Increased disposable income will benefit restaurants, spurring new construction
Los Angeles, CA (PRWEB) February 06, 2013
The Restaurant Construction industry experienced difficult conditions over the five years to 2013. During the five-year period, industry revenue contracted at an average annual rate of 6.9% to $3.7 billion in revenue. Heightened unemployment and decreased disposable income during the recession resulted in a greater number of consumers cutting back on discretionary expenditures, with restaurant spending declining 0.4% in 2008 and 2.9% in 2009. According to IBISWorld industry analyst Caitlin Moldvay, “With lower consumer spending and tighter credit conditions, restaurants shelved expansion and remodeling plans and delayed entering the industry.” At the height of the recession, spending on restaurant construction projects contracted 41.7%, according to data from the US Census Bureau. Because commercial construction typically lags behind the overall economy by one to two years due to the contract length, the industry continued to decline through 2011, although consumer spending on restaurants began rising during the recovery period. After turning the corner in 2012, the industry is expected to achieve continued growth through 2013, due to rising consumer spending and low interest rates. In 2013, IBISWorld expects that industry revenue will rise 10.4%.
Although overall spending on restaurant construction projects declined, the fast food restaurant segment outperformed the industry average. “From 2008 to 2012, spending on fast food restaurant construction projects grew at an annualized rate of 0.4%, in stark contrast to double-digit declines for the overall industry,” says Moldvay. Value-priced meals were particularly appealing to cash-strapped consumers during the recession, which resulted in an expansion in the Fast Food Restaurants industry. Furthermore, fast food restaurants have also expanded their array of healthy menu options, a trend that has been particularly appealing among consumers.
The Restaurant Construction industry has a very low level of market share concentration, with the four largest companies combined accounting for less than 4.0% of industry revenue. The vast majority of firms in the industry are small-scale, local contractors that perform fewer than five contracts per year. As such, rarely does a single general contractor earn enough revenue from restaurant construction to achieve a significant share of the market. The industry's largest firms typically operate throughout a few regional states, with the occasional project in another part of the country. However, even these firms generate a very small percentage of total industry revenue. The fundamentally fragmented nature of the industry is not expected to change during the next five years.
Over the next five years to 2018, the Restaurant Construction industry is expected to continue to gain strength. From 2013 to 2018, industry revenue is forecast to rise. The industry will primarily benefit from rising disposable income, which will enable consumers to ramp up discretionary spending on dining out. As a result, restaurants are expected to undertake expansion projects shelved during the recession and increasingly enter the industry, due to its greater growth prospects, benefiting industry revenue growth.
For more information, visit IBISWorld’s Restaurant Construction in the US industry report page.
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IBISWorld industry Report Key Topics
This industry includes operators that engage in new work, additions and reconstruction projects for food service establishments. These include commercial construction projects for fast food restaurants, single-location restaurants, chain restaurants and bars with full food services.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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