How to Use Sales Data to Determine the Right Time to Expand Your Restaurant

One of the most effective ways for a restaurant to gauge when it’s time to expand is by analyzing sales data. Sales data offers valuable insights into your restaurant’s performance, customer preferences, peak demand periods, and financial health.

By understanding key trends and patterns, restaurant owners can make informed decisions about when and where to expand their operations.

There are numerous ways that a restaurant can expand, depending on its goals, market opportunities, and available resources:

• Opening additional locations
• Franchising
• Adding items to the menu
• Offering catering services
• Diversifying into food truck or mobile services
• Offering takeout or delivery (in-house or through platforms like Uber Eats and DoorDash)
• Adding private dining or event spaces
• Expanding operating hours (breakfast, brunch, or late-night service)
• Entering new regions or international markets
• Partnerships or pop-up locations

Before expanding in any of these ways, it’s important to ensure it’s the right time to commit the finances, time, and other resources before growing the business.

This article will explore 10 types of sales data a restaurant should collect, the best ways to collect it, and how to leverage it to determine the ideal time for expansion.

Types of Sales Data to Collect

Here are 10 sales metrics that restaurants should track and analyze before expanding:

1. Total Revenue: Overall income generated from food, drinks, and other services.
2. Average Transaction Value (ATV): The average amount customers spend per transaction. This helps gauge customer spending habits.
3. Number of Transactions: The total number of orders or transactions processed. This provides insights into foot traffic and order volume.
4. Sales by Menu Item: Tracking which specific food and drink items sell the most helps restaurants identify their most popular items – as well as items that underperform.
5. Sales by Time of Day: Sales data segmented by breakfast, lunch, dinner, or specific time slots. This offers insights into peak hours and low-traffic periods.
6. Sales by Day of the Week: Identifying which days generate the most and least revenue, allowing for strategic planning and promotions.
7. Sales by Employee: Measuring sales performance by staff member, useful for evaluating employee efficiency and identifying top performers.
8. Sales by Dining Method (Dine-In, Takeout, Delivery): Helps restaurants understand how each service type contributes to overall revenue.
9. Discounts and Promotions: Tracking the impact of special deals, coupons, or promotions on total sales.
10. Customer Demographics: Collecting data on customer age, gender, or location to better understand the target audience and tailor marketing efforts.

These metrics can help restaurant owners make informed decisions in day-to-day operations, determine the most profitable ways to expand, and understand when the restaurant is ready to take the next step.

How to Collect Sales Data

Here are six ways restaurant decision-makers can collect sales data that will not only help them develop a data-driven roadmap for expansion but also reveal valuable insights into current operations:

1. Point of Sale (POS) System: Modern POS systems automatically track and record sales, including order details, payment methods, and daily totals. These systems can generate reports on sales trends, popular menu items, and peak hours.
2. Inventory Management Software: By integrating inventory management software with the POS system, restaurants can track sales data based on ingredient usage, helping to analyze which menu items are selling and which are not.
3. Customer Loyalty Programs: Restaurants can collect valuable sales data by offering loyalty programs that require customers to sign up. The data includes purchasing habits, frequency of visits, and spending patterns.
4. Online Ordering and Delivery Platforms: By using third-party delivery services or in-house online ordering systems, restaurants can track online sales, average order values, and customer preferences.
5. Manual Tracking: For smaller restaurants, manual tracking of sales through spreadsheets or daily sales reports can still be effective. This method involves recording sales by item, time, and other relevant categories to monitor performance.
6. Sales Forecasting Tools: By evaluating factors like seasonality, busy hours, and customer preferences, restaurant owners can determine if their business is stable and profitable enough to expand, ensuring the timing aligns with financial success.

Each of these methods helps restaurants analyze trends, manage inventory, optimize operations for better profitability, and plan for the future.

How to Use This Data to Determine the Right Time to Expand

Once a restaurant has collected the necessary sales data, it can analyze trends, growth, and performance across various metrics to determine the best ways to expand – and if the conditions are right to set plans in motion.

Here are five ways to approach this effectively:

1. Ensure Consistent Revenue Growth

Restaurant owners can use the total revenue they’ve tracked over time to identify consistent growth patterns. A sustained increase in sales month-over-month or year-over-year is a strong indicator that the restaurant is thriving and may have the financial stability to support expansion.

For example, for a restaurant with consistent revenue growth, it may be time to expand in the following ways:

1. Open a New Location: Expanding to an additional location in another high-demand area would allow the business to serve a larger customer base while spreading its brand influence, especially if the current location is reaching capacity.

