The Restaurant Business – SAGE Business Researcher

Is eating out still in?

Executive Summary

The U.S. restaurant industry faces a fundamental problem: too many eateries and not enough customers. Challenging the industry are disruptive forces that include a sharp decline in the number of people eating lunch out, stiff competition from food trucks, the rise of home-delivered meals and other food and the indirect effects of changing lifestyles such as greater online shopping. The total number of restaurants has fallen by 2 percent since 2014, and traffic at the remaining ones has been essentially flat. Full-service casual chain restaurants are especially hard-pressed, while lower-end fast-food chains that serve breakfast all day are in better shape and high-end restaurants in prosperous coastal cities are doing well.

Among the key takeaways:

Retail food prices decreased by 1.3 percent in 2016, while restaurant prices rose 2.5 percent as labor and health care costs increased.
Diners who patronize fast-food and fast-casual establishments at least twice a week intend to cut back their visits by 8 percent and 13 percent, respectively, over the next 12 months.
Digital ordering via smartphone apps has grown 18 percent over the past year, creating a growth opportunity for restaurants.

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Resources for Further Study

Bibliography

Books

“So, You’re Thinking About Owning, Operating or Investing in a Restaurant …: How to Get Into the Restaurant Business with Eyes Wide Open,” RSG LLC, 2016. This book by Restaurant Startup & Growth and RestaurantOwner.com explains what you need to know before investing in a restaurant.

Fields, Roger, “Restaurant Success by the Numbers, Second Edition: A Money-Guy’s Guide to Opening the Next New Hot Spot,” Ten Speed Press, 2014. This one-stop guide to opening a restaurant from an accountant-turned-restaurateur shows aspiring proprietors how to succeed in the crucial first year and beyond.

Articles

“2016 Was the Worst Restaurant Year Since the Recession,” QSR, Jan. 13, 2017, http://tinyurl.com/yaupfvd3. A magazine focused on quick-service and fast-casual restaurants looks at overall industry data for 2016 and concludes that it was not a good year.

Jargon, Julie, “Diners Are Finding $13 Burgers Hard to Swallow,” The Wall Street Journal, May 31, 2017, http://tinyurl.com/yddksn5p. Lunch traffic at quick-serve hamburger restaurants dropped by 5 percent in 2016, the biggest year-over-year decline ever recorded, according to a market research firm.

Jargon, Julie, “Going Out for Lunch Is a Dying Tradition,” The Wall Street Journal, May 30, 2017, http://tinyurl.com/y9wmp7u2. Americans made 433 million fewer trips to restaurants at lunchtime in 2016 than in the previous year, resulting in roughly $3.2 billion in lost business for restaurants, according to market research.

Thompson, Derek, “The Paradox of American Restaurants,” The Atlantic, June 20, 2017, http://tinyurl.com/ycu7a2yy. While the quality and variety of food in the United States has never been better, the restaurant industry is struggling, a journalist concludes.

Reports and Studies

“Global restaurant outlook: feeding the global consumer,” AlixPartners, October 2016, http://tinyurl.com/y9ko4x24. This report from a consulting firm includes interviews with executives from more than 40 different restaurant concepts about how they plan to address worldwide consumer trends in the future.

“Mobile Invasion: Mobile Payments in Restaurants,” National Restaurant Association, May 11, 2015, http://tinyurl.com/y7oxtprf. This trade group’s white paper looks at the benefits of mobile payment and how to leverage the trend to expand a business.

“What’s Hot Culinary Forecast,” National Restaurant Association, 2017, http://tinyurl.com/nyq9nhh. This annual forecast, based on a survey of almost 1,300 chefs, predicts food and menu trends for the coming year, including more chef-driven fast-casual restaurants and more restaurants offering locally sourced ingredients.

The Next Step

Social Media

Breuninger, Kevin, “How social media is transforming your dinner,” CNBC, July 8, 2017, https://tinyurl.com/yd4rf6vv. To court new customers, some restaurants are creating meals that have the potential to go viral on social media.

Hagerty, Kyle, “How Instagram And Retail Created The Perfect Recipe For Restaurant Anchors,” Bisnow, July 12, 2017, https://tinyurl.com/y8xslxgm. Sharing photos, a staple of social media culture, has created a thriving business model for food halls being built in areas that did not receive much foot traffic or patronage.

Yagoda, Maria, “Do Restaurants Come Up with Dishes Just for the ‘Gram?” Food and Wine, July 7, 2017, https://tinyurl.com/y9h6qqay. A food writer examines how restaurants put in extra time and effort to ensure their dishes look appealing on social media. Many chefs and marketing managers now collaborate in considering whether a dish is photogenic.

Technology

Baskas, Harriet, “Gate delivery could be game-changer for airports,” USA Today, July 10, 2017, https://tinyurl.com/ya2dq5ta. A new food service application is debuting at Baltimore/Washington International Airport that will allow passengers to order food, beverages and products on an app and have it delivered at their gate. The service is expected to expand nationwide after its debut.

Radu, Sintia, “Blue Apron promised to bring disruption to the food business. Then it got disrupted,” The Washington Post, June 21, 2017, https://tinyurl.com/ybbojyr2. Amazon’s plans to buy Whole Foods Market has forced Blue Apron, once hoping to be more innovative than grocery chains and restaurants, to reevaluate its business model just as the meal-kit company was launching an IPO.

Sherman, Elisabeth, “Food Delivery Market Surging Thanks to Online Orders,” Food & Wine, July 13, 2017, https://tinyurl.com/ycokpxjr. The meal delivery market is projected to grow in value by 79 percent in the next five years due to the ease and convenience that online ordering platforms such as Grubhub provide consumers.

Organizations

AlixPartners
2099 Pennsylvania Ave., N.W., #300, Washington, DC 20006
1-202-756-9000
www.alixpartners.com/
Global consulting firm that tracks the restaurant industry.

Black Box Intelligence
17304 Preston Road, Dallas, TX 75252
1-972-364-0490
www.blackboxintelligence.com
Consulting firm that provides restaurant-industry metrics, sales trends and performance data.

National Restaurant Association
2055 L St., N.W., #700, Washington, DC 20036
1-202-331-5900
www.restaurant.org
One of the largest food service trade associations in the world, supporting more than 500,000 restaurant businesses.

NPD Group Inc.
900 W. Shore Road, Port Washington, NY 11050
1-516-625-0700
www.npd.com
Global information company that tracks the restaurant industry.

Statista Inc.
55 Broad St., 30th floor, New York, NY 10004
1-212-433-2270
www.statista.com/
Online portal for statistics, market research and business intelligence.

Technomic
300 S. Riverside Plaza, Suite 1600, Chicago, IL 60606
1-312-876-0004
http://www.technomic.com/
Business management consulting firm that specializes in the food service industry.

U.S. Bureau of Labor Statistics
Postal Square Building, 2 Massachusetts Ave., N.E., Washington, DC 20212
1-202-691-5200
www.bls.gov
Federal agency that collects data on employment and wages.

U.S. Department of Agriculture
1400 Independence Ave., S.W., Washington, DC 20250
1-202-720-2791
www.usda.gov
Government department that tracks food prices.

DOI: 10.1177/237455680322.n1