What You Need to Know Before Starting a Food Service Business
Before you jump into this competitive industry, it helps to know who your diners are and what type of trends you might want to follow.
The following excerpt is from The Staff of Entrepreneur Media's book Start Your Own Restaurant and More. Buy it now from Amazon | Barnes & Noble | iTunes or click here to buy it directly from us and SAVE 60% on this book when you use code SIDEHUSTLE2021 through 6/20/21.
No single food-service operation has universal appeal. This is a fact that many newer entrepreneurs have trouble accepting, but the reality is, you'll never capture 100 percent of any market. When you try to please everyone, you end up pleasing no one. So focus on the 5 or 10 percent of the market that you can get, and forget about the rest.
That said, who's eating at restaurants? Let's take a look at the main market categories of food-service business customers.
This generation -- also tagged the "millennial generation" -- includes those born between 1980 and 2000. At least 75 million strong, Generation Y is the most ethnically diverse generation yet and is more than three times the size of Generation X. Gen Y teenagers have an average of $118 per week of disposable income, and 40 percent of them hold at least a part-time job. In terms of living arrangements, one in four lives in a single-parent household, and three out of four have working mothers. They're forming dining habits that will last a lifetime, and they're a prime market for food-service businesses. In fact, more than any other generation, they view prepared food as a staple, not a luxury. Even so, compared with older generations, they don't have as much money to spend on eating out. When choosing a restaurant, the top factors for Gen Y are low prices, great services and proximity to home or job. They look for discounts and coupons.
Members of Gen Y go for fast-food and quick-service items. About 25 percent of their restaurant visits are to burger franchises, followed by pizza restaurants at 12 percent. They do tend to be more experimental, however, and open to extreme flavors. Another clear difference about them is that they love places where they can be wired in so they can go online, check email and social media and play games while they eat, so make sure your WiFi is working. They also like restaurants where they feel they're welcome to stay as long as they like. In addition, they also like gadgets and/or self-serve terminals for placing food orders. So if you're looking to attract Gen Y patrons, make your operation low cost, high interest and high-tech/mobile device friendly.
Generation X is a label applied to those who were born between 1965 and 1979. While earlier generations strove to do better financially than their parents, Gen Xers are more likely to focus on their relationship with their children. They're concerned with value, and they favor quick-service restaurants and midscale operations that offer all-you-can-eat salad bars and buffets. To appeal to this group, offer a comfortable atmosphere that focuses on value and ambience.
A separate category within this age group includes working professionals who dine out with clients, partners or co-workers. Business lunches, luncheons and meetings present a huge opportunity for well-positioned restaurants in the heart of downtown or the local business district. Because businesses range widely in their culture and formality, restaurants for the business crowd can range from high-end formal to business casual. They must, however, understand the needs of the lunch crowd, which means prompt service, as time may be limited.
Born between 1946 and 1964, baby boomers make up the largest segment of the U.S. population. Prominent in this generation are affluent professionals who can afford to visit upscale restaurants and spend money freely. Today, those on the leading edge of the boomer generation are becoming grandparents, making them a target of both restaurants that offer a family-friendly atmosphere and those that provide an upscale, formal dining experience. Many have become empty nesters -- but others who thought they would be empty nesters at this point in their lives have seen their adult children move back home, and some are even caring for grandchildren. This is a tremendous demographic group that can't be reached with a one-size-fits-all product or marketing approach.
This group consists of people in the age range between the high end of the baby boomers and seniors (people in their early 50s to about age 64) who have grown children who no longer live at home. With the most discretionary income and the highest per-capita income of all the generations, this group typically visits upscale restaurants. They're less concerned with price and are focused on excellent service and outstanding food. Appeal to this group with elegant surroundings and a sophisticated ambience.
The senior market covers those who are 65 and older. Seniors range from those who are on fixed incomes and may not be able to afford upscale restaurants often to those who have tucked away significant savings and are enjoying their retirement years. Depending on the socio-economics of seniors in your area, you may opt for family-style restaurants that offer good service and reasonable prices or more upscale restaurants with higher quality items, yet not in rich or heavy sauces.
