Understanding the Restaurant Industry

1
Understanding the Restaurant Industry

• Chapter 4

2
Size of the Industry

• 440 billion in sales
• More than 4 of U.S. GDP
• Employs 12 million people
• Made up of about 878,000 establishments
• More than 54 billion meals eaten each year

3
Segments

• Eating and drinking places
• Lodging operations
• Transportation, recreational, business and
  industry markets
• Educational, health care, and retail markets
• Corrections and military food service
• Contractors

4
Eating and Drinking Places

• Full service restaurants
• Price
• Menu
• Atmosphere
• Quick service restaurants

5
Lodging Operations

• Gourmet restaurants to coffee shops
• More aggressive marketing

6
Transportation

• Highway stops
• Airplanes
• Ships
• Trains
• Airport terminals
• Train stations

7
Recreational

• 12 billion market
• Often run by contractors
• Sports arenas
• Stadiums
• Race tracks
• Movie theaters
• Bowling alleys
• Amusement parks

8
Business and Industry

• Non-food service businesses that offer on-site
  food service to employees
• Often run by contractors

9
Educational

• A shift from meal plans to a la carte operations
• From revenue consumers to revenue producers
• Appeal to non-traditional students, too
• Often run by contractors

10
Health Care

• Hospitals and other medical centers
• Nursing homes
• Retirement communities
• Often run by contractors

11
Retail

• More people eating outside the home
• More people eating take-out and home delivery
  food
• Supermarkets offering more pre-cooked take-out
  dishes, and installing food courts

12
Corrections

• State and federal prisons and local jails
• Cyclical menus
• Theft problems
• Security problems
• Often run by contractors

13
Military

• Very specialized

14
Contractors

• Major operators of noncommercial food service
• ARAMARK
• Sodexho

15
Starting a New Restaurant

• Pitfalls
• Deceptively easy industry to enter
• More complicated than it appears

16
Reasons Restaurants Fail

• Lack of business knowledge
• Lack of technical knowledge
• Lack of sufficient working capital

17
Reasons Restaurants Fail (cont)

• Recent study suggests

• 30 restaurant failure vs. 90 stated by AMEX
• Elements of Failure
• Elements of Success

18
Concept

• Foundation is menu
• Décor
• Number of seats
• Type of service
• Hours of operation
• Pricing structure
• Investment required

19
Site Selection

• Areas of dominant influence
• Central-city business and shopping districts
• Shopping centers
• Planned communities
• Highway intersections
• A good site is easily visible, easily accessible,
  available and affordable

20
Feasibility Study

• Local market characteristics
• Food Service Market Measure
• Consumer Expenditure Survey
• Supersite
• ACORN Target Marketing
• PRIZM
• Capital Investment budget
• Proposed operating budget