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Sector Spotlight: Restaurants

The latest trends, challenges, and tips to help entrepreneurs enter the restaurant business.

It’s no secret: Americans love dining out. In fact, the United States has the largest worldwide market in terms of consumer restaurant spending. Food and beverage sales have jumped from $379 billion in 2000 to almost $800 billion in 2017, and total industry employment is expected to reach nearly 17 million by 2027. It would seem that the demand for delicious restaurants that double as local dining staples will never go out of style.  

But it takes more than just purchasing a restaurant with good books to really hit it big and drive ongoing profit. Running a successful restaurant all begins with finding the right, initial fit. Considerations that have proven universal when it comes to buying a restaurant include:

  • The type of food and beverage you will serve
  • Knowing your local market and competition
  • Location, location, location

As if that weren’t enough, everything must be accomplished all while staying in budget. While this might seem insurmountable to aspiring entrepreneurs, rest assured that your dream restaurant is out there and you can find it if you know where to look.


Busting restaurant closure reputations

First and foremost, let’s bust the all-too-common myth that 90 per cent of restaurants fail in the first year. According to a study conducted by Cornell University, approximately 30 per cent of restaurants may fail or change ownership within the first year, and that number jumps up to 60 per cent after 3 years.  

While that might sound high, it’s on par with the average failure rates of small businesses regardless of industry. This means that restaurants are not riskier than any other small business or franchise venture.

The Restaurant Performance Index (RPI) reached 102 in August 2018, and an index score over 100 indicates a time of growth and expansion for the restaurant industry. So, don’t let unfounded statistics deter you from investing in a restaurant business this upcoming year.


Understanding your market

One of the keys to succeeding in this industry is learning what customers in your area are looking for and knowing where there’s potential for your restaurant to stand out from the crowd. It takes research to understand what food will be in demand, what prices the local demographics will be willing to pay, and how your restaurant will give patrons something they can’t find elsewhere.

Keep in mind that the demand for dining out is always present. According to the National Restaurant Association, 2 in 5 American consumers say restaurants are an essential part of their lifestyle, and 61 per cent of adult consumers reported they would rather spend money on an experience — such as a restaurant or other activity — compared to purchasing material goods.

Before buying or investing in a local restaurant, visit other restaurants in the area to study their menu, prices, and their audience. Consider the area demographics. Are you servicing college students who are looking for cheap food in a millennial-focused atmosphere? Are the average household incomes in the area high enough to justify premium-pricing?  

Different restaurant concepts appeal to different demographics, and how you design the interior space, structure and price the menu, and train your service staff will depend on how you choose to strategically tap into your market.


Consider industry trends

When purchasing an existing restaurant, you’ll want to bring something fresh to the table. And we mean literally fresh. Restaurant industry and consumer trends from 2018 and beyond show that more customers are opting for fresh, local, and organic ingredients, which are quickly becoming top-purchased ingredient categories.

Develop relationships with local farmers and organic distributors to help keep quality high and associated costs down. Consider modifying the menu to include food dishes that cater to all dietary preferences and trends to attract a broad market to your business.

According to a study by Emerson, consumers through 2020 are increasingly demanding bold, adventurous meals when dining out, so consider adding an ethnic twist on traditional dishes. In addition to fresh, local ingredients, consumers also want to feel that the restaurant is transparent in abiding by sustainable practices, and some consumer demographics are looking for “convenient, sophisticated experiences.”

Whichever angle you take to enhance your restaurant business, delivering value to your customers will always remain a top priority to ensure your success. Be sure to continuously research industry trends to keep your restaurant on top of its game.


Preparing to face challenges head-on

Owning a restaurant is far more than just understanding your market and preparing food that meets their needs. The restaurant industry is notoriously complicated, so as you prepare to buy the business, you’ll also need an acute understanding of difficulties, and have a strategy to overcome them.

For example, keep a keen focus on managing expenses, especially since your inventory management deals with perishable goods. If you fail to keep a handle on your inventory, you can expect unforeseen expenditures and supply overages or shortages during peak business periods.

Know how much your ingredients cost and monitor demand on a regular basis. Consider changing your menu seasonally to regulate ingredient costs, and keep loyal customers coming back to see what’s new.

If you own a restaurant in a summer-tourist town, and your customer base fluctuates seasonally, consider hiring a seasonal staff to accommodate increased demand.

Customers are focused on service, so finding the right staff, investing in training, and ensuring your managerial processes are solidified will ultimately decrease employee turnover. This will not only increase customer satisfaction but also drive profit for your business.

Ready to buy a restaurant?

For many entrepreneurs, owning and managing a successful restaurant is nothing short of a dream job.

For additional information, check out our top tips buying a restaurant, which includes how to write your business plan, where to find funding, and doing your due diligence to protect your investment.

With the right attitude and preparation, capitalizing on consumers’ undying love for dining out can be a smart business move to help you cash in. Or, if a restaurant is not the ideal fit you are looking for, take a look at the other opportunities available.

Bruce Hakutizwi

About the author

USA and International Manager for, a global online marketplace for buying and selling small medium size businesses. The website has over 60,000 business listings and attracts over 1.5 million buyers to the site every month.


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