Companies in this industry operate restaurants and other eating places, including full-service restaurants (FSRs), quick-service restaurants (QSRs), cafeterias and buffets, and snack bars. Major companies include Bloomin' Brands, Darden Restaurants, McDonald’s, Starbucks, and YUM! Brands (all based in the US), as well as Greggs (the UK), Jollibee Foods (the Philippines), Skylark (Japan), and Restaurant Brands International (Canada).
The global food service industry, which includes restaurants as well as catering services, generates about $3 trillion in annual revenue, according to Technomic. Cross-border franchising of restaurants has helped boost growth in recent years. The largest restaurant markets are Asia/Pacific, North America, and Western Europe. Latin America and the Middle East/Africa region are the industry’s fastest-growing markets.
The US restaurant industry includes about 660,000 restaurants with combined annual revenue of more than $550 billion.
Restaurants are adopting new technologies and services to compete for consumers who increasingly value convenience. Mobile payments, online ordering, and home delivery are becoming more commonplace in both the full-service and limited-service segments of the industry. Pricing is also becoming a more important issue as customers are able to choose from a growing variety of dining options, including pre-packaged meals from outlets such as grocery stores, convenience stores, and coffee shops. Emerging competitors such as providers of subscription meal kits could further disrupt the industry in the future.
Factors that can influence global competition in the restaurant industry include reliable access to infrastructure, stable relationships with ingredient suppliers, and the ability to adapt menus to suit local tastes. Some restaurants rely heavily on imports of fresh produce and other ingredients, which can make them vulnerable to trade disruptions. Several large American chains are increasing their efforts to expand globally through franchising, while some international restaurant chains are becoming more competitive within the US market.
The profitability of individual companies can vary: while QSRs rely on efficient operations and high volume sales, FSRs rely on high-margin items and effective marketing. Large companies have advantages in purchasing, finance, and marketing. Small companies can compete by offering superior food or service. The US industry is highly fragmented: the 50 largest companies account for more than 15% of revenue.
Trendy Menus – Restaurants that continually adapt their menus in response to changing consumer tastes often stand out from competitors that stick to more traditional fare. For example, establishments have increased sales in recent years by adding new breakfast items, snacks, and healthy dishes to their menus in response to rising customer demand.
Focus on Convenience – Restaurants are investing in mobile technology, expanding their delivery networks, and making other upgrades to provide faster service and additional convenience for customers. Conveniently located establishments near customers’ homes and workplaces are well-positioned to compete not only with other restaurants but also with neighborhood supermarkets and convenience stores.
Strategic Pricing – Restaurants are under constant pressure to keep their prices competitive while accounting for ever-rising costs of ingredients and other key inputs. Operators attempt to maintain healthy margins by closely monitoring the profitability of individual menu items and adjusting prices according to changes in demand and operating costs. Offering lower-priced value deals can increase traffic but also runs the risk of eroding overall sales.
Companies to Watch:
McDonald’s has more than 36,000 restaurants serving burgers and fries in about 120 countries. Almost 85% of the company’s restaurant locations are run by franchisees or affiliates.
YUM! Brands — whose flagship chains include KFC, Pizza Hut, and Taco Bell — is the largest fast-food operator in the world in terms of number of locations, and it trails only McDonald's in global sales. The company is pursuing growth by expanding its franchising business in Asia; in 2016 it spun off its Chinese operations into a separately traded public company.
Starbucks, the world’s largest coffee retailer, has more than 25,000 coffee shops in 75 countries. The company also sells products through grocery stores and food service customers, and it earns additional revenue through brand licensing.
Darden Restaurants is the top casual-dining operator in the US and Canada, with a collection of chains including Olive Garden, LongHorn Steakhouse, Eddie V's, and The Capital Grille. Many of the company’s brands cater to families by offering mid-priced menu items in primarily suburban locations.
Products, Operations & Technology
About half of full-service casual restaurants serve general American fare, according to Mazzone & Associates; other popular specialties include breakfast
Sales & Marketing
Finance & Regulation
Regional & International Issues
Also includes the following chapters:
Quarterly Industry Update
Trends and Opportunities
Call Preparation Questions
Glossary of Acronyms