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 217,100 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 between $1 million and $2 million annually.

    • The full-service restaurant industry consists of about 217,100 firms that employ between 5 million and 6 million workers and generate about $365 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

                              May 14, 2023 - Handheld Devices Speed Service
                              • Handheld devices – on-table and server-held – increasingly are making their way into full-service restaurants, FSR reports. Manufacturers contend handheld devices enable servers to turn over tables 20% faster and boost revenue by 15% to 20%. Moreover, they add, food gets to diners three to five minutes faster. Some studies suggest handhelds reduce server trips to tables from twice to five times. Handheld devices include those left at the table so guests can check out on their own time. When servers carry handhelds, they can be pinged on demand, from guests and the kitchen. The devices also can prevent tipping errors because guests are often prompted to leave between 18% to 20% tips and may reduce fraud since a server isn’t walking away with a guest’s card. With the exception of fine-dining establishments where personal service is prized, handhelds may be a good fit for most eateries.
                              • As more consumers look to book tables ahead of time, restaurants are embracing premium reservation strategies that target higher-income diners and frequent customers, CNBC reports. Tables booked through online reservation services like Resy and OpenTable are increasing rapidly. Indeed, OpenTable said in 2022 that it connected more than 1 billion people with restaurants every year – a number that climbed to more than 1.5 billion consumers in May, CNBC reports. With help from online reservation services – which will hold back reservations for prized customers – restaurants are giving their most desirable reservations to big spenders and loyal customers to drive higher sales. Resy, which is owned by American Express, offers exclusive reservations that are only for customers with select AmEx cards. As more tables are held for prized customers, it’s becoming more competitive for other people to book tables in advance.
                              • Some restaurants have begun experimenting with dynamic pricing based on demand, The Wall Street Journal reported in March. Dynamic pricing (aka surge or demand pricing) is emerging as a tool for restaurants to maximize profits during specific times of day, with some industry experts saying it could become a common practice, according to Restaurant Dive. Digital technology could help restaurants change their offerings or prices several times a day. However, new research found consumer sentiment on dynamic pricing to be overwhelmingly negative and that it would add friction to the guest experience. Software vendor Capterra’s 2023 Dynamic Pricing in Restaurants survey of 900 customers found 65% percent of consumers said dynamic pricing would make the decision of where and when to eat more difficult, while 63% said it would make it harder to budget their restaurant spending.
                              • For the first time in a year and a half, the annual increase in prices for food away from home exceeded inflation at retail food outlets, Food Service Director (FSD) reported in April. Prices at restaurants, workplace cafeterias and school lunch programs increased 0.6% in March, and 8.8% on an annual basis, according to the Bureau of Labor Statistics, as food service inflation remains elevated even as operators report easing prices for labor and food. By comparison, retail food prices declined 0.3% for the month and were up 8.4% year over year. March marked the first time menu price inflation exceeded retail price inflation on an annual basis since September 2021. The drop in grocery store prices could become a pressure point for food service industry sales this year if consumers perceive restaurants as a worse value, according to FSD.
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