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Full Service Restaurant Business Overview & Trends, 2012
SIC Code: 5812, NAICS Code: 722110
This Full Service Restaurant Business industry summary is from First Research which also sells a full version of this report.
The US restaurant industry includes about 480,000 restaurants with combined annual revenue of about $400 billion. Major companies include McDonald’s; YUM! Brands (KFC, Pizza Hut, Taco Bell); and Darden Restaurants (Olive Garden, Red Lobster). The industry is highly fragmented: the 50 largest companies hold just 20 percent of the market.
The industry consists of fullservice restaurants (FSR) and limited service eating places, which include quick-service restaurants (QSR); cafeterias; buffets; snack bars; and nonalcoholic beverage bars.
Demographics, consumer tastes, and personal income drive demand. The profitability of individual companies can vary: while QSRs rely on efficient operations and high volume sales, FSRs rely on high-margin items and effective marketing. Large companies have advantages in purchasing, finance, and marketing. Small companies can offer superior food or service. The industry is labor-intensive: annual revenue per worker is less than $50,000.
Restaurants compete with companies that serve meals or prepared foods, including grocery stores, warehouse clubs, delis, and convenience stores. In addition, restaurants compete with home cooking.
PRODUCTS, OPERATIONS & TECHNOLOGY
Products include appetizers, entrées/main dishes, desserts, and beverages. Companies may specialize in a certain type of cuisine (such as Italian, Chinese, or barbecue); entrée (sandwiches, steak, seafood); or other food item (pretzels, smoothies). Among FSRs, most establishments focus on Italian cuisine, steak, or seafood. Hamburger joints make up a majority of QSR locations, along with pizza parlors and sub sandwich shops.
This Full Service Restaurant Business market research report summary is from IBISWorld which also sells a full version of this report.
…the Single Location Full-Service Restaurants industry experienced a major slowdown due to the struggling economy. However…as consumer spending rebounds…(0)ver the five years to 2012, IBISWorld estimates that industry revenue will grow at an average annual rate of 0.6% to $94.0 billion. After declining 4.2% to $85.4 billion over 2009, revenue grew for the first time in four years in 2010 and 2011, and it is expected to continue its upward trajectory in 2012 with revenue growing 2.8%…
…Consumers are also becoming more health conscious. While major restaurants have responded by expanding the number of healthy options on their menus, the general trend toward healthy eating has hurt many of the greasier establishments.
The Single Location Full-Service Restaurants industry consists of owner- and family operated restaurants that are independent of chain or franchised networks. In general, operators are small businesses, so the industry is fragmented and highly competitive.
The average establishment generates revenue of about $460,000 and employs 12 people; however, some large operators have far higher annual revenue. Operators with five or fewer establishments that are not part of a chain can pull in annual revenue ranging from $11.0 million to $60.0 million…In the five years to 2017, industry revenue is forecast to grow at an average annual rate of 2.7% to $107.3 billion.
Here is a Restaurant Business forecast for 2012 from the National Restaurant Association. The following information is excerpted from their press release announcing the 2012 study.
…the restaurant industry is projected to expand in 2012, according to the National Restaurant Association’s 2012 Restaurant Industry Forecast…restaurant industry sales are expected to reach a record high of $632 billion in 2012 – a 3.5 percent increase over 2011…
…restaurant industry employment will reach 12.9 million in 2012, representing 10 percent of the total U.S. workforce…
In 2011, total U.S. employment grew at a rate of 1.0 percent, while restaurants added jobs at a 1.9 percent rate. In 2012, the National Restaurant Association expects the restaurant industry to add jobs at a 2.3 percent rate…
The industry is expected to gain back all of the jobs lost during the recession by early 2012. The overall economy isn’t expected to be back at pre-recession employment levels until 2014…the Association expects a jump in restaurant employment to 14.3 million individuals in the next decade – an increase of 1.4 million jobs.
Challenges and Opportunities
…the top challenges cited by restaurateurs are food costs, building and maintaining sales volume, and the economy.
“Because about one-third of sales in a restaurant go to food and beverage purchases, food prices are a crucial component for operators,” said Hudson Riehle, senior vice president of the National Restaurant Association’s Research and Knowledge group. “Last year, we saw wholesale food prices post their strongest annual increase in more than three decades. In 2012, we will see continued increases in the cost of some commodities, while price pressures will ease for others.”
However, opportunities are also present for operators to be successful by understanding and leveraging consumer trends to attract new guests and make current ones come back. The good news is, there is substantial pent-up demand for restaurant services, with 2 out of 5 consumers saying they are not using restaurants as often as they would like. With the right incentives, that demand can translate into sales.
The Rise of Technology
…nearly 4 in 10 consumers say they’d be likely to use an electronic ordering system and menus on tablet computers at tableservice restaurants. About half said they would use at-table electronic payment options and a restaurant’s smartphone app to view menus and make reservations. At quickservice restaurants, about 4 out of 10 consumers say they would place online orders for takeout, use in-store self-service ordering kiosks, and use smartphone apps to look at menus and order delivery.
…Roughly 3 in 10 of adults said they would like to receive an email with daily specials, while about 1 in 5 prefer text messages with similar information. If a restaurant’s specials were available on Facebook or Twitter, nearly one-third of consumers say they’d be likely to sign up, indicating that social media continues to be a powerful marketing tool.
…more than nine out of 10 restaurant operators said their restaurant will likely be using Facebook in the next year or two, with use of Twitter and smartphone applications expected to be on the rise as well.
…food quality, customer service quality and value are the top attributes consumers look for when choosing a tableservice restaurant. For quickservice restaurants, customers are looking for food quality, value and speed of service when picking where to dine.
