Key Trends- Restaurant Franchises

Although Americans are becoming more frugal about spending their money at restaurants, the industry is still thriving. Fast food chains often benefit from economic downturns because people simply choose less expensive restaurants when they do eat out or get take-out.
 
The National Restaurant Association forecasts restaurant revenues of $558 billion in 2008, at 945,000 restaurants nationwide. Restaurant revenue is expected to grow 4.4% in 2008 and make up 4% of the U.S. gross domestic product.
 
The restaurant industry has earned a reputation for high risk and high rewards. Some industry analysts claim a dubious 90 percent failure in the first year. Franchise restaurants based on proven systems have a higher success rate -- about 62 percent over four years – than independent operators.
 
Restaurants & Institutions (R&I), a leading source of vital information for the entire food service industry, in its 2008 New American Diner Study found that eating out continues to be an important part of Americans' busy lives. The average adult purchases a meal or snack away from home about 3.72 times each week. Nearly one-third (31.9%) of respondents say that on weekdays they always or often purchase lunch at a restaurant or fast food provider.
 
A quick glance at the R & I’s Top 400 restaurant chains for 2007 reads like a “Who’s Who” of franchising:
 
1. McDonald’s  ($63,554 million in sales)
2. KFC ($14,575)
3. Burger King ($13,200)
4 .Starbucks ($12,900)
5. Subway ($11,300)
6. Pizza Hut ($9,500)
7. Wendy’s ($9,025)
8. Taco Bell ($6,400)
9. Domino’s Pizza ($5,437)
10. Dunkin’ Donuts ($5,220)
11. Applebee’s Neighborhood Grill & Bar ($4,507)             
12 Chili’s Grill & Bar ($3,790.0)              
13 Sonic ($3,608)      
14 Arby’s ($3,400)
 
 
When buying food from quick service franchise restaurants, customers typically look for value in return for their purchases. But there is also a trend for consumers to seek more upscale food service, which is driving the growth of “fast-casual” chains, such as Panera Breads. The fast-casual segment grew at twice the rate of fast serve restaurants last year, with seven fast-casual restaurant franchises reporting nearly 18 percent increase in sales and 11.6 percent in unit growth. Panera Breads leads the pack at 20 percent increase in sales and 17 percent in unit expansion.
 
One factor influencing the growth of the fast-casual segment is the popularity of Mexican restaurants. Chipotle is the winner in the fast-casual Mexican segment with some $500 million in sales and nearly 300 units. The chain increased sales last year by 31 percent, and grew units by 12 percent – making it the ninth consecutive year of double-digit growth.
 
The snack segment of the restaurant industry made the strongest growth gains last year. For chains that sell coffee, doughnuts, ice cream and smoothies, sales grew about 17 percent.
 
What factors most influence consumers’ choice in restaurants and fast foods? Chain Leader Magazine recently published survey results from Technomic Inc., a Chicago market research firm, that indicated 65 percent of respondents choose restaurants based on food taste and freshness. Another survey backed up this finding, with participants citing cleaniness (82 percent) and food flavor and freshness (75 percent) as the most important criteria for choosing where to eat out. 
 
Franchise restaurants offer a consistent experience -- consumers know the premise will be well-kept, the food tasty and a good value for their money – all good reasons for choosing which restaurant to patronize.