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 toward more nutritious eating.

Industry size & Structure
Industry Forecast
Limited-Service Restaurants Industry Growth
Source: Vertical IQ and Inforum

Recent Developments

Nov 14, 2023 - Rising Wages and Employment
  • Employment by limited-service restaurants rose in August compared to a year ago but dipped slightly (less than 1%) from July. Overall employment by the industry is above its pre-pandemic level. Average wages for nonsupervisory employees at limited-service restaurants continue to rise in August although not as steeply as over the last two years. Rising sales by limited-service restaurants are helping to offset rising labor costs. Sales for the limited-service restaurants industry are forecast to grow at a 5.77% compounded annual rate from 2022 to 2027, faster than the growth of the overall US economy.
  • Consumers’ growing preference for drive-through service – accelerated by the pandemic – shows no sign of slowing, The New York Times reports. Drive-through traffic increased by 30% from 2019 to 2022, according to foodservice research firm Technomic. Meanwhile, the number of people eating inside fast-food restaurants in the first half of 2023 plunged 47% from the same period in 2019. Drive-throughs now account for two-thirds of all fast-food purchases, according to a September report by Revenue Management Solutions, cited by NYT. To meet the growing demand for contactless service fast-food chains are adding more drive-through lanes and downsizing and even eliminating dining rooms. Chick-fil-A has plans to open a two-story, four-lane drive-through in Atlanta in 2024 that can handle 75 cars at a time and deliver food from the kitchen on a conveyor belt. Fast-food patrons, especially younger ones, appear to prefer speed and minimal personal interaction when ordering food.
  • McDonald’s is increasing the fee it will charge franchise operators opening new restaurants in the US and Canada, QSR reports. It's the first time in almost 30 years that the burger giant has raised its royalty fee, according to CNN. The royalty fee (previously called a service fee or service charge) is a monthly percentage of sales. It will rise from 4% to 5% beginning in January 2024 and is expected to impact a relatively small number of restaurants, at least initially. Roughly 95% of all McDonald’s locations are operated by franchises. The rate will remain the same for current franchisees who are running McDonald’s locations and who extend their leases, as well as those selling their franchises to other operators. While some other fast-food chains are struggling to grow sales, McDonald’s US locations open at least 13 months grew 10.3% in the quarter ending June 30.
  • Late-night traffic is becoming a bigger revenue driver for major fast food chains, Restaurant Dive reports citing data from marketing analytics firm Wendy’s, Jack in the Box, McDonald’s, Burger King, and Taco Bell all saw late-night visits – between 10 pm and 4 am – rise in the second quarter compared to the first quarter, said R.J. Hottovy, head of analytical research at The rise in late-night traffic creates opportunities for new promotions, expanded operating hours, the formation of new delivery partnerships, and even new store models such as digital-only locations. In September, What-A-Burger opened its first seatless, cashless digital-only restaurant in Austin, Texas where customers order via the company’s mobile app or through kiosks and get their food through a pick-up lane or a food locker.
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