market’s age, income, and lifestyle.
- Restaurant foot traffic: High foot traffic areas, like shopping centers or busy streets, attract more customers.
- Competition: Analyze local competition to identify opportunities.
- Accessibility: Ensure the location is accessible by public transport and has adequate parking.
- Visibility: High visibility spots, such as corner locations or large storefronts, draw more walk-ins.
- Lease terms: Evaluate lease terms and costs to fit your restaurant budget and profitability expectations.
4. Determine your service model
Choosing the right service model is crucial for aligning your restaurant with customer expectations.
Consider options like fine dining for a high-end experience, casual dining for a relaxed atmosphere, or fast casual and quick service for convenience. You might also explore delivery and takeaway, a full-service restaurant, or a food truck for added flexibility.
5. Write a new restaurant business plan
You wrote a business plan before opening your first restaurant, so it shouldn’t be difficult to do it again.
Remember that each new location requires a separate restaurant business plan. Differences in market analysis, target customer groups, or competition may lead to different calculations.
Remember that a thorough business plan is especially important if you intend to apply for restaurant funding.
6. Secure adequate funding
Securing adequate funding is crucial to grow your restaurant business. Explore various restaurant financing options, such as
- a business loan,
- investor partnerships,
- crowdfunding
to ensure you have the necessary capital.
7. Obtain necessary licenses and permits
To open a new restaurant, you must comply with all local laws and regulations.
Please note that licenses and permits may vary by state and city, so it’s essential to research the specific requirements for your new location.
8. Decide on your menu
The next aspect is your restaurant’s menu. Will it be the same as in the current location or completely different?
If the restaurant’s target market is different, the menu, menu descriptions, and restaurant menu pricing will also need to be adjusted accordingly.
9. Create a restaurant marketing plan
A comprehensive restaurant marketing plan is essential to attract customers to your new location and grow your restaurant empire.
Build on the strategies that worked for your original restaurant and adapt them to the new market.
Include both online and offline marketing tactics, focusing on restaurant social media marketing.
10. Strengthen your branding
Strengthening your restaurant branding is key to standing out in a competitive market.
To build recognition and loyalty among your customers, ensure your brand’s identity is consistent across all locations, from logos and signage to menus and marketing materials.
11. Enable online orders
Another important aspect is restaurant technology. What will you use in the new location? Certainly, launching online orders is a must.
Also, consider building a restaurant mobile app to make the ordering process even more convenient for customers.
More and more restaurants are introducing QR code menus, which allow customers to view the menu and place orders directly from their smartphones.
Tableside ordering is also becoming popular, providing a seamless and efficient dining experience.
12. Purchase equipment
The next step is to purchase furniture and equipment. If it’s the same brand and just another location, you can replicate the setup from your original restaurant to maintain consistency.
If it’s a new concept, you must choose furniture and equipment that align with the new theme and ambiance.
Get inspired by these restaurant ideas.
13. Hire and train the right team
It’s crucial to have the right team in place. Your current restaurant staff can help train new employees, ensuring they understand your standards and procedures.
A well-trained team will deliver excellent service and create a positive customer dining experience.
14. Host grand opening
Throwing a grand opening is a great way to introduce your new restaurant to the community.
Consider fun grand opening ideas for restaurants, like special promotions, live music, or a ribbon-cutting ceremony.
15. Cross-promote your restaurants
Cross-promoting your restaurants can boost visibility and customer loyalty. Use your existing locations to promote the new one and offer incentives for customers to visit both.
Social media, a restaurant newsletter, and in-store promotions are great ways to encourage customers to visit all your spots.
Check out these restaurant promotion ideas for inspiration.
Key Takeaways
- Increase capacity: Expand your restaurant space or reconfigure the layout to accommodate more guests.
- New locations: Open additional locations or start a food truck to reach new markets.
- Franchise: Consider franchising your restaurant concept to grow your brand without bearing all the expansion risks yourself.
- Customer analysis and business plan: Conduct a thorough customer analysis and create a tailored restaurant business plan for each new location to address market differences.
- Restaurant technology: Implement restaurant technology, such as an online ordering system and a QR code menu, to enhance customer convenience and streamline operations.
Frequently Asked Questions (FAQ)
How to expand a fast food chain?
Expanding a fast food chain involves the following:
- Franchise model: Consider franchising your brand to grow rapidly with lower capital investment.
- New locations: Open new locations in high-traffic areas like malls, airports, and busy streets.
- Drive-thrus: Add drive-thru services to increase convenience for customers.
- Delivery services: Partner with food delivery platforms to reach more customers.
- Menu innovation: Introduce new and seasonal menu items to attract diverse customer bases.
- Marketing campaigns: Use targeted marketing and promotions to build brand awareness and attract new customers.
- Optimize operations: Streamline kitchen operations and supply chain management to maintain quality and efficiency as you scale.
What are the benefits of expanding a restaurant?
Expanding a restaurant offers several benefits:
- Increased revenue: More locations or capacity can lead to higher overall sales.
- Brand growth: Expanding enhances brand visibility and market presence.
- Economies of scale: Larger operations can reduce costs per unit through bulk purchasing and shared resources.
- Market diversification: Reaching new customer bases reduces dependency on a single market.
- Enhanced brand loyalty: Offering new experiences can strengthen customer loyalty across multiple locations.
Is the restaurant industry expected to grow?
Yes, according to the National Restaurant Association report, the restaurant industry is set for significant growth in 2024. Sales are projected to surpass $1.1 trillion, marking a historic milestone.
The industry is also expected to add 200,000 jobs, bringing total employment to 15.7 million.
