I sell stuff to a lot of restaurants. Most of the people that open a second location end up making less money or end up closing everything after they just get run into the ground. Then again, some people do it successfully and make way more money. It just depends on so many things.
A bit of anecdata. My wife ran a restaurant for four years, a reasonably successful one: a lot of praise from customers, profitable enough to stay in business, but nothing like hockey-stick growth. If anything, she decreased the number of tables as the fame and revenue grew. She carefully focused on making her place distinct from other restaurants nearby, and in training her personnel.
Her long-time friend also ran a restaurant, for a much longer time, and more well-known in the city. After quite some years, she opened another, at a different part of the city. It struggled for some time, but eventually stabilized as a reasonably profitable place, after, say 6 or 7 years. Several years after that, she started planning to open a third one, and was saying that this would stretch her thin, and she's very reluctant, but the demand was apparently there.
This is exactly the kind of business VCs run away from: inevitable slow growth, no way to put in more money and scale the business to get more revenue. Large companies also often shy away from that. This may be a huge opportunity if you hold it right.
If you can find such a niche that pays you enough for your needs, it's really great because competition is low: few know about it, and of them, even fewer want to overtake you.
Not at all, depends on the owners goals in life. If the goal is to make as much money as possible and you don't mind over working then it could grow, or take on a partner.
There was a great breakfast place near me ran by the guy who owned basically all the commercial real estate on the block - the breakfast place was only open in the mornings 6 days a week and occasionally the owner would come in and serve, it was basically a passion project and he wanted to make enough to pay for it. After 15ish years of running he started hosting popups at night and another 4-5 years after that sold to one of the popups. It was a real restaurant and widely love by those in the know.
You could say El Bulli fits the bill of don't expand, they shut down after a while and converted the space into food research and events center. A little different, but I was trying to think of a more famous "real restaurant".
I think the analogy still works in this scenario, though. Like once you've grown so much that your at capacity in your current setup, THEN you can invest in growing your business.
For this restaurant this adding a new room or a new location in another town.
For a solo founder, this might be when you finally start hiring to free up your time for other tasks.
It's not necessarily never grow. It's about growing on your own terms when you can afford to do so.
If that’s an option, yes. But for many it isn’t. The building isn’t owned by them. Or there’s no available space next door to expand into. Or the capital cost of remodeling that new section is too high. Or the profit margins are so small they can’t justify the cost. Or they’re already maxed out on loans and can’t afford more.
And a second restaurant is still a second restaurant. There's still a very high (>50% for sure) chance it fails. The second location isn't quite as good. The manager you hire starts to slack off a bit. Food critic gets sick during opening week. A close family member dies and you ignore the restaurant(s) for just a little too long. The list of things that could happen that boil down to "bad luck" is endless.
> Or the profit margins are so small they can’t justify the cost.
You mean the cost increase? I'm afraid I don't understand. Who would you need to justify the cost to, the clients? They don't know anything about your profit margins, and they don't really need any justification.
Operating the restaurant at the current size might not provide enough revenue to pay for the expansion costs (more rent, renovation of the space, etc.).
