Limited-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 159,000 limited-service restaurants in the US offer counter service, a practice in which patrons order food and beverage and pay before eating. Food and beverages may be consumed on-premise, taken out, or delivered. Franchises, like McDonald’s and Subway, are ubiquitous in the limited-service restaurant industry and provide independent owners with a well-known brand name and operational and marketing support.
Competition from Alternative Meal Sources
Limited-service restaurants face competition from various alternative sources, including full-service restaurants, prepared foods, specialty food and beverage retailers, and home cooking.
Junk Food Reputation
Fast food (aka "junk food") has a reputation for being unhealthy, an image that runs counter to the consumer trend toward more nutritious eating.
Industry size & Structure
The average limited-service restaurant employs about 30 workers and generates about $2.3 million annually.
- The limited-service restaurant industry consists of about 159,000 firms that employ between 4 million and 5 million workers and generates over $367 billion annually.
- The limited-service restaurant industry includes chains, franchises, and independent operators. Large franchises include McDonald’s, Taco Bell, Burger King, Subway, and Panera Bread. Large chains include Chick-fil-A, Chipotle, and Panda Express. The largest firms have an international presence.
- Limited-service restaurants accounted for 38.5% of food-away-from-home expenditures in 2019 and have increased their share since the COVID-19 pandemic.
- Between 1997 and 2022, spending at limited-service restaurants increased by over 300% from $112 billion to $468 billion.
- Fast food chains account for 75% of limited-service restaurant traffic, according to NPD. Fast casual restaurants account for 8%. Quick-service retail, which includes prepared foods, accounts for 17%.
- In 2020, there were 785,316 franchise owners of fast food restaurants in the US.
Industry Forecast
Limited-Service Restaurants Industry Growth
Recent Developments
Nov 14, 2024 - Wages Keep Rising
- Employment by limited-service restaurants grew 1.1% in September compared to a year ago, while average industry wages rose 4.8% over the same period to a new high of $16.26 per hour, according to the latest US Bureau of Labor Statistics data. Although employment by the industry is near record high levels, demand for new hires persists. According to National Restaurant Association data, between July 2023 and July 2024, the bulk of unique job postings in the restaurant industry were in limited-service restaurants, with 691,819 postings over the 12 month period.
- Restaurant industry bankruptcies are rising amid an increase in operating costs and empty tables, The Wall Street Journal reports. In 2024, restaurant chains and operators are on track to declare the most bankruptcies in decades excluding 2020, according to an analysis of BankruptcyData.com records cited by WSJ. The firm tracked chapter 11 filings of restaurants that are publicly traded, along with companies holding more than $10 million in liabilities. Restaurant chains filing for bankruptcy this year include fast-casual operations such as Tijuana Flats and Roti. As consumers retreat from some types of discretionary spending, including eating out, same-store sales traffic at US restaurants dropped by 3.3% this year through Oct. 6 versus the same period in 2023, according to market-research firm Black Box Intelligence. Chains with fewer than 50 locations that can’t benefit from the scale advantages of bigger companies are considered the most vulnerable, per WSJ.
- Less than six months after California’s $20 minimum wage for fast-food workers took effect, restaurants there are bringing in the cobots – robots that work alongside humans. In September, Chipotle debuted its Autocado machine – an avocado processing cobotic prototype that cuts, cores, and peels avocados before they’re hand mashed (by humans) to make guacamole – at a restaurant in Huntington Beach, CA. Currently, on average, it takes Autocado approximately 26 seconds to fully flesh out the fruit inside an avocado. The chain is also automating its kitchen operations, using what it calls a cobotic makeline (aka Augmented Makeline) to build bowls and salads while employees operate the top makeline to make burritos, tacos, quesadillas, and kid's meals, according to a company press release. Chipotle is working with its tech partners and staff to identify tasks that are time consuming and less favorable among crew members and automate them.
- As fast-food chains continue to compete on value, McDonald’s has announced it’s extending its $5 Meal Deal through the end of 2024, QSR reports. The burger giant’s $5 Meal Deal, launched on June 25th, was originally supposed to last four weeks, Bloomberg reported at the time. The chain’s value offer has significantly increased customer traffic, according to the company, with research from Placer.ai finding that June 25 was McDonald’s busiest Tuesday of the year to date. In addition to its $5 Meal Deal, McDonald’s is launching other national offers via its app this fall, including free Fries Fridays, where customers can get free medium fries with any $1 minimum purchase. McDonald’s isn’t alone in extending its value offer. Burger King announced in early August that its $5 Your Way Meal has performed so well that franchisees agreed to extend the offer into October, according to QSR.
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