There’s a lot of excitement in the limited-service restaurant industry today. Young brands are springing up across the country, offering creative food in vibrant atmospheres with the convenience and price of the quick-serve and fast-casual brands that came before them.

But as these young brands grow, they face a big hurdle that inevitably comes to any company with forward momentum: moving outside their home turf and into a second market.

Expanding to a second market offers a more far-flung footprint, a larger store count, increased brand awareness and revenue, and proof of concept for small-but-growing brands. But moving outside your home market also has a bevy of challenges and risks, making it critical to think long and hard about what the process entails before diving in.

“It’s a lot more multifaceted than it feels when you first go into the project,” says Ben Friedman, cofounder and co-CEO of Homegrown Sustainable Sandwiches, a Seattle-based fast-casual brand that opened in its second market, San Francisco, last month. “You have to cast a wide net on all the issues you should be thinking about, from policy and real estate to labor and food.

“A new market touches every aspect of your business,” he adds, “not just real estate or operations.”

Here are the six most important things to remember when you decide to grow outside your home market—according to the operators who have recently made that important decision.

1 / Take your time

After all the effort it requires to develop a brand, get it off the ground, and have it running successfully, the instinct may be to keep the momentum going by growing as quickly as possible.

But when it comes to expanding outside your original market, that’s the exact opposite of what many brands and experts would advise.

“There’s excitement around expansion, and there’s a lot of opportunity, but too often it’s underplayed and it can be really dangerous. It can cost you your whole company,” says restaurant consultant Aaron Allen, adding that brands should have at least three units before expanding to a new market.

John Epifanio, director of real estate at New York–based Aurify Brands—whose concepts include The Little Beet and Melt Shop, which have each expanded into other markets—says you can never be too careful or wait too long when expanding outside your home market.

“If you think you’re being conservative, just be ultra-conservative,” he says. “There’s nothing worse than expanding into a new market and having to shut that market down, because it puts you back years.”

Just as it’s critical to wait long enough to expand, it’s also important to take your time while expanding. Allen says a rough rule of thumb is to spend around 18 months conducting research and doing due diligence before entering another market.

Not only did Homegrown wait six years to begin expanding, but it also spent nearly a year looking at potential markets before settling on San Francisco. Likewise, Los Angeles–based Mainland Poke has been looking for a second market for almost nine months. That’s because owner Ari Kahan knew it was critical to spend time in each potential market before committing to one, learning everything he could about the city and its customers, demographics, and real estate.

“Go and spend a week and sit at a coffee shop. Watch how people walk and watch what people do,” he says. “Do they grab their coffee and go? Do they sit and hang out? You have to know your customer; you can’t just go blindly into a market.”

2 / Get your affairs in order

Epifanio says knowing when to take the leap into a second market is both an art and a science, but he adds that it all comes down to operations.

“You really need to button up operations in your backyard before you start exploring other markets,” he says. “If there are any areas of opportunity or it’s not running on all cylinders … then you don’t want to get ahead of yourself.” 

He adds that a brand can typically tell if it’s ready when it has smoothly opened and operated a handful of restaurants in its primary market, as well as when leadership can take their hands off the wheel in terms of day-to-day operations.

“When you feel like you can just go home at night and not even have to think about your restaurants, or go home for a weekend and a manager’s running it, that’s when it’s time to start considering other markets,” Epifanio says.

Once operations are under control and the search for a new market is underway, Allen says, the next priority is sourcing—guaranteeing the product and supplies that make a brand unique can be easily accessed in a secondary market.

At Homegrown, local and organic produce is at the core of the menu. Friedman says that’s why San Francisco—a hotspot for the slow-food movement that’s known for its abundance of organic produce—was such an attractive market.

Similarly, fresh, high-quality fish is paramount to Mainland Poke’s concept, so choosing a market that gives it direct and easy access to that product is a non-negotiable.

“We go to the fish markets every morning and pick out the best stuff,” Kahan says. “We have to make sure we can do that in another city.”

3 / Know where to go

While a variety of factors go into choosing the best spot for a second market, close proximity to the original market allows for better control of the operations in the new city. That’s one reason why, for its second market, The Little Beet chose Washington, D.C.—a fast-casual mecca located a short train ride or flight away.

“The closer [a market] is, the easier it is to manage, for me to go out there and source sites and evaluate conditions,” Epifanio says.

Philadelphia-based HipCityVeg also chose D.C. for its second market, citing proximity and the convenience of hopping on a train to get from one market to another as key components for its choice.

“At this stage as CEO, I still have to check in on the restaurants all the time,” says founder and CEO Nicole Marquis. “You really have to have quite the infrastructure to open somewhere where you have to take a plane.” That was one hurdle, she adds, that prevented the brand from opening in Miami, which it considered when it first decided to expand.

