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 428,725 restaurant companies in the US include full-service restaurants, quick-service restaurants (fast food, snack and non-alcoholic beverage bars), fast-casual restaurants, grills, buffets, and cafeterias. Franchise restaurants are individually owned and operated and benefit from marketing and operational assistance provided by a franchisor.

Competition For The Food Dollar

While the restaurant industry is highly competitive, eating establishments also compete with convenience stores, grocery stores, warehouse clubs, and home cooking.

Emphasizing Health and Sustainability

Increasing consumer concern for health and the environment has led to growing demand for healthier and more sustainable restaurant menu options.

Industry size & Structure

A typical restaurant operates out of a single location, employs about 25 workers, and generates $1-2 million annually.

    • The restaurant industry consists of about 428,725 companies which employ 11 million workers and generate almost $700 billion annually.
    • The industry includes full-service restaurants, quick-service restaurants (fast food, snack and non-alcoholic beverage bars), fast-casual restaurants, grills, buffets, and cafeterias. Food service contractors, bars that serve mainly alcoholic beverages, mobile food services, and caterers are not included.
    • Franchise restaurants are individually owned and operated and benefit from a recognizable brand name, corporate marketing, volume purchasing, and operational assistance provided by a franchisor.
    • Restaurants may specialize by type of fare (Mexican, Chinese), dish (hamburgers, sushi), item (cookies, ice cream), or meal (breakfast, lunch, dinner).
    • Large restaurant companies include McDonald's, Subway, Burger King, Wendy's, Golden Corral, Ruby Tuesday, DineEquity (Applebees) and Starbucks.
                                  Industry Forecast
                                  Restaurants Industry Growth
                                  Source: Vertical IQ and Inforum

                                  Recent Developments

                                  Mar 14, 2024 - Labor Costs Rose Again in 2023
                                  • Employment by restaurants grew 2.6% in December compared to a year ago after rising 4.3% and 14.2% in the previous two annual comparisons, according to the US Bureau of Labor Statistics. Average wages for restaurant workers rose 4.4% last year to a record high of $19.96 per hour in December. Wages for restaurant workers continue to rise with 22 states raising the minimum wage for hourly workers on January 1, 2024. As a percentage of sales, restaurants rely on labor more than other retail sectors, making the rise in wages particularly draining on profits, according to industry economists cited by The Wall Street Journal.
                                  • The combination of rapidly rising payroll costs and diners’ pushback against high menu prices is putting many independent full-service restaurants in financial peril, The Wall Street Journal reports. Demand for eating out, which surged as the pandemic subsided, has given way to growing consumer resistance to ever-higher checks, WSJ reports. Indeed, prices for food eaten away from home were up 30% in January compared with the same month in 2019, BLS data showed. Sales growth for sit-down restaurants is about half that of fast-food and limited-service restaurants, according to the National Restaurants Association estimates. Full-service restaurants also trail other formats in employment growth with staffing at full-service establishments still below pre-pandemic levels while fast-food chains have fully recovered. High labor costs are especially painful for full-service eateries that prepare food from scratch. Moreover, mom-and-pop operations lack the buying power to command volume discounts, WSJ reports.
                                  • Restaurants sales are forecast to top $1.1 trillion in 2024, driven by ongoing employment growth, technology advancements, and expanded use of restaurant apps, according to the National Restaurant Association’s 2024 State of the Restaurant Industry Report. The restaurant and food service industry is projected to add 200,000 jobs this year, bringing total industry employment to 15.7 million. Between 2024 and 2032, the industry is projected to add 150,000 jobs per year on average, with total staffing levels reaching 16.9 million by 2032, per NRA. While nearly eight in 10 restaurant operators predict their sales will increase (33%) or hold steady (45%) from 2023 levels, operators are less optimistic regarding profitability, with only 27% expecting to be more profitable this year. Average food costs have increased more than 20% and average wages more than 30% since 2019, taking a bite out of profits, per the NRA report.
                                  • Diners will become much more value-conscious in 2024 than in recent years, Nation’s Restaurant News (NRN) reports citing insight from Fitch Ratings. Directors from the credit ratings agency told a retail and restaurant outlook panel at a conference in January that they’re expecting a value-oriented environment and flattish to low-single-digit growth in the restaurant space in 2024. Fitch Senior Director Bill Densmore said he expects restaurants will be more focused on making operational enhancements and predicts that much of the growth this year will come from "stronger, healthier brands." Larger players are expected to continue to leverage analytics to increase their market share by better understanding consumer behavior and making data-informed decisions, influencing customer behavior, and driving brand loyalty. Fitch also predicts restaurant traffic to be similar to 2023 – down by about 2%.
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