By: rkapur
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Is 2020 A Good Year to Expand My Restaurant?

Running a restaurant that’s doing well can be very satisfying. If your sales and profits are rising, and employee morale is high, you have every right to be proud.  But are there times when you have to turn people away because of a lack of seating capacity? Is your restaurant too small to accommodate all your customers? If you’re facing this situation, it may be time to expand.

Will 2020 be a good year to open a new restaurant? Let’s find out.

Is 2020 a Good Year to Expand Your Restaurant?

According to the National Restaurant Association, the outlook for the industry is positive.

The National Restaurant Association represents the interests of over 380,000 restaurant locations across the country. It was established 100 years ago. Among its other activities, the Association publishes industry reports and surveys that provide restaurant owners with inputs on the state of the sector.

The Restaurant Performance Index for October 2019 that has been recently published by the Association indicates that the industry is experiencing favorable conditions and that it could be an excellent time to expand.

Here’s an image that shows the level of the Index from 2004 until October 2019:

Restaurant Performance Index

Let’s take a minute to understand how the Restaurant Performance Index is made and what it tells us:

  • The Index is based on the responses the Association receives from participating restaurant owners
  • If the Index stands at a level higher than 100, it indicates expansion

In September 2019, the Restaurant Performance Index was at a level of 100.4. In October, it rose to 101.1. This increase was because of two factors. One, same-store sales were up. Additionally, customer traffic had also increased.

There are other positives, as well. Unemployment in the country is at its lowest level in 50 years. More people are working and eating out. Consumer trends are also changing. Data gathered by the National Restaurant Association reveals that 9 in 10 consumers say they enjoy going to restaurants.

Additionally, about 75% of people hold the view that eating out with friends and family is a good way to use leisure time. It’s better than cooking and cleaning up at home.

Restaurants are gaining popularity for other reasons, too. About two-thirds of consumers say that the food in restaurants provides flavors that they can’t duplicate at home. For many people, restaurants have become a part of their lifestyle.

People Are Spending More at Restaurants

Here’s another reason to expand your restaurant in 2020. Industry sales are growing at a fast clip.

Restaurant industry sales – ($B)

Restaurant sales have been growing at a rate of 6% annually since 1970. It’s expected that this trend will continue, even accelerate.

What’s driving people to eat out more? Hudson Riehle, senior vice president of research and information services at the National Restaurant Association, says, “There are two important drivers for the industry from a consumer perspective — convenience and socialization.”

Which categories are growing the fastest? Riehle explains, “Particularly looking at quick service, which has grown much more quickly than table service. There’s a greater focus on the off-premise market including carryout, drive-through, delivery, curbside, and even food trucks.”

Here’s another eye-popping statistic that provides convincing evidence about the positive outlook for the restaurant business. Back in 1955, one-fourth of the money spent by consumers on food went to restaurants. Today the proportion is more than half.

Long-term Trends to Watch Out For

If you are planning to expand your restaurant business and open a new location in 2020, it’s a good idea to be aware of the expected long-term developments in the industry. Here are some of the trends pointed out in the forecast made by the National Restaurant Association in its Restaurant Industry 2030 Report.

  • Restaurant sales will continue growing. They are expected to reach an annual level of $1.2 trillion within 10 years
  • People won’t cook as much at home. They’ll prefer to eat out. The sectors that will grow the fastest will be grab-and-go, delivery, and virtual restaurants.

What’s a virtual restaurant? Also referred to as ghost restaurants or cloud kitchens, these provide only delivery options. Orders are placed through digital apps and third-party services.

  • The industry will move towards smaller restaurants. There will be an increase in kitchen automation.
  • As lifestyle diseases become more common, there will be greater demand for healthy meals.

If You’re Planning to Expand, You’ll Need Funds

Decided to go ahead and expand your restaurant business? Before you put your plans into action, think about how you are going to raise the money. If you have accumulated a large enough surplus, you probably won’t need to approach a lender.

But remember that the fund requirement could be significant. You’ll need cash to pay the rent for the new location and to buy furniture. You’ll also need money for kitchen equipment and funds to arrange for all the business licenses and permits that you will need.

In fact, there could be dozens of costs that you have to think about when you decide to expand.

A small business loan could be an excellent way to raise the cash you need. Camino Financial specializes in providing funds to restaurant owners like you. We know the ins and outs of the restaurant industry and our loan specialists will do their best to match you with the financing solution that fits your needs and goals. Our loan amounts range from as little as $5,000 to a maximum of $400,000. Apply today for a restaurant business loan to see if you qualify. Our motto is “No business left behind.” We’ll do our best to ensure that you get the funds you need to expand.

Some Tips to Make Your New Restaurant a Success

Is there any way to ensure that your expansion works out as planned? Here are a few steps that could help you succeed:

  • Location: Choose the location well. You don’t want it to be too close to your first restaurant. Your existing customers may prefer the new place, and sales may drop at your original restaurant. But it shouldn’t be too far either. You need to be able to manage both locations without having to spend too much time going from one place to the other.
  • Give your restaurant a unique character: Your guests aren’t looking only for good food. They want to have a memorable experience, as well. Think of ways to set your restaurant apart from the competition. You could do this by creating signature items or getting a liquor license to offer unique drinks. Remember to keep your target market in mind when you are thinking about how to differentiate your restaurant.
  • Manage your costs: Two crucial factors will determine the success of your restaurant. The first is attracting a large enough number of customers. In addition to this, you must also keep your costs down. One area to focus on is the cost of food. If you do these two things well, you have a better chance of making a profit.
  • Keep some funds in reserve: This is a precaution that many small business owners fail to take. Your restaurant will probably not provide you with a consistent stream of revenue. There will be good days, and there could also be periods when business is slow.

You must have an adequate amount of money reserved to see you through the off-season or when there is a slump in the number of customers. Think of this as a sort of “emergency fund” for your restaurant.

If you’re low on cash and you need funds quickly, consider approaching Camino Financial for a loan. We can provide an instant quote for a sum of up to $400,000. If your loan is approved, we can transfer funds directly to your bank account in a matter of days.

The Bottom Line

2020 could be a good year to expand your establishment. Restaurant owners across the country are optimistic about the industry’s growth prospects. Additionally, the long-term forecast for restaurants is positive. If you already own a successful restaurant, this could be the best time to expand.

We’ll be happy to help you raise the money that you need for your new restaurant. Apply for a business loan today to see if you qualify.

Keep reading: How to Start a Food Truck to Expand Your Restaurant





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