Not only does closeness make the opening and operating of a second market simpler, but it also allows for a potential carryover of brand awareness, as both HipCityVeg and Homegrown have experienced.

“There are people now in D.C. who come in and go, ‘Oh, I love you guys. I had you when I was in Philly,’” Marquis says. 

Homegrown’s Friedman says the tech connection between Seattle and San Francisco allows for the same phenomenon. “People are constantly moving back and forth between the cities,” he says. “That’s not always possible in different cities, but San Francisco and Seattle have this kind of connectivity that’s unique.”

However, not every brand chooses to stay local when first expanding. Like The Little Beet, Aurify sister brand Melt Shop first launched in New York City—largely in malls and shopping centers—but then hopped to Minneapolis to open a unit at the Mall of America. “It seemed natural to just leapfrog to a market we probably wouldn’t have considered in the past, because it was a proven real estate play for us,” Epifanio says.

Still, jumping from a large, first-tier market to a smaller, second-tier market should be an exception rather than the rule, he adds. “Until you exhaust all primaries, you put the secondary markets in that next tier, just because there’s so much more security in the primary markets,” he says.

4 / Let guests guide the way

While geographic proximity is a key consideration, the convenience of a nearby market means nothing if the right customer isn’t waiting when you arrive.

“When I talk to people about my process of identifying markets and sites, I always begin with the customer,” Epifanio says. “It’s not the real estate; it’s not location; it’s not any of those things.” 

That’s why Aurify researches the exact profile and persona of its customers, going beyond age, gender, and disposable income to look at factors like what consumers are buying, reading, talking about on social media, and, yes, eating.

“Once we identify our customer profile, we can find markets and specific trade areas that align with our brand,” Epifanio says.

At Mainland Poke, sushi culture and a customer base looking for affordable alternatives to full-service sushi are critical.

“If the sushi culture doesn’t necessarily exist, there has to be something that leads us to believe that the people of that city care about what they’re eating and what they’re putting in their body,” Kahan says. 

Similarly, a built-in market of food-conscious consumers was a must for Homegrown’s mission to deliver what it calls “Sandwich Environmentalism.”

“As a mission-drive company, we do best with highly educated areas of the country,” Friedman says. He points out that two of the most educated cities in the country per capita are Homegrown’s primary market, Seattle, and its secondary market, San Francisco.

“If you know a lot about food or a lot about the world, you’re more apt to make educated consumer decisions, like, ‘I should buy produce raised without pesticides.’”

5 / Keep all costs in mind

While many brands know they’ll pay a premium when opening in larger markets rather than second-tier markets, rent and construction aren’t the only costs restaurants should evaluate when looking for the right location to jump to next. Occupancy costs, impact fees for parking, and common-area maintenance are just a few of the other costs operators must shoulder when moving into certain locations.

Allen says many brands underestimate the costs that come with developing second markets, including airfare and hotels for management, pre-opening costs for labor, food for testing the menu, marketing, launch parties, and soft openings.

“Those costs add up really quickly,” he says, adding that some spend 30–40 percent more on opening in a second market than they expected or planned.

The cost of and access to labor—including factors like minimum wage, employment, and health-care laws—are also important considerations before choosing a second market.

“That could be a $200,000 difference in price in building out a restaurant,” Kahan says of the labor market.

Friedman says a shallow labor pool can be a major—and expensive—hurdle, particularly in in-demand markets saturated with competition that’s also looking to hire high-quality employees.

6 / Embrace the competition

Most U.S. cities are now rife with fast-casual options, so moving into any new market can be a challenge when it comes to competing for customer dollars. That’s what HipCityVeg discovered when it moved into the very-crowded D.C. market.

When it first opened in Philadelphia four years ago, Marquis says, there were few, if any, competing fast casuals in a couple-block radius of the original location.

“Going into a market that was already saturated definitely was a challenge,” she says. “It’s easy to lead the way, but to go in and be like, ‘Hey guys, I’m here. Do you see me between all these fast casuals?’ [was more difficult than expected].”

While oversaturation in cities can be a hurdle, many restaurants view competition in a second market as a good thing for business. After all, if a similar concept is present and thriving in a particular area, it lets other concepts know there’s a built-in audience in that particular location for their brand, which only increases the likelihood of success. 

For Mainland’s Kahan, opening near like-minded concepts offers a complementary relationship.

“I’m less in the mindset of, ‘If you build it, they will come,’” he says. “It’s all about having quality operators and quality brands that really have a good draw.”

This story originally appeared in QSR’s February 2017 issue with the title “Home Away from Home.”

Emerging Concepts, Growth, Story, HipCityVeg, Homegrown Sustainable Sandwich Shop, Mainland Poke, Melt Shop, The Little Beet