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
Jan 14, 2025 - Robust Job Growth
- Employment by limited-service restaurants grew 1.1% in October compared to a year ago, while average industry wages rose 4.4% over the same period to a new high of $16.32 per hour, according to the latest US Bureau of Labor Statistics data. More broadly, eating and drinking places added a net 29,800 jobs in December, after adding 23,200 jobs in November. According to the National Restaurant Association, the November-December period marked just the second time the sector added more than 20,000 jobs in consecutive months in 2024. Overall, eating and drinking establishments added 172,500 net new jobs in 2024 despite dozens of chain bankruptcies, unit closures, and traffic declines. Continuing job growth suggests the restaurant business is strong enough to warrant the investment, says Restaurant Business.
- Rising eggs prices are a challenge for restaurants, especially breakfast-focused formats where eggs are a cornerstone ingredient, Fastcasual.com reports. Bird flu outbreaks have caused the cost of eggs to surge by 30% over the past year. The average cost of a dozen Grade A large eggs was $3.65 in November 2024, up 28 cents from October, according to the Bureau of Labor Statistics. By comparison, in 2023 the cost averaged $2.07 per carton. Rising and volatile egg prices impact everything from food costs to menu pricing strategies for full-service and quick-service restaurants. Strategies for managing volatility and protecting the bottom line include reducing waste and managing costs using inventory management software such as Restaurant365. Other cost-saving measures include preventing overportioning, adjusting menus to include less egg-centric dishes, and negotiating with vendors to reduce other food costs to compensate for higher egg prices, according to Fastcasual.com.
- According to a new Restaurant365 study, food and labor costs continued to be a major pain point for restaurant operators in 2024, with 88% experiencing rising staff expenses compared to 89% in 2023, FoodtruckOperator.com reports. Of operators reporting rising labor costs, 51% reported a 1-5% increase, 41% experienced a 6-14% increase, and 8% saw labor costs rise more than 15%. More than half of respondents (59%) said labor challenges led to operating below their full capacity. As for food, 53% of respondents reported a 1-5% jump in costs, 37% saw a 6%-14% increase, and 10% saw a rise of over 15%. Rising food costs led to menu price increases, with about 61% of respondents saying they hiked prices. Costs are expected to remain a challenge in 2025, with 82% of respondents expecting food costs to increase and 77% predicting rising labor expenses.
- 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.
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