Restaurants “Teaser” Industry Report

Industry Analysis

Restaurants
Q1 2014
Industry Overview
The restaurants industry represents every person’s entrepreneurial dream, complete with a fine dining elegant setting
serving the owner’s favorite cuisine. The reality is that, by revenue, most of this industry consists of fast-food and
chain restaurants striving to operate with meticulous efficiency. The industry includes fine and casual dining full-
service restaurants, family-style full-service restaurants, fast-food and quick-casual restaurants, bars and pubs, ice
cream parlors, cafes and food catering services.

Franchising is important for growth, resulting in large national chains controlling most sales. Franchisers operate the
majority of all quick-service units and a growing number of full-service units in the U.S. As regional chains become
successful, larger national chains looking for growth-opportunities and diversity of products quickly acquire them.
Large chains prefer to grow through acquisitions, rather than build new units. New units can easily cost over $1
million to build, even for fast-food restaurants. Becoming larger is key to success, because it spreads fixed costs over
a larger revenue base, it provides leverage over suppliers in order to keep costs down, and allows for brand
awareness through extensive advertising budgets.

Despite consolidation and the dominance of large chains, the industry remains highly fragmented and intensely
competitive. High-priced full-service restaurants and pubs tend to be owned by individuals, families and limited
partnerships. Seven out of 10 restaurants are single-unit independent operations, according to the National
Restaurant Association (NRA). Many high-priced restaurants are competing with chains in brand awareness with
celebrity chefs as their head chefs, who often own a handful of restaurants in destination locations and cosmopolitan
cities, along with limited partnerships and private equity funds as investors. Despite the celebrity-chef phenomenon,
local word-of-mouth remains the main tool for promoting brand awareness for high-priced restaurants.
Latest Activity. Similar to other industries, the restaurants industry in the U.S. felt the pinch of the recession in 2008
and 2009. The industry grew a modest 3.5 percent to $513.5 billion in sales in 2008 compared to 2007. However,
after adjusting for inflation, this modest increase translated to a 1.2 percent decline. In 2009, while the industry grew
to $565.8 billion, it reflected a 2.9 percent inflation-adjusted decrease. While the U.S. restaurant operators registered
a virtually flat growth in 2010 at $570 billion, the industry showed signs of gradual recovery. In 2011, industry sales
rose 7 percent to $610 billion, followed by another 4.1 percent increase in 2012*Full reportbillion.
to $635 containsNRAinsurance-focused
forecasts that for research
including: critical analysis, statistics, and qualitative
2013, the U.S. restaurant industry will experience an increase for the fourth straight year, expected to post record
commentary, along with Advisen analytics such as
sales of $660 billion, up by 3.8 percent compared to the previous year.
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In terms of restaurant growth, there were around 3,000 more restaurants in the U.S.*Click as ofhere
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compared to the same period in 2012. In total, there are 617,505 U.S. restaurants, a 0.5 percent increase compared
*Advisen subscribers have full access to the reports,
to 2012. Unit increases were driven by restaurant chains, which grew to 280,336, a 1.3 percent increase compared to
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2012. Quick-service restaurant units stood at 328,162, up one percent versus 2012. Independent restaurant units
*Bulk rates are
slightly dropped to 337,169 units, registering a 0.2 percent decrease in units. Meanwhile, unitalso available,
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service
support@advisen.com
restaurants, which include casual dining, midscale/family dining, and fine dining, were flat at 289,343 units. for information

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