Full-Service Restaurants

Industry Profile Report

Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters

Industry Overview Current Conditions, Industry Structure, How Firms Operate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.

Call Preparation Call Prep Questions, Industry Terms, and Weblinks.

Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.

Industry Profile Excerpts

Industry Overview

The 217,000 full-service restaurants in the US provide food services to patrons who order and are served by waitstaff while seated and pay after eating, a practice known as “table service.” Firms may also offer catering services, food and beverage for off-premise consumption, and non-theatrical entertainment. The full-service restaurant industry includes chains, franchises, and independent operators.

High Labor Turnover

Full-service restaurant operations are labor-intensive, and the quality of service is highly dependent on staff.

Uneven Demand

Full-service restaurants are characterized by demand that can vary by day of the week and time of day.

Industry size & Structure

The average full-service restaurant operates out of a single location, employs about 25 workers, and generates just over $1 million annually.

    • The full-service restaurant industry consists of over 217,000 firms that employ between 5 million and 6 million workers and generate about $300 billion annually.
    • The industry is highly fragmented; the top 50 companies account for just over 15% of industry revenue.
    • The full-service restaurant industry includes chains, franchises, and independent operators. The largest chains include Olive Garden, Buffalo Wild Wings, and Chili’s. The largest franchises include Denny’s, IHOP, and Applebee’s. Larger firms may operate both company-owned and franchised locations.
                              Industry Forecast
                              Full-Service Restaurants Industry Growth
                              Source: Vertical IQ and Inforum

                              Recent Developments

                              Nov 10, 2022 - Urban Restaurants Rebounding
                              • Fueled by rebounding office occupancy rates, restaurants in urban areas appear to be staging a comeback. New York City’s office occupancy rate increased by more than 10% in September and Shake Shack is reaping the benefit, Nation’s Restaurants News reported in November. “We saw strong momentum coming out of Labor Day, as mobility and back-to-office trends broadly improved. It’s clear that our hometown in New York and other urban centers, things are improving with more people moving about,” Shake Shack CEO Randy Garutti said. Individual city data from Placer.ai shows some urban markets are exceeding the nationwide average, with foot traffic to offices in NYC, Denver, and Washington, DC tracking with or exceeding the nationwide average since January 2022. Other eateries with urban exposure, including Tim Hortons in Canada, and Potbelly, have noted similar strong recoveries in sales and traffic in Q3 2022, NRN reported.
                              • As post-pandemic demand for dining out increases amid an ongoing labor shortage, restaurant wait lists are growing, The Wall Street Journal reported in October 2022. Walk-in traffic has fallen 8%, while online reservations rose by 9% from January through June of 2022 compared with the same period in 2019, according to data from online restaurant-reservation service OpenTable. Las Vegas, Miami, Austin, Texas, Fort Lauderdale and Naples, Fla., are all seeing double-digit increases compared with the same time in 2019, according to WSJ. As restaurant traffic rebounds to pre-pandemic levels, a higher portion of diners is booking online reservations rather than risk walking in. Competition for tables at popular restaurants has gotten so fierce that some diners are booking months in advance.
                              • Restaurants have been raising prices more aggressively in recent months to offset rising food and labor costs. Full-service prices rose 9% year-over-year in August 2022, according to the most recent federal data, while limited-service prices rose 7.2%, Restaurant Business reported. But there comes a “breaking point” at which restaurant traffic plunges when price increases get too aggressive, a study by the consulting firm Revenue Management Solutions (RMS) found. “When price increases went beyond 10% to 13%, traffic started to severely decline, negating some or all of the net sales benefits,” Scott Foxworth, director of consulting services at RMS, told RB. RMS analyzed in-store price increases in the second quarter for 25,000 locations to find the consumer breaking point. The consultancy also found that 45% of consumers said they are eating out less and that a rising percentage of consumers say they are ordering less expensive items or choosing less expensive restaurants.
                              • A recent survey of restaurant operators found most are optimistic about restaurant traffic and business conditions, according to Restaurant Dive. A Rewards Network survey of 1,000 restaurants conducted in summer 2022 found 88% of operators have a neutral or positive outlook for 2023. While half of operators are concerned labor shortages are hurting operations, only about 4% of customers have cut back on frequency due to staffing issues, according to a press release to Restaurant Dive. Despite rising consumer prices at restaurants (up 7.6% year-over-year in July 2022 ) operators have confidence in customer loyalty, with 54% of restaurants expecting frequency to reach or surpass pre-pandemic levels. Loyalty and rewards programs have emerged as a key method of retaining customers and improving business, with 73% of restaurants with loyalty programs surveyed saying loyalty programs would be important or critical to remaining in business after the pandemic, Restaurant Dive reported.
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