You’re the Boss Blog: Would You Open a 2nd Restaurant Two Blocks From the First?

Jeffrey D. Allred for The New York TimesLucy Cardenas and Bill Coker, owners of the Red Iguana.

Case Study

What would you do with this business?

A case study we’ve just published recounts the dilemma experienced by Red Iguana, a family-owned Mexican restaurant in Salt Lake City.

A local favorite, the restaurant, which had been featured on the Food Network’s “Diners, Drive-ins and Dives, had people lining up around the block for its food when the city announced a disruptive public works plan to build a light rail line down the middle of Red Iguana’s street. Scheduled to start in 2010, the multiyear project had the potential to dissuade customers from visiting and, during its most intense periods, to close the restaurant — a huge potential loss for a one-location business that had been serving 700 people a day, 363 days a year.

In response, the restaurant’s married owners, Lucy Cardenas and Bill Coker, came up with a somewhat counterintuitive plan. One option they considered was to buy a warehouse and turn it into a second location for the Red Iguana — just two blocks from the first. But to get the money to buy and develop the location, they would have to convince both their bankers and the Salt Lake City Office of Economic Development that this was a good idea — and both were skeptical.

We asked several restaurant owners what they would advise. You can read their comments below — and please tell us what you think, too. Next week, we’ll follow up with another blog post that will explain what Ms. Cardenas and Mr. Coker decided and how it worked out.

Danny Meyer, founder, Union Square Hospitality Group, which includes Union Square Cafe and Gramercy Tavern: “Though it has worked for some — Nobu, Nobu Next Door — I would absolutely not advise repeating the same concept so close to the first. It’s confusing to patrons, and you may inadvertently hurt morale as staff members will invariably feel they might not be working in the better of the two.”

Anton Schulte, co-owner of Bistro Daisy in New Orleans: “In most cases no one knows the customer base better than an owner with a long history. Obviously, they’re doing good numbers at the one location, possibly even near capacity. From that standpoint, and with the expected interruption in business, the additional location makes sense. As for what I would have done if it were my business … I would probably just hunker down financially and try to weather the business interruption storm. I don’t know their financials, but at the level of business that they say they are at, I would assume they have a little bit of money in reserves.”

Charles Phan, owner, The Slanted Door and other restaurants in the San Francisco Bay Area: “I would strictly look to expansion only if you have a niche in the market that needs to be filled or you’re bringing something new to the table and it is interesting to you and the customer. I wouldn’t do it just because there are extra people around the corner. For me, it never works to redirect somebody to a second location with the same name.”

Ian Schnoebelen, chef and co-owner of Iris in New Orleans: “I think that opening the second location, even two blocks away, is a good idea. I do, however, think that the concept needs to be a bit different. Also I believe that the new one should probably be more casual than the flagship. Purchasing the building instead of renting is key as well. If the restaurant doesn’t work out, the building can be rented, and in the end they are going to own a nice piece of property.”

Article source: http://feeds.nytimes.com/click.phdo?i=dada8c493342802f2eaf85db384ce156