Over 46% of the full service restaurant chain units are netting $1-$2.5 million per year in annual sales.
Chicago, IL (PRWEB) April 19, 2012
CHD Expert is America’s leader in collecting, managing and analyzing data in the away from home foodservice market, and they expect independently owned full service restaurants to continue to hold strong during tough economic times.
If you think that Chili’s, IHOP and Applebee’s are taking over the full service restaurant (FSR) industry, think again. Independent FSR locations across the United States outnumber the major chains by eight to one (Source:1). This is a bit surprising, as our streets and highways are seemingly lined with major chain restaurants. Still the independently owned FSR operators are holding their own during the worst of economic conditions and increased encroachment from the major chains.
How are they doing it? Consumers seem to enjoy the independent experience. This could be due to long-term loyalty the consumer has to their local neighborhood restaurant. Independent restaurants have a tendency to understand the regional cuisine and local tastes as well as preparation methods that consumers prefer. They also have the flexibility of changing their menu to offer more variety, whereas the chains do not. There is also a strong attraction by the consumer for the local décor and ambiance their local independent restaurants give them offering a strong level of comfort. With a high level of intimacy offered, service qualities extend to knowing the consumer’s name as well as their ordering history. The local Pub N’ Grub isn’t going away anytime soon. And there are many more of them to choose from.
Whatever the reason, the resilience of the local independent restaurant is unmistakable. But despite having many more locations, independents are dwarfed by the chains in dollar volume. Almost 62% of the independent FSR restaurateurs have less than $500,000 in annual sales; only 3% of chains are at or below this sales level. Over 46% of the full service restaurant chain units are netting $1-$2.5 million per year in annual sales.
Of particular interest on this note is the northeastern U.S. The northeastern states (Washington DC and north, including Pennsylvania) account for 10 out of the top 11 states with the highest density of independent FSR restaurants by percentage in the country. Only Alaska breaks into the top eleven. In total, over 93% of FSR locations in this region are independently owned.1
One might argue that the ethnic diversity of the northeastern states results in numerous specialty restaurants to service the various cultures here. By overlaying consumer demographics with independent restaurant footprints, we can get a clear understanding of the affect ethnicity has in the market. Certainly, this part of America is historically the oldest, and many of the independents in the region might have been handed down from generation to generation. One might also speculate that Manhattan and other major cities have skewed the numbers; as local ordinances, zoning laws and/or costly real estate have subdued the expansion of the conglomerates in this market.
It appears there are some markets that have the ability to keep the chain restaurants at bay and win the battle for market share with their experience of being both flexible and nimble to adapt and evolve in the foodservice market.
A better understanding of the independent market conditions will benefit both restaurant operators and suppliers/distributors who partner with them. The ability for food service providers to reach the independent operators has and continues to be a challenge. With the large number of independents in the food service industry, it will be critical for food service providers to leverage this information and increase their market share in the industry through direct independent operator outreach.
According to Cathy Kearns, General Manager at CHD Expert, a Chicago-based database marketing firm, “Many of our customers like to focus on the major restaurant chains in their marketing efforts, but there is actually more potential in the independent restaurant market. Prudent marketing strategy should not preclude the little guys… en masses they are a very powerful customer basis”.
CHD Expert is the worldwide leader in collecting, managing and analyzing data for the Away-from-Home Global Foodservice Market. For more than 10 years CHD Expert has been dedicated to support Foodservice channel members in providing a global vision and an in-depth understanding of the industry (in Europe, North America and Asia Pacific).
Our objective is to support food service providers in their sales and marketing strategies by providing the most comprehensive and accurate foodservice census, housing operator intelligence for more than 4 million operators worldwide.
1.Source: CHD Expert, Internal Data, April 2012