Restaurants
See A Full Sample Profile
What you're seeing is just a taste! The full profile contains:
- 30 - 50 Call Prep Questions
- Business Challenges
- Trends and Opportunities
- And much more...
Get Information Now
Rest assured, your information will not be shared with anyone else (see our privacy policy for details).
Industry Overview
About 400,000 restaurants operate in the US, with combined annual revenue of $240 billion. Large chain owners include McDonald's; Yum Brands (KFC, Pizza Hut, Taco Bell); and Darden Restaurants (Olive Garden, Red Lobster). The industry is highly fragmented: the 50 largest companies hold only 20 percent of the market. The typical restaurant company has one location and less than $500,000 in annual revenue, although a few companies have revenue up to $5 million.
Competitive Landscape
Demand is largely driven by consumer income because restaurant food is more expensive than food at home. The profitability of an individual restaurant depends heavily on service and marketing. There are few economies of scale, except that chains can buy raw materials in bulk and can leverage their marketing costs. Small restaurant companies can readily compete against large ones by offering superior food or service. The industry is labor-intensive: annual revenue per employee is roughly the same for large or small restaurants, about $35,000.
Products, Operations & Technology
Restaurants buy food in bulk and prepare it for sale to retail customers. The business is simple in concept, which is why a large number of restaurants compete in most markets and why small restaurants and chains can effectively compete with larger ones. The highly competitive nature of the industry makes success difficult, and the failure rate for restaurants is higher than for most other businesses.
Industry revenue is split about equally between fullservice restaurants (FSR) and quickservice restaurants (QSR), which differ mainly in level of service and menu selection. FSRs serve food mainly to customers on the premises. The menu selection is fairly wide, alcohol may be served, orders are taken at the customer's table, and food is delivered directly to the table. A typical chain location has annual revenue of $1.5 million and 50 employees.
In QSRs (also called limited-service), the menu is limited to a few standard items and food is often taken off the premises. Food may be eaten on the premises, but customers must order and serve themselves. By limiting service and menu selection, QSRs can serve food quicker and at a lower price. The simplicity of operations means that they can easily be duplicated, so chains are a major factor in this segment. A typical QSR chain location has annual revenue of $800,000 and 25 employees.
Restaurants use computer technology mainly to help with menu ordering and billing, sometimes using touch screens that show all menu items. Some use wireless, handheld credit card scanners that allow waitstaff to process credit card payments at the table. Companies with multiple restaurants use computers to determine successful menu items, order raw materials, and control inventories. Because they have many employees, restaurants also use automated payroll systems. Some restaurants allow customers to reserve tables and place take-out orders over the Internet. Many restaurants use a website to post their menu, provide directions, and offer promotions.