"Younger" seniors are likely to be more active and have more disposable income than "older" seniors, whose health may be declining. Other seniors may appreciate restaurants that offer early-bird specials and senior menus with lower prices and smaller portions. Restaurants dealing with a significant senior population should have flexibility with menu items and ingredients for health purposes.
The 1990s brought a trend to the restaurant industry that's continuing into the 21st century: an appreciation of value. There's no question that family-minded Generation Xers and baby boomers are concentrating on stretching their dollars.
Some other industry trends include:
Food trucks, carts and kiosks. Eating establishments no longer require customers to come to them. In many cases, the restaurant goes to the customer in the form of a food truck, cart or kiosk. Many limited-service mobile facilities are operating at locations that attract large numbers of people, such as malls, universities, airports, sports stadiums and arenas. These restaurants typically offer limited menus but attract customers with their recognizable names.
Nutrition-conscious customers. Restaurant-goers are showing a heightened interest in health and nutrition. Many are looking for low-fat dishes and fresh, locally sourced foods.
A focus on children. Because there are many families and baby boomers with grandchildren dining out, the majority of their restaurant experiences are family-oriented. Food-service operations wanting to reach this market are offering children's menus and children's value meals with smaller portions. Some offer child-friendly environments with booster seats, toys, balloons, crayons, menus featuring games on them and even free table-side entertainment in the form of magicians and clowns.
Expanding the bar. Restaurants want their guests to hang around, so they're offering more flavorful cocktails and savory appetizers, often available in bar areas designed for comfort and lingering. Classic, glamorous, old-fashioned cocktails have returned to popularity. And "mocktails" -- nonalcoholic drinks with the same sophisticated flavors as the cocktail menu -- are an attractive alternative for nondrinkers and designated drivers.
As you put together a plan for your food-service business, be aware of some of the trends in terms of menu content and design. These factors could -- and, in fact, should -- influence the type of food-service business you open.
Restaurant operators report that vegetarian items, tortillas, locally grown produce, organic items, fusion dishes (combining two or more ethnic cuisines in one dish or on one plate) and microbrewed or local beers continue to be popular. Pita dishes and wraps are also in high demand as an easy-to-consume alternative to sandwiches. You'll also see a strong demand for bagels, espresso and specialty coffees, as well as "real meals," which are typically an entrée with a side order. Other top menu trends include locally sourced meats and seafood, locally grown produce and co-op food sources, sustainability as a culinary theme, nutritious kids' dishes, gluten-free and food-allergy-conscious items, and back-to-basics cuisine.
Customers are also demanding "comfort food" -- the dishes that take them back to their childhoods, when mothers baked from scratch, and meat and potatoes were at the center of each plate. Creative chefs are looking for ways to redefine and reinvigorate comfort food favorites. Instead of the traditional version of shepherd's pie, for example, you might see one made with mushrooms, spinach, carrots and lobster sauce.
Menus are also showing a number of ethnic dishes and spice-infused offerings. It's not surprising to find Thai, Vietnamese, Creole, Tuscan and even classic French cuisines on the same menu and even on the same plate. There's also a growing trend of seasonal menus and smaller portions, including "mini food," such as small sandwiches and desserts that are just a few bites. These items are often served on smaller plates to enhance the presentation.
Though menu variety has increased over the years, menus themselves are growing shorter. Busy consumers don't want to read a lengthy menu before dinner; dining out is a recreational activity, so they're in the restaurant to relax. Keep the number of items you offer in check, and keep menu descriptions simple and straightforward, providing customers with a variety of choices in a concise format.
Another trend growing in popularity is the offering of sharable items, such as appetizers that can be shared by the entire party and half portions of entrée items. We're also seeing increased flexibility in restaurant dayparts; the traditional set times for breakfast, lunch and dinner are a thing of the past in our 24/7 world. In particular, offering breakfast any time of the day is rapidly becoming the new standard. Pay attention to these trends, and adjust your own menu when the market demands it.
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