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 156,000 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 30 workers and generates about $2 million annually.

    • The limited-service restaurant industry consists of about 156,000 firms that employ between 4 million and 5 million workers and generates over $328 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

                              Recent Developments

                              May 14, 2023 - NYC Mulls Reusable Takeout Containers
                              • A bill introduced by the New York City Council in April would require some NYC restaurants to offer customers the option of reusable, returnable containers for dine-in, takeout and delivery, instead of the single-use packaging ubiquitous in food service, The Wall Street Journal reports. The goal of the Choose 2 Reuse bill is to improve sustainability in the restaurant business, albeit at the expense of convenience to customers and restaurant operators. Takeout customers would be asked to return their reusable food containers, knives, forks and chopsticks either through delivery or logistics partners who come to pick them up or in person via receptacles at participating restaurants, according to WSJ. The bill doesn’t apply to beverage containers and only would apply to corporate-owned fast casual food establishments. The NYC bill follows the adoption of similar but more stringent legislation in France and Germany, per WSJ.
                              • Wendy’s is partnering with food giant Conagra Brands to bring it chili to grocery stores later this spring, USA Today reports. A long-time staple on the fast-food chain’s menu, Wendy’s Chili with Beans will sell for a suggested retail price of $4.99 per can in the chili sections of grocery stores and mass retailers, including select online retailers, Conagra said. Other fast-food menu items sold in grocery stores include Taco Bell hot sauce, White Castle microwaveable cheeseburgers, and Panera Bread’s broccoli cheddar soup, among other items from Arby’s, McDonald’s, and Whataburger.
                              • Robots are coming to a restaurant near you, Fortune reported in April. Amid a stubborn labor shortage, rising wages, and restaurants looking to automate as much as possible, robot waiters that can greet guests, lead them to their tables, deliver food and drinks and ferry dirty dishes to the kitchen have already joined the staff at some restaurants. “There’s no doubt in my mind that this is where the world is going,” said Dennis Reynolds, dean of the Hilton College of Global Hospitality Leadership at the University of Houston. Robot waiters are proliferating, writes Fortune. Bear Robotics introduced its Servi robot in 2021 and expects to have 10,000 deployed by the end of this year in 44 US states and abroad. Chick-fil-A, which is testing robots at multiple locations, says the robots give human servers more time to refresh drinks, clear tables and greet guests.
                              • Among restaurant industry employees, fast-food workers especially are at high risk for on-the-job industries, QSR reports. Research from the food news website found that 87% of fast-food workers are injured at least once a year, largely with cuts and burns, while 78% are injured more frequently. Roughly a third (34%) suffer injuries from lifting or carrying heavy items, while 12% report being assaulted on the job. The high injury rate is leading many restaurant groups to prioritize safety, while improving risk management measures and training. Monitoring hours can also help as overworked staff members are more at risk of costly accidents, according to QSR. Fast-food restaurant workers are also vulnerable to crime.
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