News

Study predicts 5-year restaurant industry growth, but also new competition

November 22, 2016

There is some fairly positive news this Thanksgiving week in the latest IBIS report on the chain restaurant industry nationally. The study indicated that chain restaurants have experienced steady growth over the last five years. It attributed growth to an increase in per capita income, consumer confidence and spending, as well as a decline in overall unemployment. 

The report also found that although profit margin remains slim for the restaurant industry as a whole, most chains have gotten fatter profit margins over the last five years thanks to more revenue and lower costs. Over the five years to 2016, industry revenue is expected to increase at an annualized rate of 4.3 percent, to $107.6 billion, according to a news release about the study.

The study predicted the industry's run of steady growth will moderate over the five years to 2021, and blames competition from the fast casual sector for being a force for overall food service sector change in coming years. IBIS World Industry Analyst Andrew Alvarez said that although consumers will increase restaurant spending as the economy continues to improve, that may not be all good news for the total sector.

"Increasing competition from a growing number of fast casual restaurants that serve high-quality food at reasonable prices and have business models that are not reliant on large overheads will continue to threaten industry profit margins," Alvarez said in a news release. 

In fact, for this reason, IBIS predicts that major full-service restaurant chains will increasingly push operations abroad to emerging economies for growth.