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 Industry Structure, How Firms Opertate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.

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

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

Industry Profile Excerpts

Industry Overview

The 160,000 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 a variety of alternative sources, including full-service restaurants, prepared foods, specialty food and beverage retailers, and home cooking.

Junk Food Reputation

Fast food has an unhealthy reputation for being junk food, an image that runs counter to the consumer trend towards more nutritious eating.

Industry size & Structure

The average limited-service restaurant employs about 29 workers and generates between $1 million and $2 million annually.

    • The limited-service restaurant industry consists of about 160,000 firms that employ between 4 million and 5 million workers and generate over $250 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.
    • Fast food chains account for 75% of limited restaurant traffic, according to NPD, fast casual restaurants account for 8%. Quick-service retail, which includes prepared foods, accounts for 17%.
    • Fast food restaurants accounted for 61% of the restaurant market in 2019, according to TDn2K, while fast casual restaurants accounted for 11%.
    • The top 20 fast casual restaurant companies accounted for 56% of fast casual sales in 2016, according to Technomic. Large franchises dominate the fast food sector.
    • In 2012, franchises accounted for 54% of fast food restaurant establishments and 70% of fast food restaurant sales.
                              Industry Forecast
                              Limited-Service Restaurants Industry Growth
                              Source: Vertical IQ and Inforum

                              Coronavirus Update

                              May 3, 2022 - Food Prices Skyrocket
                              • Food prices have been rising since mid-2021, but they are expected to increase further amid the Ukraine war and rising interest rates. On a seasonally adjusted basis, US food manufacturers’ prices rose 1.5% in March 2022 compared to the prior month, but unadjusted food prices grew 14.6% over March 2021, according to the US Bureau of Labor Statistics. While restaurants have tended to increase their prices as food costs rise, firms and their customers are not likely to get much relief. Food-away-from-home prices are expected to rise between 5.5% and 6.5% for all of 2022 compared to 2021, according to the food price outlook released in March by the US Department of Agriculture.
                              • Amid rising food costs, McDonald’s raised its prices by about 8% in the first quarter of 2022, the company said during a call with investors in late April. McDonald’s expects food and other costs to rise between 12% to 14% for the year, which is larger than the company anticipated earlier. The company said it is closely following the behavior of lower-income customers who may have “increased value sensitivity” as gasoline and housing prices rise.
                              • In March 2022, 6.1% of accommodation and food services workers quit or left their jobs, the highest percentage of any US industry sector. Full-service restaurants have been more impacted during the pandemic than limited-service eateries. In February 2022, full-service restaurant employment was down 11.5% compared to February 2020; limited-service restaurant employment was only down 0.8% over the same period.
                              • Automation is increasing in the restaurant industry. Kiwibot, the maker of autonomous delivery bots, plans to bring the machines to 50 college campuses in 2022 through a partnership with the big noncommercial operator Sodexo. Restaurant chain Checkers is adding AI drive-thru ordering to more restaurants, and the White Castle restaurant chain plans to add the robotic fry-cook Flippy 2 to 100 more restaurants. Fast-casual chain Sweetgreen is acquiring Spyce, the robot-powered bowl concept with an electric delivery fleet. Sweetgreen said it is determining “when and where” to implement Spyce’s technology into its more than 130 restaurants.
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