…the top menu trends are all about local sourcing and nutrition, especially kids’ nutrition. Nearly three-quarters of consumers say they are more likely to visit a restaurant that offers locally produced food items, and more than half of all restaurants currently offer locally sourced produce.
…nearly three-quarters of consumers say they are trying to eat healthier now at restaurants than they did two years ago, and a majority of restaurants agree that customers are ordering more such items.
Full Service Restaurant Business Customer Demographics
The following facts are from Best Customers: Demographics of Consumer Demand, which provides detailed information on consumer demographics for many industries. This resource, and other demographics and marketing materials are available for purchase from New Strategist.
- According to Best Customers, “Older Americans, particularly empty-nesters, are far more likely to choose full-service over fast-food restaurants.” (p. 576) This means that as the U.S. population continues to age (think, “baby boomers retiring”), there could be continued growth in demand in the full-service restaurant business. Balancing this potential for growth is the reality that the retiree population generally lives on fixed incomes, so growth in restaurant expenditures depends on continued availability of discretionary income.
- The demographics of breakfast customers at full-service restaurants (Best Customers, p 580):
- Best Customers notes that those “aged 55 to 74 spend 23 to 24 percent more than average” on full-service breakfast and brunch.
- Another key demographic for full service restaurant owners is married couples without children at home, who spend 26 percent above the average for breakfast and brunch.
- The family demographic is of course of great importance for full-service restaurants because their larger group size accounts for them spending 68 percent more than average on full-service breakfast. (p. 580)
- The demographics of dinner customers at full-service restaurants (Best Customers, p. 584):
- Middle-aged married couples enjoying a leisurely meal. Householders ranging in age from 35 to 64 spend 9 to 16 percent more
than average on this item.
- Married couples without children at home (many of them empty-nesters) spend 26 percent more than average on full-service restaurant dinners. Those with school-aged or
adult children at home spend 34 to 51 percent more than average on this item.
- Asians spend 41 percent more than average on full-service dinners. Households in the Northeast lead those in other
regions in full-service dinner spending—their bill is 18 percent higher than average.
- Middle-aged married couples enjoying a leisurely meal. Householders ranging in age from 35 to 64 spend 9 to 16 percent more
Full Service Restaurant Business Startup Costs
- Average start-up costs for Full Service Restaurant Business range from $57,000 to $570,000.
- Entrepreneur.com lists startup costs for different full-service restaurant franchises.
Full Service Restaurant Liquor Licensing Requirements
Helpful links on getting a liquor license for a full service restaurant.
- Obtaining a Liquor License
- List of State Licensing Authorities
Full Service Restaurant Business Articles
- 2010 Edition. Restaurant Industry Operations Report. Washington, DC: National Restaurant Association and Deloitte & Touché LLP, 2010. order full report at National Restaurant Association
- 2011 Restaurant Industry Forecast: Inside the Mind of Today’s Consumer: Why Restaurants are Poised for Success in 2011 and Beyond. Washington, D.C.: National Restaurant Association
- 2012 Restaurant Industry Forecast from National Restaurant Association.
- Chef Survey: What’s Hot in 2011
- Restaurant Business Facts at a Glance
- Restaurant Business at a Glance – Choose Your State
- Nation’s Restaurant News
Full Service Restaurant Business Associations
Trade associations often are excellent sources of information on an industry. Here are some relevant industry associations:
Full Service Restaurant Business Social Media Outlets
- Restaurant Group on LinkedIn (requires free LinkedIn account to access)
- National Restaurant Association Group on LinkedIn (requires free LinkedIn account to access, plus approval of group membership)
- National Restaurant Association on Facebook
- National Restaurant Association on Twitter
- Nation’s Restaurant News on Facebook
- Nation’s Restaurant News on Twitter
Full Service Restaurant Business Employment Trends
Labor costs are important factors for full service restaurant owners. Here is a Full Service Restaurant Business labor market summary from the Bureau of Labor Statistics.
The median hourly wage for food and beverage serving and related workers was $8.72 in May 2010. The median wage is the wage at which half the workers in an occupation earned more than that amount and half earned less. The lowest 10 percent earned less than $7.54 per hour, and the top 10 percent earned more than $11.62 per hour.
Median hourly wages for food and beverage serving and related workers in May 2010 were as follows:
- $9.34 for food servers, nonrestaurant
- $8.87 for hosts and hostesses, restaurant, lounge, and coffee shop
- $8.83 for counter attendants, cafeteria, food concession, and coffee shop
- $8.75 for dining room and cafeteria attendants and bartender helpers
- $8.63 for combined food preparation and serving workers, including fast food
- $9.61 for food preparation and serving related workers, all other
Some food and beverage serving workers receive customer tips. In some restaurants, workers contribute all or a portion of their tips to a tip pool, which is distributed among qualifying workers. Tip pools allow workers who do not usually receive tips directly from customers, such as dining room attendants, to be part of a team and to share in the rewards for good service.
Although some workers in this occupation earn tips, the majority get their earnings from hourly wages. Many entry-level or inexperienced workers earn the federal minimum wage ($7.25 per hour as of July 24, 2009). However, many others earn more per hour because they work in states that set minimum wages higher than the federal minimum.
Also, various exceptions to the minimum wage apply under specific circumstances to disabled workers, full-time students, youths under age 20 in their first 90 days of employment, tipped employees, and student learners. Tipped employees are those who customarily and regularly receive more than $30 a month in tips. According to the Fair Labor Standards Act, the employer may consider tips as part of wages, but the employer must pay at least $2.13 an hour in direct wages.
In 2010, about half of all food and beverage serving and related workers worked part time. Food service and drinking establishments typically have long dining hours and offer flexible and varied work opportunities. Many workers work evenings, weekends, and holidays.
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