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 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
Recent Developments
Apr 14, 2024 - Employment Grew in 2023
- According to annual data from the US Bureau of Labor Statistics, employment by full-service restaurants grew 3.5% in 2023 after rising 12% in the previous annual comparison. In the first two months of 2024, the average hourly earnings of production and nonsupervisory employees at full-service restaurants eased slightly from a record high of $19.95 in December. Last year, average industry wages rose 5.4% compared to a year ago, after rising 8.4% in the previous annual comparison.
- California’s minimum wage hike for fast-food workers, which took effect on April 1, has broad implications for all eateries in the state, regardless of format, size, or cuisine, Nation’s Restaurant News (NRN) reports. Targeted at fast-food establishments with at least 60 locations nationwide, the raise to $20 per hour is expected to set off competition for restaurant workers throughout the state. Moreover, it comes amid a period of acute inflation, particularly noticeable in the "Food Away from Home" sector, NRN noted, citing data that restaurant transactions have been under significant pressure over the past year, as evidenced by declining sales and foot traffic. Faced with consumers’ growing resistance to high menu prices, restaurants in California will have to scramble to mitigate costs without resorting to passing them on to diners. To cope, restaurant operators in California and beyond increasingly rely on labor-saving technology to cut costs.
- 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, WSJ reports that mom-and-pop operations lack the buying power to command volume discounts.
- Restaurant sales are forecast to top $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.
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