Marshall, TX restaurant and franchise owners usually finance a second location with the first location's numbers: its sales, its margins and its payment record. The build-out, the equipment and the opening payroll are separate pieces, and each fits a different funding type.
Fieldford Business Loans in Marshall, Texas explains how restaurant and franchise owners finance a second location, with an invented drive-through costed piece by piece. Funding partners decide.
Using the first location's numbers to finance the second
A partner reviewing a second location looks first at the first one: two or three years of sales and tax returns, margins, existing payments and how the owner managed the first opening. A first location that carries its own debt comfortably is the strongest case for a second.
Limited-service restaurants counted 44 employers in Harrison County, TX in 2023, and full-service restaurants 25 (County Business Patterns). See the restaurant loans page.
If the first location is still paying off its own build-out, a partner will add that payment to the new ones. A first site that is close to paid off is a stronger base than one that just opened.
Build-out, equipment and opening payroll as separate pieces
Split the cost into three pieces. The build-out, walls, plumbing, electrical, a drive-through lane, suits a term loan. The kitchen equipment suits an equipment loan. Opening payroll, inventory and marketing for the first months suit working capital or a credit line.
Keeping the pieces separate lets each be sized and priced for its own life. A fryer financed over ten years, or payroll over seven, is a mismatch.
Opening inventory and smallwares are easy to underestimate. Ask the first location's suppliers what a full opening order costs and include it in the working capital piece.
Existing franchise owners: what a franchisor may need to approve
Franchise owners usually need the franchisor's approval for a new unit, and the franchise agreement may set site, design and equipment requirements and fees. Partners may ask for the franchisor's approval letter and the development agreement.
Franchise systems sometimes have relationships with particular lenders; owners can compare those offers with others.
Owners who are not franchisees still face approvals: the landlord, the city for permits and the health inspections office for food permits. The permits guide lists the city steps.
A term loan, an equipment loan or both for a second site
A term loan alone can fund a second site when the build-out is most of the cost. When equipment is a large share, adding an equipment loan lets the equipment secure its own payment and may lower the overall cost.
Either way, the first location's cash flow carries the payments until the second one pays its own way.
Retail owners opening a second store follow the same split: fixtures and build-out on longer terms, stock and opening payroll on short money. The retail page covers stock.
An invented second drive-through, costed
Illustration only, invented figures: a second drive-through needs $220,000 for the build-out, $140,000 for equipment and $45,000 for opening payroll and stock. A term loan for the build-out over 120 months at an annual rate of 9.25% is about $2,817 a month; an equipment loan over 60 months at 9.75% is about $2,957 a month (our arithmetic).
Together that is about $5,774 a month before the second site earns anything, plus the $45,000 opening cushion (our arithmetic).
The example leaves out rent, utilities and insurance at the new site during construction. Add them to the opening cushion if the lease starts before the doors open.
What the first location has to keep doing while the second opens
The first location has to keep its sales and service up while the owner's attention moves to the new site. Partners ask who runs the first location day to day during the opening.
A manager in place before construction starts, and a cash reserve at the first site, both reduce the risk a partner sees. The term loan page covers build-out loans.
By Fieldford Business Loans · Updated
