Business
Before opening a second venue, make the first one stand on its own
A full room and a good reputation are a strong start. Expansion needs a clear view of the profit that remains when you step away.
Business & Outsourced Finance
Before opening a second café or restaurant, test whether the first venue earns a sustainable profit after paying for the work you do. Then model the second venue's setup costs, slower opening months and effect on the existing business.
A venue can appear comfortably profitable while the owner covers the early starts, rostering, ordering and weekend gaps. Opening another address makes that contribution harder to repeat.
The first expansion cost may therefore arise at the original venue.
Put a fair cost against the owner's week
Write down the roles you perform and the hours they take. Which responsibilities could a venue manager assume? Which would still sit with you?
Allow for appropriate replacement costs in a management view of the first venue's results. This does not mean every owner must stop working in the business. It makes the economic contribution visible.
Review a full trading cycle rather than a few strong months. Busy periods, quieter weeks, repairs and annual commitments should all be represented.
Ask whether the first venue could support its own manager and still produce a worthwhile return. If the answer is unclear, another lease may amplify the uncertainty.
Read the trading pattern behind the turnover
Look at sales by day, service period and channel. Put labour, food and beverage costs, delivery commissions and other direct costs alongside them.
A busy Saturday and a quiet Tuesday can carry very different economics. A delivery order and a dine-in order may also produce different contributions even when the menu price is similar.
Avoid adopting a single industry ratio as a verdict on your venue. Your format, opening hours, service expectations, location and mix of sales matter.
Use the numbers to identify a specific decision. Would changing a service period improve the result? Are menu items priced with current ingredient costs in mind? Is waste being recorded consistently? A useful report should lead to action the team can understand.
Build the staffing budget from the actual roster
The staffing model needs to reflect the work required across opening, preparation, service and closing.
The Fair Work Ombudsman's restaurant and café resources explain pay and employment conditions and link to tools for checking entitlements. Confirm the applicable award or agreement and allow for relevant classifications, penalties, allowances, leave and superannuation.
Budgeting solely from a base hourly rate can understate the commitment. So can assuming the owner will cover every absence at both venues.
Think about who will lead the second team and how recruitment and training affect the first venue before opening day.
Put all the opening commitments in one place
The fit-out quote is only one part of the cash requirement. Include lease-related payments, equipment, professional fees, licences, initial stock, recruitment, training and any costs incurred before trading begins.
Make the opening date an assumption you can change. A delay may mean paying costs for longer before taking the first booking.
The government's guide to calculating start-up costs is a useful starting point for separating initial and ongoing commitments. Apply it to the new venue while keeping the existing business's needs visible.
Model the ramp-up in trade. A new venue should not automatically inherit the sales history or reputation of the first.
Test one uncomfortable but plausible scenario
Suppose the opening moves back and trade builds more slowly than expected. How much additional cash would be required, and where would it come from?
Consider the effect on the owner's income as well as the business. If the first venue funds the second, decide what operating reserve it must retain and how the investment will be recorded.
Review the lease, guarantees and financing with the relevant advisers before signing. Understand which commitments remain if the new site underperforms.
This exercise does not need to rule out growth. It helps define the conditions under which growth is affordable.
Decide what success should feel like
A second venue can create opportunity for the team and reduce reliance on one location. It can also increase the owner's workload without improving their financial position.
Set a practical objective for the first year: the level of management independence, the cash commitment you are prepared to make and the return the expanded business needs to support.
Agree when you will review the result and what evidence would lead you to adjust the plan.
Should we use the first venue's cash to fund the second? Only after understanding its own commitments, seasonal needs and exposure to setbacks. The source of funding does not remove the need to assess the investment.
Is a second venue the best way to increase owner income? It may be, but improving the existing venue's profitability or reducing owner dependence can also be valuable. Compare those options before committing.
If another location is on the table, speak with EFS. We can help connect business planning, funding and your personal financial goals so the next venue has a clear commercial purpose.
General information only. Obtain financial, employment and legal advice relevant to your venue and proposed commitments.
Speak with our team
For advice on your circumstances, speak with David Rosenthal or Dion Spice.