Market Focus: Restaurateurs

Cooking Up Response

October 2006 By Hallie Mummert

multipage

You could say the business forecast for the restaurant industry is as rosy as a vodka blush sauce. Research conducted by the National Restaurant Association, the leading business association for the restaurant industry, indicates that consumers will continue to allocate more of their food dollars to meals outside of the home. Currently this figure hovers around 40 percent, but Hudson Riehle, senior vice president, research at the National Restaurant Association, estimates it will hit an unprecedented high of 50 percent within the next few years.

And the economic impact of this consumption trend on the spending power of the restaurant industry will be significant, Riehle points out. “For every consumer dollar spent in restaurants,” he explains, “another $2 is spent by restaurants” to service customers and grow their businesses. The restaurant industry, on average, spends $183 billion annually on food and beverage purchases alone, he adds.

So just how many sites are we talking about? The National Restaurant Association reports as many as 925,000 restaurant/food service operations in the United States, which employ 12.5 million people. “The restaurant industry is the second largest employer in the United States, after the government,” says Edward J. Mueller, publisher of Chicago trade publication Chef magazine. And it’s a business sector, he informs, that is aggressively promoting women and minorities into management positions.



Who’s the Boss?

Beyond the fact that more women and minorities are assuming decision-making roles in the restaurant industry, marketers interested in selling to this sector need to consider other factors that affect who is likely to be running the business.

For example, the National Restaurant Association tracks more than 39 different industry segments—from sole proprietorships to multi-unit chains to individual franchisees, and from fine dining establishments to ice cream parlors to pizza stands. Each business model and corporate structure is different, and so are the primary contacts and business needs.

Of these 39 segments, however, one restaurant type dominates: More than seven out of 10 eating-and-drinking places are independent operations, and of these independents, seven out of 10 have fewer than 20 employees, says the association. At these restaurants, the head chef is likely also the owner, and thus the chief decision maker. Sometimes sole proprietors have investment partners who help with business plans and operations; others hire business managers.



From Bread to Business Loans

Regardless of who calls the shots, Riehle says that some challenges in the industry are shared by all restaurant owners, and they are, in order of importance: employee recruitment and retention; rising energy costs; and growing the business. Given that hiring and staff turnover leads the list, it’s no surprise that research from the National Restaurant Association indicates more than one out of four tableservice operators will increase the portion of their budget allocated to training in 2006. And it’s just as logical that 56 percent of table service operators have purchased energy-saving equipment in the past two years.

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