Opening a second location is like having another child. One plus one doesn’t equal two—it’s more like three.
A second store means a second set of staff, a second set of fixed and variable costs, a second set of vendor deliveries, a second grand opening—and lots more.
Depending on your business, replicating your operations in a new location may mean adding more complexity instead of synergies.
I used to own and operate Powder, a San Francisco-based shaved snow business. (Shaved snow is a Taiwanese-inspired treat that’s a cross between ice cream and shaved ice.)
In the early days, we operated one 300-square-foot store where we made our desserts and served them at our retail counter. After a little more than a year, we decided to grow our physical presence and open a second outpost.
This is why we decided all the costs of a second store were worth it—and how you can use the same framework to decide whether you should open another business location.
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1. The business case phase
First, evaluate the constraints of your current location. With a year of operations under our belt, the drawbacks of our original store had become clear.
Our front-of-house footprint was too small for the nature of our product. Our thesis had been that customers would visit, order their dessert, receive it, and keep moving.
But the reality was that our customers were not casual passersby. So if customers planned a date, a family outing, or a friendly catch-up over shaved snow, they’d want to enjoy that experience in our store.
Lack of parking
We thought most of our customers would be local or coming from other neighborhoods within San Francisco. However, a large percentage of our customer base was coming from outside city limits—and driving was their only way to frequent us.
Our thinking had been that our central location would support a made-to-order-only business. This proved to be true, but we heard repeatedly from customers that it was a big ordeal to visit. Unless they lived in the area, if a customer felt like eating shaved snow, it required a lot of steps.
- Getting in a car
- Crossing town
- Waiting in line
- Enjoying it in a crowded indoor space or eating in the parklet outside
That’s a lot to ask of someone to fulfill a craving. (Breaking down all the steps a customer has to go through is an eye-opening exercise.)
We thought we would use traditional marketing avenues to get more customers to hear about us. Sites like Facebook and Instagram proved very helpful in engaging with our community, but less so for bringing awareness to new, local consumers.
Once you create your list of drawbacks, go through each one and ask yourself whether a second location will solve for those things. After completing our analysis, it became apparent to us that growing our physical presence could alleviate some of the burdens for our growing, enthusiastic base.
Once the business case is there, go through another series of questions:
- Am I in a financial position to be able to take on a second store build-out?
- Is the current staff able to handle existing operations?
- Do I have enough bandwidth to find, design, build, launch, and manage a second store?
It’s much easier to troubleshoot and solve unforeseen issues when you’re only focused on one location. You can physically be there all the time. When you have two or more locations, you can’t always be around or pop in to fix things.
Therefore it’s also critical to weigh your mental and physical health in addition to the business case in making the decision to expand to a second location.
2. The wish list phase
Okay, so we decided we were ready for store two. Sweet. We had access to capital, stable existing operations, and bandwidth. Just recreate Store 1, right? Not quite.
The next step is to analyze what you should replicate from your existing business and what should change.
The replicate versus iterate exercise
We already knew of four constraints that we wanted to optimize for in our site selection and store design. But were there other areas of the store that we could change even though they weren’t necessarily problem areas?
Ask yourself the same set of questions.
- What do you want to replicate from your first store?
- And what do you want to iterate on in your second store?
We wanted Store 2 to be an improvement, while still ensuring that it felt like an extension of Store 1.
Here’s how we did it:
Could we simplify order taking by changing the menu layout and design? Our thesis in Store 1 was to give the customer lots of options. But when introducing a new product to the market, too many options cause decision paralysis.
By simplifying the menu structure, we would help our customers get to an order they felt confident about.
Did we want to add any add-on products for our customers? Trying to operate in a tiny space meant we hadn’t been able to add things like homemade waffles or baked goods. As we thought about the design of Store 2, we were able to plan for those sorts of extras.
Should we replicate the same look-and-feel as Store 1 or should we use Store 2 as an opportunity to expand our brand? What you can do with a retail space is often dictated by what was there before you.
In Store 1, we installed vertical plank walls that were warming in the winter and cooling in the summer. But with a new space, comes new possibilities.
We knew that in designing a second location, we wanted it to feel related to our original store. If we needed to use different materials in construction, we knew we at least had our brand and story to tie the locations together.
3. The site selection and design phase
After determining everything we wanted to achieve for our second location, we started the hunt for our future home.
There are entire books focused on site selection, so I won’t attempt to tell you how to evaluate spaces, landlords, and terms here. My advice is just to be patient until you find the right real estate partner. It’s the hardest thing to hear when you are an entrepreneur who is ready to go-go-go, but bad deals are hard to undo.
When you’re a small fry, maintaining mindshare with real estate brokers is hard. They deal with so many clients, so you really have to stay on them and do a lot of hunting on your own. We looked at commercial real estate websites and walked the streets to find listings.
Once you find a space you like, it’s important to also evaluate the landlord.
- Are they reasonable?
- And are they willing to work with you?
A bad landlord can ruin a business so it’s important to make sure everyone is on the same page. After all, it’s usually a 5+ year relationship you’re signing up for.
Consider creating a simple chart that outlines what each location will solve for so you can find a site that meets (most of) your needs.
|Store 2||Store 1|
|Parking (it’s still SF!)||✕||✕|
|Expanded product offering||✓||✕|
4. The pre-opening and launch phase
Every grand opening has hiccups. Building inspectors cancel appointments. Inventory arrives late. Staff quit unexpectedly.
It’s the most dynamic game of Tetris because everything is dependent on something before it.
For restaurants, it can be especially challenging because health departments continue to change policies and procedures—and those inspectors hold the keys. Without a permit to operate, your store stays closed.
But once you’ve navigated the pre-opening obstacles, you’ll be ready to open. You’ll prep as much as can, but inevitably there will be unforeseen problems. This is when you need to be rested and positive so you can have an easier time troubleshooting as you go.
Here’s how you can make your second grand opening as successful as possible:
Even though you are likely transferring the same operations from Store 1 to Store 2, have a soft opening! It will give you extra time to further train new staff. It will also give you time to see where the kinks are. And it will give you time to work out distribution operations (snow blocks, in our case).
Notify and engage with your existing customers. Your loyal fans will be ecstatic about your growth and will evangelize on your behalf.
We invited our biggest fans to come to our soft opening so they could be the first folks to see what we had been up to.
Make it newsworthy
With something as grand as opening a second location, you want to make sure you get some press.
In a market like San Francisco, a second store isn’t really newsworthy in the restaurant space. So we upped the ante and launched a new product line-up—a flight of rum infused tropical shaved snows—to make a splash.
Hopefully you’ve been grooming your staff all along because now is the time when you really need to depend on them thinking like owners.
With two operating locations, there are going to be instances when they have to make decisions without getting your opinion first. If you’ve enabled and trained them for this, it will go a lot smoother. It might even mean promotions (as it did in our case).
Clear your schedule
Don’t plan to be away from the business anytime in the near future. But don’t fret. You won’t want to be. This is baby #2 and you’re going to want to be there for it.
The decision to start your own business can be daunting. The fear doesn’t stop there—the decision to scale your business can be equally scary.
You know what to do for the most part, but in changing some variables, you create even more uncertainty.
But with high risk, comes high reward. And hopefully, a lot of satisfaction in knowing that you’re bringing even more amazing customers along for the ride.