Restaurant expansion: How to expand your business to another state

In order to be successful, it’s important to consider market demand, financial stability, restaurant operational efficiency, customer base, and growth projections. In this article, learn more about these key topics and how to expand your restaurant successfully.

Assessing market demand

First, you’ll want to conduct a market demand assessment. This involves researching potential new markets to confirm there’s a demand for your cuisine or everything your restaurant offers, such as unique décor or upscale service. During this phase, be sure to:

• Analyze the local market saturation. Conduct market research into potential expansion locations to see what’s already in business and where there’s a need for what you offer. You can also study trends in consumer preferences to see if what you offer is increasing in demand, such as plant-based food in a location where there aren’t a lot of options.
• Evaluate the competition. Look at similar types of restaurants in the area(s) you’re considering. Read menus to identify gaps your restaurant can fill. Browse online reviews on sites such as Yelp and Google to read feedback from current diners in new areas to see where opportunities for your restaurant emerge.
• Research the target audience. Knowing your current customers, you’ll want to research potential new areas to see if similar types of diners live there. Look up demographics information for areas you’re considering to see if they match up with who you currently serve or who you want to serve when you expand.

Once you’ve confirmed your restaurant has the potential for success in a new particular area, you can evaluate and strategize other parts of your business operations.

Financial stability

Determine whether your financial standing is equipped to handle the opening of a new restaurant. During this phase, you’ll want to:

• Evaluate the current financial health of the restaurant. Assess your profitability and cash flow. Review your debt and liabilities. Do you have the capital you’d need now to open a new location, or will you need funding? Determine whether it’s a bigger priority to pay off current debts, or get more funding to expand your brand.
• Calculate the cost of expansion. Determine a budget for a new location, including space, state business license and permit fees, furniture, and staffing. Project an expected return on investment and how you’ll plan to use it, whether it’s toward marketing your new restaurant, paying off debt, or some other use.

Another part of making a restaurant profitable is setting the right prices for your target consumer. Read our ultimate guide to pricing strategy for businesses for tips that can help with how to expand restaurant business in new places.

Operational efficiency in restaurants

It’s easier to open a restaurant in a new state when you’ve streamlined existing workflows and processes. Some operational tips for how to expand your business to another state include:

• Assessing current workflows and processes. Where can you implement efficiency improvements? Are there workflows you can automate, such as inventory management, within your restaurant point-of-sale system? Are there training updates that need to happen to make learning processes easier? How do you train staff, and how can training be easily implemented in a new location? Answer questions such as these to improve your processes.
• Developing scalable systems. With set workflows and processes in place, you can help ensure the ability to replicate success in new locations. Another helpful tool for scalability is restaurant technology. How does technology affect restaurants? With restaurant technologies, such as a restaurant POS, you can deliver the same speed and accuracy for order taking and meal delivery across all your restaurants. You can also take payments more securely, so customers have peace of mind when they dine with you.

Operational efficiency is key because you can’t be everywhere at once. Creating set workflows means you can train all your staff to do things the right way at every location. Restaurant technology can help you achieve this.

Customer base analysis

An essential part of market analysis is understanding your existing customer base. It can be helpful to analyze customer demographics, such as income, frequency of dining out, family size and ages, and other factors that could influence your restaurant strategy in a new area.

If you’re wondering how to find customer demographics, check out reputable sites such as the United States Census Bureau. You can input a city, state, county, town, or ZIP code and learn things such as:

• Age and gender percentages
• Race and Hispanic origin percentages
• Veterans figures
• Percentage of population born in another country
• Housing characteristics
• Families and living arrangements
• Computer and internet use
• Education
• Health
• Economic statistics
• Income and poverty

You’ll also want to do a customer loyalty assessment to learn more about your most loyal customers. Look at things such as when they typically dine with you and what they order. Think about ways you can replicate the repeat business you currently have in a new market.

Adapting to new market expectations

You don’t have to do everything the same in a new location. Once you understand your new target customer, you can adapt your current restaurant model in ways including the following:

• Use local ingredients in your dishes. Highlight local vendors/partners in your menu and in business marketing materials.
• Evolve current menu items to local tastes, or add new dishes based on local preferences. For example, if you’re expanding into an area where spicy food is common, you might add the option to add extra heat to dishes. If you’re opening in an area where a significant portion of the population represents a certain ethnicity, you might consider adding specialized dishes or adapting current menu items for those tastes.
• Create marketing strategies based on the new customers you’re targeting. For example, if you’re opening near a college, using Gen Z social media sites, such as TikTok, can help you reach students.

There are both small and big ways you can adjust or change your restaurant based on where you’re opening. Think about what will delight your target customers in the new location to evolve your strategy.

Growth projections

Any good plan for how to expand a restaurant business includes defining success metrics, so you can measure your progress, see what’s working, and improve where you need to. Determine what metrics matter to you on which timeline. Implement ways to monitor your key performance indicators.

You can gather data, such as sales and employee performance insights, right in your POS. You can then use analytics for informed decision-making, including:

• Deciding which menu items to promote and which to phase out
• Identifying which employees are top performers, and then applying their techniques to other staff
• Considering how specific promotions and loyalty programs impact sales trends

Continually ask for feedback from customers, as well as staff. Adjust your strategies based on what you hear, and learn from your data so you can grow your new business and potentially keep expanding. You can create a restaurant expansion case study and use it for future location openings based on your results.

Expanding your restaurant is easy with the right tools

Expanding to a new state or market is exciting, but you’ll want to do research and equip yourself with the right tools first to help ensure your success. Clover’s restaurant POS systems can help you open restaurants in multiple locations with ease. When you’re opening a new restaurant with Clover, you can:

• See insights into all locations in a single terminal
• Automate inventory management
• Scale payment processing

Why wait? Get started with a Clover POS system today to elevate your business.

This information is provided for informational purposes only and should not be construed as legal, financial, or tax advice. Readers should contact their attorneys, financial advisors, or tax professionals to obtain advice with respect to any particular matter.

Editorial Team

Full Service Restaurants (FSR), Quick Service Restaurants (QSR), Run your business, Start a small business, Strategy

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