Things To Know About The Restaurant Industry Before Starting Your Business

The restaurant industry offers a world of opportunity to the prospective restaurateur.

However, before jumping completely into restaurant ownership, get a glimpse of the landscape and potential of this broad industry with the following overview.

A Snapshot of Restaurant Types

According to the National Restaurant Association, there were over 1 million restaurants in the United States in 2018. They are separated into two major categories: Limited Service and Full Service.

Limited service restaurants offer no table service and include both Quick Service, and Fast Casual establishments (the fastest-growing restaurant segment).

Full Service restaurants offer table service and include Casual Dining, Upper Casual, and Fine Dining.

Having this variety of restaurant types makes it easy to choose one that aligns best with your concept and personality. What will set your establishment apart from others in your category is your creativity, innovation and unique selling proposition.

A Growing Industry

The restaurant market is strong financially, showing growth and great sales potential.

In fact, in 2017 alone, this industry racked up $800 billion dollars in sales (a 3.8% increase from 2016), and is predicted to reach $863 billion by the end of 2019.

Of these restaurants, the two leading categories were Full Service (increasing 3.5% from 2016 to $263 billion), and Quick Service (increasing 5.3% from 2016 to $234 billion).

While these are both promising categories to pursue a business in, there are opportunities for growth in other ones as well. For instance, several Fast Casual chains experienced triple-digit growth in 2017, and Casual Dining is predicted to experience a 3.5% gain in sales by the end of 2019.

Creating Great Job Opportunities

According to the National Restaurant Association, the restaurant industry is “the country’s second largest private-sector employer,” providing jobs for 10% of the American workforce.

In 2019 that percentage equated to 14.7 million people, and that number is predicted to climb to 16.3 million by the year 2027.

Restaurant owners not only provide jobs in their communities, but have the opportunity to retain and mentor employees. This can lead others to lasting careers and professional advancement within the industry.

Serving Up a Profit

How much money you can make as a restaurant owner after paying your bills (or your profit margin) largely depends on the type of restaurant you own.

Generally, there is more opportunity for higher profits in Limited Service establishments rather than Full Service. This is mostly because Limited Service Restaurants (with no wait staff and more standard food options) typically have lower payroll and food costs.

Some industry experts point to a 4-6% profit margin for most restaurants, while others cite, 3-6%, or even 2-6%. However, one thing everyone agrees upon is that the restaurant industry typically has lower profit margins than other consumer businesses.

New Ways To Serve Customers

Takeout and delivery continue to dominate the industry, with 63% of restaurant sales occurring from delivery and takeout. In fact, 60% of restaurant owners in several categories report that their sales from takeout and delivery are higher than they were in 2017.

Many restaurateurs are capitalizing on this trend and plan to spend more money in 2019 to expand their takeout and delivery business. This will be particularly important in order to meet customer demands and increase profits over the next decade.

Restaurant Industry Trends

As a potential restaurateur, you will be creatively challenged in ways other than simply creating delicious food and offering great customer service.

You will need to stay on top of changing consumer demands, trends and technological advances such as:

  1. Social media integration to place orders, leave reviews and participate in loyalty programs.
  2. Adding alternative payment options such as mobile payment apps and contactless card readers.
  3. Outsourcing food delivery to reach new customers, enhance and improve delivery operations, and increase sales
  4. Sustainability in food sourcing, preparation and packaging through locally-sourced ingredients, waste reduction practices, composting, and recycling.
  5. Gaining customer loyalty through participating in charitable events and donating to worthy causes.

With this industry knowledge, you will be better prepared to meet the challenges of restaurant ownership and maximize all of the opportunities it provides.

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