The US restaurant industry is huge and diverse. But guess what? Only a tiny percentage of restaurants actually dominate the market.
According to Tarci’s research, out of the approximately one million restaurants in the US, a mere 3% have three or more locations. That means most restaurants are independent and have to fight for every customer.
Now, why does this matter to you? Well, if you’re offering services or products to small and medium-sized businesses (SMBs) in the restaurant industry, it’s a big deal.
While most entrepreneurs focus on the big players that everyone knows, you have a golden opportunity to tap into the hidden potential of these seemingly humble establishments.
Keep reading for strategies to succeed in the fragmented US restaurant industry.
Why Are Most US Restaurants Single-Unit Operations?
You may have been surprised to learn that only 3% of US restaurants have 3 or more locations. Another statistic, revealed by the National Restaurant Association sheds light on an intriguing trend within the industry. The majority of restaurants in the United States, roughly 70%, are single-unit operations with fewer than 50 employees. So, what’s behind this prevalent pattern? We’ve identified three main factors:
- Cost and Risk: Opening and operating multiple restaurant locations is expensive and risky. It involves finding locations, hiring staff, managing inventory, complying with regulations and taxes, maintaining quality, and dealing with competition.
- Low-Profit Margin and Cash Flow: According to Zippia, the average profit margin for a full-service restaurant is 3 to 5%. This means that restaurants must generate a high sales volume and control their expenses to stay profitable. However, many restaurants face cash flow issues due to seasonality, volatility, or unexpected events that affect their revenue and expenses.
- Preference and Passion: Some restaurant owners prefer to focus on one location and create a unique concept that reflects their vision and values. They enjoy being hands-on and involved in their business. They also have a loyal and niche customer base that appreciates their offerings and service.
How Can You Benefit from This Trend?
As a business that provides services or products to SMBs in the restaurant industry, you can leverage this trend to your advantage. Here are some ways you can do that:
- Target the smaller restaurant market: Develop tailored solutions and services that cater to the specific needs and challenges faced by smaller restaurants. This could include providing cost-effective insurance packages, financial management tools, or efficient delivery services that cater to their scale of operations.
- Identify growth potential: While most restaurants have a single location, the 3% that have multiple locations indicate the potential for expansion and growth. Consider offering specialized services or support for these growing restaurant chains. This could involve creating custom packages for their insurance and financial needs or offering bulk discounts on products and services to incentivize their continued partnership with your business.
- Establish partnerships: Explore opportunities to collaborate with other businesses that cater to the restaurant industry. For instance, partnering with POS (Point of Sale) system providers, food suppliers, or restaurant technology companies can help you tap into the restaurant market more effectively. By integrating your services with theirs, you can create comprehensive solutions that address the needs of restaurant owners and enhance your value proposition.
What Kind of Services or Products Can You Offer?
The practical implications for your business model will also depend on what kind of services or products you offer to SMBs in the restaurant industry. For example:
- Insurance services: You can target independent and single-unit restaurants needing more protection and coverage from various risks, such as property damage, liability claims, employee injuries, food spoilage, business interruption, etc.
- Finance services: Offer loans, lines of credit, equipment leasing, merchant cash advance, or other financing options to help independent and single-unit restaurants cope with cash flow challenges, expansion plans, renovation projects, or unexpected expenses. You can also provide financial advice and guidance on managing their finances effectively and efficiently.
- Delivery services: Partner with independent and single-unit restaurants that may not have their own delivery infrastructure or staff or that may want to expand their reach and customer base. You can also offer them competitive rates, fast and reliable service, and easy-to-use technology platforms that integrate with their existing systems.
However, be aware of the seasonality and volatility of the restaurant industry, which may affect the demand and supply of your services or products. For example, some restaurants may experience higher sales during holidays, weekends, or special events, while others may face lower sales during bad weather, economic downturns, or health crises.
This trend allows you to reach a wider audience, increase your customer base, and make more profit. But to turn this insight into action, you will need to gather additional supporting data, and that is where Tarci comes in.
For instance, geographic distribution data that analyze which regions or cities have a higher concentration of multi-location restaurants can guide your marketing and expansion strategies. Also, other market trends and challenges data include factors such as changing consumer preferences, emerging technologies, or regulatory changes that will help you adapt your services and offerings to align with the evolving needs of restaurant owners.
Tarci can easily provide you with these data and all the insights you need to conduct additional research and stay informed about the restaurant industry. You can then refine your business model, develop effective strategies, and better serve the needs of small and medium restaurants in the United States.
Contact the Tarci team today to get all you need to turn our insights into success stories with your new or existing clients.