Seven Reasons the Restaurant Industry is Still a Great Bet

Thursday, April 4, 2013
I placed my first bet on the restaurant industry years ago. I was a young army non-commissioned officer with a promising military career for the taking. The only problem was, I wanted to return to the civilian world and build a career in the restaurant industry. Just three days before my discharge date my unit's Sergeant Major, who had been both a supporter and mentor, dropped by the dining facility. In a comical attempt to encourage me to re-enlist he said "Wallace, it's not too late to change your mind and save yourself. I hear that in the civilian world, the lines for soup in New York stretch all the way to California". I smiled and replied, "With all do respect Sergeant Major, I guess that means the civilian world is in need of some well trained foodservice people". I noticed him chuckle and shake his head as he walked away. A few months later I was in college pursuing my degree in Hotel & Restaurant Management. Since then the industry has grown in ways that few could have predicted. My initial bet on the industry has paid off in spades. As a hospitality student, classically trained chef, restaurateur, and corporate executive, I have been privileged to experience the restaurant industry from several perspectives. Personal bias aside, I can say with certainty that there are many good reasons to know that the restaurant industry is still a great bet, in spite of our current economic storm. Here are seven reasons worth considering: 1. Needs Based - Restaurants serve two basic needs that are not going away any time soon. I am talking about the need to eat and the need to connect with others. When it comes to eating options, the industry has gone to great lengths to provide convenience. You can walk up, sit down, take it out, drive-through, and even drive up for curb-side services. When I travel outside of America, I am always amazed at how common it is for people to gather in town centers and open air cafes in the evenings to connect. Here at home, operations like Starbucks and casual bars have become our necessary "Third Place" for connecting away from home and work. 2. Lifestyle Driven - Generations "X" and "Y" have grown up eating meals prepared away from home. For them it is as common and expected as electric washers and dryers became for the previous generation. For these Americans, I don't envision a massive or permanent return to cooking any more than I envision a return to scrubbing boards and clotheslines. 3. Decentralized - Unlike some industries that have suffered the most recently, the restaurant industry has remained decentralized with resources and assets dispersed across the country. In the case of some of the biggest industry players, use of a franchise business model, has also provided dispersing of capital investment and risk. What this means is that the industry is not subject to a massive implosion like the automobile or banking industries have experienced. 4. Massive Scale - With more than a half trillion dollars in annual U.S. Sales and nearly a million restaurants nation wide, the restaurant industry's size attracts support from a wide range of industries. From back office technology to cooking equipment, companies across the globe invest heavily in research and development with the understanding that there will be a market for their best innovations. 5. Developed Infrastructure - Over the past few decades the restaurant industry has amassed an enviable infrastructure. From state-of-the-art distribution and logistics to national online reservations and employee training systems the industry has moved closer to being "Plug-and-Play" for even the smallest operators. 6. Entrepreneurial - In spite of the industry's size, according to national restaurant association statistics, 7 out of 10 restaurants are single unit operations. Fortunately, the barriers to entry into the industry have remained relatively low. As a result the industry enjoys constant bottom up innovation. The next trend is as likely to come from a small Cuban Diner in Miami as a heavily staffed test kitchen in Dallas. 7. An Affordable Luxury - Now once the economy begins to recover there will be some industries that will come back slower than others. One of the reasons restaurants in general have not fallen as sharply as others sectors, is that, eating out is still an affordable luxury even in difficult times. Most consumers don't have to take out a loan to enjoy a meal out. For this same reason pinned-up demand should drive strong growth as things recover. For all the reasons listed the restaurant industry is an exceptional source of opportunity for millions of Americans, who own, manage, and work in the industry across the nation. It stands and will continue to stand as an excellent example of sustainable healthy capitalism at its best. You can bet on it!