When is a kids' activity business ready for a second location?
Been eyeing up empty shopfronts on the drive home and wondering if you’re ready for a second location? Before you sign on the dotted line, it’s worth taking a look at these five things we see in almost every kids’ activity business that expands well.
- Your timetable sits at 85 to 90% capacity across most time slots.
- You've held healthy profit margins for at least 12 to 18 months.
- Your team can get through a full week without you.
- Enrolments, attendance and payments live in one system your whole team can use.
- Families in your area know who you are and recommend you without being asked.
Working through the checklist
Tick all five and you’ve got our blessing to start browsing commercial listings. Two or fewer and your first site still has some growing to do, which is no bad thing. Here’s what each one looks like in practice. And if you’d rather skip ahead to the answer, our kids’ activity business health check will tell you where you stand in a few minutes. We’ll leave the rest of the article here for later.
1. Your timetable is 85 to 90% full across most time slots
A waitlisted Saturday with half-empty Tuesdays is a timetable problem, and a new venue won’t necessarily fix it. Once you’re at 85 to 90% across most slots, though, you’ve run out of room to grow, and the families you turn away are going elsewhere.
2. Your margins have held for 12 to 18 months
One strong term can just be a good term. What matters is how long you've been running this full. Twelve to 18 months of healthy margin, held through the school holidays and the winter dip, tells you demand is steady enough to build on and gives you the cushion a second site will lean on while it fills.
3. Your team can run without you
At one site, a lot of the business runs through you. The best way to find out how much is to take a week off and ask the team to write down everything that goes wrong while you’re away. Whatever ends up on that list is what needs sorting before a second site.
It usually comes down to a written standard for each class level, which we've covered in standardising teaching across multiple sites, and someone other than you who can make a call on the day. Our piece on leadership skills for multi-site managers covers how to grow that person from inside your current team.
4. Everything lives in one place
If enrolments sit in one spreadsheet and payments in another, a second site doubles the places you have to look. With everything in one system, you can see which classes are filling and which families are drifting at each site without ringing anyone.
It also makes it much easier for two sites to keep each other in the loop, which we've written about in 7 strategies for effective communication across multiple sites.
5. Families recommend you without being asked
Word of mouth is what fills a new site's first classes. If parents already talk you up at school pickup, that reputation will travel with you to the next suburb, and a few of your current families may live closer to the new site than the old one.
I'm ready. Where do I start?
So you’ve read through the checklist, you’re nodding along, and you’ve got the confirmation you were after that you’re good to go. Before you sign a lease, these are the three things to work through.
Start by finding the right location
Most successful second sites sit 15 to 30 minutes' drive from the first. That's close enough to get between them on a busy afternoon, and far enough to reach new families instead of splitting the ones you have.
Five factors then decide whether a particular site will work.
- Demand. Is there a waitlist, or a gap nobody nearby is filling?
- Competition. Who already runs classes close by, and how full are they?
- Local demographics. Are there enough families with children in your age range who can afford your programme?
- Access. Can a parent park close by and get a four-year-old in the door without a battle?
- Operating costs. Do the rent, fit-out and wages fit what the business can carry while the new site fills?
Start with the families you already teach. Map their postcodes and ask where they’d happily travel to, then check the area against council data and your competitors’ timetables before you sign anything.
Then plan for a dip in margins
Overall margin almost always drops in the first year. The new site's costs start well before the doors open, while enrolments take a few terms to build.
To take some of the sting out of that first year, sort your costs into the ones that double with a second site and the ones that don’t. The table below shows how they usually split.
Hold 6 to 12 months of operating capital on top of setup costs to cover the gap, and give the new site its own budget from day one so you can see whether it's filling at the rate you planned. Our guide to budgeting and forecasting for multi-site class-based businesses goes through the numbers in more detail.
And keep your first site strong
When expansion goes wrong, the new venue usually gets the blame, and the cause is more often back at the original one. It's natural to pour your energy into the new place, so put regular time in the diary at the first site and keep to it. Parents notice if the coaching or the welcome feels different between venues, and some will try both.
Two sites can also double your hours if you let them. We've written about avoiding burnout as a multi-location owner, and it's worth a read before the second set of keys arrives.
Not sure where you stand? Start with a health check
A second location can be the best thing that happens to a kids' activity business. More families get to learn with you, and your best coaches get somewhere to grow.
Udio is built for kids' activity businesses growing from one site to several, with enrolments and payments for every location in one place, so you can see how each site is tracking well before the end of term.
If you're weighing up a second site, our kids' activity business health check is a good place to start. It shows where your current site is strong and where it needs work before you take on another.
Frequently Asked Questions
How do I know if my business is ready for a second location?
When your timetable sits at 85 to 90% capacity across most slots, your margins have held for 12 to 18 months and your team can get through a week without you, you’re in a good position to start looking.
What’s the best way to grow my business if I’m not ready for a second site yet?
Fill the time slots you already have, add classes where waitlists build and keep families enrolled for longer. A second site makes sense once demand clearly spills past what one venue can hold.
What should I look for when choosing a new location?
Look at five things: demand, competition, local demographics, access and operating costs. Together they tell you whether enough families nearby want what you offer and can get to you, and whether the site can pay its way while it fills up.
How much money should I have set aside before opening a second location?
Plan for 6 to 12 months of operating capital on top of your setup costs. That gives the new site time to find its feet without pulling cash from the first.
What happens if my second location doesn’t work out?
Give it time before you call it. A new site usually needs a few terms to fill, and slow early numbers are normal. If it’s still struggling after that, its own budget will show you whether the issue is the location, the timetable or the cost of running it. Your 6 to 12 months of operating capital is what stops a slow second site from pulling down the first. It’s also worth asking about exit or break clauses before you sign the lease, so you have a way out if you need one.
