Book
Excerpt
Chapter 1
As increasing numbers of consumers want to either
dine out or take prepared food home, the number of food-service
operations has skyrocketed from 155,000 about 25 years ago to nearly
800,000 today. But there’s still room in the market for your
food-service business.
Shifting demographics and changing lifestyles are
driving the surge in food-service businesses. Busy consumers don’t have
the time or inclination to cook. They want the flavor of fresh bread
without the hassle of baking. They want tasty, nutritious meals without
dishes to wash. In fact, the rise in popularity of to-go operations
underscores some clear trends in the food-service industry. More and
more singles, working parents and the elderly are demanding greater
convenience in buying their meals and are turning to operations that
provide that convenience.
Though the future looks bright for the
food-service industry overall, there are no guarantees in this business.
Even the most successful operators will tell you this isn’t a “get rich
quick” industry. It’s more like a “work hard and make a living”
industry. A hard reality is that many restaurants fail during their
first year in business, frequently due to a lack of planning. Does this
mean your food-service business must be an extremely complex operation?
Not at all—in fact, the more streamlined you can make it, the better
your chances for success. Robert O., owner of a casual seafood
restaurant in Nags Head, North Carolina, observes, “The restaurant
business is a simple business that people make complicated.” His formula
for success is quality food, good service and great people—an approach
that’s worked for him for nearly two decades.
Who Are The Diners?
No single food-service operation has universal
appeal. This is a fact that many newer entrepreneurs have trouble
accepting, but the reality is that you will never capture 100 percent of
the market. When you try to please everyone, you end up pleasing no one.
So focus on the 5 or 10 percent of the market that you can get and
forget about the rest. With that said, who is eating at restaurants?
Let’s take a look at the main market categories of food-service business
customers:
Generation X
Generation X is a label applied to young adults
who were born between 1965 and 1977. While members of this group have
lower incomes than the typical baby boomer, they definitely have a
desire to eat out. In fact, young adults eat a greater percentage of
their dinners out than any other age group. They enjoy Mexican food,
pizza, hamburgers, Asian food and sandwiches. Generation X consumers
appear to prefer casual, convenient establishments to formal, upscale
restaurants. They are also concerned with value, and they favor
quick-service restaurants and midscale operations that offer
all-you-can-eat salad and food bars. To appeal to this age group, offer
a comfortable atmosphere that focuses on value and ambience.
Baby Boomers
Born between the years of 1946 and 1964, baby
boomers make up the largest segment of the U.S. population. Prominent in
this generation are affluent professionals who can afford to visit
upscale restaurants and spend money freely. During the 1980s, they were
the main customer group for upscale, trendy restaurants that offered
expensive meals. A decade ago, value was not the main goal for baby
boomers who dined out, but as they have children and expand their
families, value may become a greater concern. In the 1990s, many baby
boomer families included two incomes and children. By 1995, 80 percent
of baby boomers had children living with them. To appeal to this market,
restaurants may want to offer a family-friendly atmosphere or, as a
different option, an upscale, formal atmosphere where boomers can visit
or entertain without the children.
Empty Nesters
This group consists of people in the age range
between baby boomers and seniors (people in their early 50s to about age
64). They typically have grown children who no longer live at home, and
their ranks will continue to increase as the baby boomers grow older and
their children leave home. With the most discretionary income and the
highest per-capita income of all the generations, this group typically
visits upscale restaurants. They are less concerned with value and are
more focused on excellent service and outstanding food. Appeal to this
group with elegant surroundings and a sophisticated ambience.
Seniors
The senior market covers the large age group of 65
and older. It’s a market that will continue to grow in both numbers and
economic diversity as empty nesters and baby boomers age. Generally, the
majority of seniors are on fixed incomes and may not be able to afford
upscale restaurants often, and they tend to visit family-style
restaurants that offer good service and reasonable prices. “Younger”
seniors are likely to be more active and have more disposable income
than “older” seniors, whose health may be declining. Seniors typically
appreciate restaurants that offer early-bird specials and senior menus
with lower prices and smaller portions, since their appetites are less
hearty than those of younger people.
Industry Trends
In the 1980s—the decade of greed—new restaurants
were typically upscale establishments that centered on unique and
creative dishes by famous chefs. Young, professional baby boomers, often
on liberal expense accounts, supported these concepts. The 1990s brought
a trend to the restaurant industry that is expected to continue well
into the new century. Generation Xers and family-minded baby boomers are
concentrating on stretching their dollars, and the trend is
value-oriented.
Some other industry trends include:
Carts and kiosks: Eating establishments no longer
require customers to come to them; in many cases, the restaurant goes to
the customer in the form of a cart or kiosk. Many limited-service mobile
facilities are operating at locations that attract large numbers of
people. Malls, universities, airports, sports stadiums and arenas now
allow customers to choose from a variety of restaurants operating from
kiosks on their premises. These restaurants typically offer very limited
menus but attract customers with their recognizable names.
Dual-branded operations: A relatively new but
popular trend is the dual-branded restaurant, where two well-known
restaurants, typically quick-service operations, combine their menus in
one location to offer customers a wider selection of items.
Nutrition-conscious customers: The importance
consumers place on nutrition appears to be on the decline. This trend
can be largely attributed to the value-minded Generation X market group,
whose members tend to frequent quick-service establishments, which are
not known for their nutritious fare.
Popular menu items: Barbecued foods and
appetizers are two of the most popular menu items. Barbecue appears to
satisfy customers seeking spicy foods and regional cuisines. Appetizer
orders are also growing, a trend led by customers who omit entrees and
choose appetizers instead.