1. Expand the Current Space: Adding seating, extending the dining area, or enhancing outdoor seating can accommodate more customers and boost revenue without the costs of a new location.
2. Diversify the Menu or Offer New Services: It may be time to add new menu items, such as specialty dishes, seasonal offerings, or premium upgrades. Alternatively, the restaurant could offer new services like catering, private dining events, or delivery options to attract different customer segments, increasing its reach and profitability.

Restaurant revenue statistics indicate the online food delivery services alone will grow to $570.4 billion by 2029, at a compound annual growth rate (CAGR) of 10.05%. This makes delivery a particularly attractive avenue for expansion when the time is right.

2. Identify Peak Hour Demand

Analyzing sales by time of day, days of the week, months of the year, and the number of transactions during peak hours can give valuable insights into when the restaurant is most busy and whether this is consistent over time.

If the restaurant consistently reaches full capacity during peak times, this indicates high demand, suggesting expansion could be beneficial.

For example, if a restaurant identifies consistent peak demand during late hours or weekends, it might consider extending its operating hours or offering special promotions during those times. This can lead to revenue growth without needing to open a new location, optimizing the existing space for peak times.

However, if peak demand consistently strains the restaurant's capacity, and this demand is geographically concentrated (such as in a business district or high-traffic area), it might make sense to open a new location nearby. This could reduce overcrowding and allow the restaurant to better serve its customer base.

Another option for expansion would be to offer delivery or takeout if there’s high peak-hour demand, especially during lunch or dinner. If customers are facing long waits for seating, offering these conveniences during these times can capture additional sales, reducing wait times for dine-in customers while still meeting demand.

3. Measure Sales by Location

For restaurants operating in multiple locations, comparing sales performance across them can point to opportunities for expansion and help determine the right time to do so. If one or more locations consistently outperforms, it might indicate an opportunity to replicate that success in other areas.

After comparing sales performance across multiple locations, a restaurant could expand in the following ways:

1. Open Additional Locations in High-Performing Areas: If certain locations consistently outperform others, the restaurant could focus on opening additional branches in similar high-demand areas. This strategy allows the business to replicate success in regions with proven demand for its offerings.
2. Enhance Operations at Low-Performing Locations: If sales data reveals underperforming locations, the restaurant might invest in operational improvements such as better marketing, revamped menus, or updated decor. This could help increase sales in areas that have potential but aren’t fully optimized.
3. Adjust Menu Offerings Based on Regional Preferences: Sales performance data can highlight differences in customer preferences across locations. The restaurant could expand by tailoring menus to regional tastes or creating location-specific offerings to boost local appeal and drive sales growth in different markets.

4. Analyze Customer Demographics and Location Demand

To know when and where to expand, it’s essential to know where potential customers are. Demographic data allows restaurants to assess whether the customer base is growing in untapped areas. Expanding to locations with a high concentration of the target demographic can increase chances of success.

For example, a restaurant that offers late-night menu options would likely find target customers near college campuses or high-traffic areas with vibrant nightlife. Likewise, a full-service restaurant with a family friendly menu and atmosphere would likely attract target customers in the suburbs, in residential areas or neighborhoods with multifamily housing, or along busy roads near malls, shopping centers, or other popular retail areas.

5. Ensure Strong Profit Margins and Cost Control

Monitor profitability to ensure that current operations are efficient. High sales with strong profit margins suggest that the restaurant is well-positioned financially to handle the costs of expansion.

For example, a restaurant with high sales and strong profit margins, relative to the operating costs, can open new locations or enhance delivery and takeout services by partnering with delivery platforms or building its own fleet.

Additionally, a restaurant in this position could expand by:

1. Franchising: This allows third parties to open and operate new branches under the restaurant’s brand. This approach enables rapid expansion while reducing the company’s direct operational responsibilities.
2. Introducing a New Concept or Brand Extension: With a healthy cash flow and high margins, the restaurant might explore launching a new concept, such as a sit-down or more upscale version of the current restaurant, a fast-casual version, or a food truck to target different market segments.
3. Investing in Marketing and Brand Recognition: With a solid profit base, the restaurant could expand its marketing efforts, such as with content marketing campaigns, influencer partnerships, or events, to grow its customer base and solidify its brand reputation.

Conclusion

Expanding a restaurant is a major decision that requires careful consideration and strategic planning. While growth can lead to increased profits and brand recognition, expanding at the wrong time can strain resources and jeopardize a business.

From identifying consistent revenue growth and understanding peak hour demand to analyzing profit margins and customer demographics, sales data provides the foundation for making data-driven expansion decisions.

Whether you’re looking to add more seating, open a second location, or expand into new markets, use this guide to help you leverage the power of sales data to ensure your restaurant is ready for the next stage of growth. Expanding a restaurant is about more than just intuition – it’s about using hard data to maximize your chances of success.