Automating the entire process of Fault Location, Isolation, and Service Restoration (FLISR) can significantly reduce the minutes of interruption (caused by a fault) in distribution grids. Consequently, it can reduce the penalties paid by utilities for the outage of the end customers. This could be achieved through implementation of cyber-physical systems (CPS) which are made of Intelligent Electronic Devices (IEDs) capable of reliable and fast communications. This paper proposes a novel distributed FLISR algorithm which optimizes previously developed supply restoration strategies in terms of minimizing the losses in the grid. Furthermore, the test-case scenario considered in this paper is closer to real-world scenarios wherein there are multiple spare feeders which could be utilized in supply restoration strategies after fault occurrence. The proposed algorithm is paired with the GOOSE communication protocol presented in IEC61850 and is implemented in a real-time Hardware-in-the-Loop (HIL) platform using the Real Time Digital Simulator (RTDS). From results it can be concluded that the improved service restoration algorithm in this paper successfully selects the spare feeder with less losses and connects that to the non-faulty loads properly.