Catering to children: Catering to families is a
recurring trend for restaurants. Because many baby boomers have children
still living at home, the majority of their dining-out experiences are
family-oriented. Restaurants wanting to reach this market are offering
children’s menus and children’s value meals with child-size portions.
Some even offer child-friendly environments with booster seats, toys,
balloons, crayons, menus featuring games on them, and even free
table-side entertainment in the form of magicians and clowns.
Menu Trends
As you put together a plan for your food-service
business, be aware of some of the trends in terms of menu content and
design: These factors could—and, in fact, should—influence the type of
food-service business you open.
Restaurant operators report that items gaining
popularity include vegetarian items, tortillas, locally grown produce,
organic items, fusion dishes (combining two or more ethnic cuisines in
one dish or on one plate) and microbrewed/local beers. Pita dishes and
wraps continue to be in high demand, particularly as an easy-to-consume
alternative to sandwiches. You will also see a strong demand for bagels,
espresso/specialty coffees and “real meals,” which are typically an
entree with a side order. Consumers are also eating more chicken,
seafood and beef entrees than they have in recent years. At the same
time, they expect to see meatless alternatives on the menu.
Customers also are demanding “comfort food”—the
dishes that take them back to their childhoods, when mothers baked from
scratch, and meat and potatoes were at the center of each plate.
Creative chefs are looking for ways to redefine and reinvigorate
comfort-food favorites. Instead of the traditional shepherd’s pie, for
example, you might see one made with mushrooms, spinach, carrots and
lobster sauce.
Menus are also showing a number of ethnic dishes
and spice-infused offerings. It’s not surprising to find Thai,
Vietnamese, Creole, Tuscan and even classic French cuisines on the same
menu, and even the same plate.
Though menu variety has increased over the years,
menus themselves are growing shorter. Busy consumers don’t want to read
a lengthy menu before dinner; dining out is a recreational activity, and
they’re in the restaurant to relax. Keep your number of items in check
and menu descriptions simple and straightforward, providing customers
with a variety of choices in a concise format.
Your menu should also indicate what dishes can be
prepared to meet special dietary requirements. Items low in fat, sodium
and cholesterol should also be marked as such.
Understanding Takeout Customers
Research conducted by the National Restaurant
Association is a strong indicator of the popularity of off-premises
consumption of restaurant food. Of respondents to a National Restaurant
Association survey, 21 percent who use off-premises restaurant service
purchase one or more such meals a day; 26 percent purchase off-premises
meals every other day; 22 percent purchase meals for off-premises
consumption about twice a week; and 31 percent make purchases for
off-premises consumption less than once a week.
Fast-food restaurants capture the largest share of
off-premises dining occasions (52 percent) and dollars (41 percent).
Carryout restaurants capture 10 percent of off-premises dining patronage
and 15 percent of sales. Full-service restaurants account for six
percent of off-premises dining patronage and 11 percent of sales.
What motivates consumers to buy prepared food to
consume elsewhere? They are in a hurry and want easy access, fast
service and reasonable prices. Another reason is that they’re just too
tired to shop for and prepare food themselves. Often, consumers looking
for a special treat are inclined to buy takeout food, particularly ice
cream, snacks and gourmet coffees. Another strong motivator of take-out
customers is the desire to eat “something that is good for me.” These
customers tend to patronize full-service restaurants, grocery stores and
cafeterias/buffets for tasty, fresh foods.
Where Is The Competition?
Competition in the food-service industry is
widespread, varied and significant. When you open a restaurant, you’ll
be competing not only with other similarly themed restaurants, but every
restaurant in the area you serve. In addition, your customers themselves
are a form of competition, because they can make their own meals at home
if they choose. Let’s take a look at the primary categories of
competition.
Chains
Chain restaurants may be the biggest threat to
independent operators. Chains are growing as private companies and
franchises take over a greater portion of the market. With well-known
names and large advertising budgets, chains enjoy significant consumer
recognition.
What these restaurants do not offer is the
personalized attention that many small, independent operations
provide—so this is where independent restaurants have an advantage. Many
restaurateurs become acquainted with their regular customers and build
relationships with them. This is not to say that chains do not offer
personalized service—indeed, many of them excel in this area—but there
is a difference when customers know they are dealing directly with the
owner.
Independent restaurants have several other
competitive advantages over chains. Independently owned fine-dining
restaurants are often willing to take reservations, while chains usually
do not. Independents may also offer live music, experienced chefs
(rather than just basic cooks), and creative foods and beverages. While
chains have the advantage of a well-known name, many independents offer
the atmosphere customers prefer.
Supermarkets And Convenience
Stores
Supermarkets and convenience stores are fairly
recent competitors for restaurants.
They offer customers food that is freshly prepared
and ready to go; their menus typically include fried chicken,
sandwiches, side dishes, salads and desserts. The primary concern of
customers who visit these establishments is convenience, so supermarkets
and convenience stores offer serious competition to quick-service
restaurants that compete on the basis of convenience and value.
Eating At Home
Dining out is not a necessity for most people.
Restaurants, like other service businesses, sell convenience: They
perform a task that consumers could otherwise handle themselves. Some
consumers perceive dining out as something to do only on special
occasions, which may be the attitude of a larger portion of upscale
restaurant customers. Quick-service and midscale restaurants must appeal
to value-conscious and time-conscious consumers. They must stress how
eating out can save customers the time and trouble of cooking, and how
customers can relax while they eat and not worry about cleaning up
afterward.
For more information about researching the
competition, see Chapter 1 in Entrepreneur’s Start-up Basics.
