Restaurants - Industry Overview

Topics: Fast food, Fast food restaurant, KFC Pages: 26 (8987 words) Published: January 30, 2011

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Global Industry Overview: Restaurants Gale Global Industry Overviews: 2006

Restaurants are involved in retail sale of prepared foods and beverages for on-site or immediate consumption, such as fast-food restaurants, diners, refreshment stands, and full-service restaurants. Caterers and institutional food service establishments are also included in this category.

Industry Snapshot
Large fast-food chains lead the restaurant industry, which by 2005 consisted of approximately 8 million restaurants worldwide in an extremely competitive environment. Most restaurants were single unities, independently owned and operated, while about 300 companies were involved in chain restaurants. McDonald's was the world's leading restaurant chain in terms of sales and the second largest based on number of sites. Yum! Brands, formerly Tricon Global Restaurants Inc., was the world's second largest restaurant company in terms of sales, with 33,000 units in 100 countries, and the largest in terms of restaurant units. Its major brands were also global leaders in their markets: KFC (chicken), Pizza Hut, and Taco Bell (Mexican-themed). In the food service sector, Compass Group PLC ranked as the world's largest company, followed by Sodexho Alliance SA. Worldwide, the restaurant industry saw considerable growth in 2003 as the economy began to stabilize and consumer confidence increased. According to Euromonitor, the industry grew 4.5 percent in the United States, reaching US$189.9 billion. In the United Kingdom, the industry grew 3.0 percent, to US$23.1 billion. China also experienced growth of 9.4 percent to US$110.4 billion. The market in France held steady at US$33.9 billion, but the Japanese market decreased 7.5 percent to US$138.8 billion.

Organization and Structure
Traditionally, the restaurant industry has consisted of two main sectors: full-service restaurants (including family restaurants, casual dining establishments, dinner houses, and grill-buffets) and quick service restaurants (QSR), also known as fast-food restaurants. The QSR sector typically serves hamburgers, chicken, sandwiches, pizza, Mexican dishes, and breakfast and snack items. The National Restaurant Association (NRA) of the United States breaks the industry down further, into restaurants that provide full menus with table service, limited menus with table service, and limited menus without table service. Of establishments with a limited menu and providing table service, most are small, independently owned operations. The restaurant industry is a mature industry, and in many countries, such as the United States and in Western Europe, competition is very tough as many markets are saturated. In addition, restaurants must compete with expanded supermarket offerings that include a vast array of frozen foods, deli foods, and other fully or partially prepared meals for at-home dining. As a result, many large restaurant companies have turned to acquisition to expand their menu offerings, to increase their number of locations, and to capture market share in a region or niche that previously was unavailable to them. Franchising. Since the 1970s, the growth of franchising has propelled the growth of the larger restaurant industry. The popularity of franchising stems from the parent company's ability to expand without as much expense, as start-up costs are usually paid by whoever purchases the franchise. In addition to a license fee and equipment and stock purchases,

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the local owner, or franchisee, pays the franchiser royalties based on sales. For the person buying into a well-known franchise, this is an extremely low-risk investment, when compared with independent eating establishments, which do not have an established clientele to be tapped. However, franchise...
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