Restaurant Industry
Research- Part 3

Industry Research- Competition

The competition falls into several different categories, each of which you need to pay attention to and scope out completely. There are competitors who compete with you because they are the restaurants closest to you, the ones in the same food category as you, and the ones in the same price category as you. Obviously your very closest competitors are the ones that fit all three categories- for example if a taco stand opened across the street from your Mexican fast food restaurant!

A big part of understanding who your competition is relates to knowing who your customers are. If your customers are mostly dinner patrons coming for a nice evening out, then chances are they will come from a larger radius, and they will be less price sensitive than if other types of customers. In this case you are competing with the other upscale restaurants, of which there are fewer, but from a wider circle of driving time.

On the other hand, if your customers are mostly the office lunch crowd, then they don't have a lot of time to drive around looking for food, so you have fewer competitors in a smaller area, but these eaters are often looking for a good deal on the price, and they want quick service, so you are competing with the fast food chains and the pizza delivery places.

So, to thoroughly research your competition, complete the following steps:

1) Figure out the range of how much your customer is going to spend, on average, in your restaurant. (For example, the average range might be $2.50 to $6.50 for a typical fast food customer)

2) Figure out where most of your customers are going to be coming from- how far away will somebody reasonably drive to get to your restaurant- be realistic.

3) Decide what category of food you are serving. (This should be easy! Mexican, burgers, gourmet, etc.)

4) Imagine your restaurant is the point in the center of a circle- now draw a circle around that point on a map however far out you have estimated people will drive from to get to your location. In a dense city, this might only be ½ a mile or less, in a rural town it might be 20 miles or more. Only you can guess, but be conservative, and if have time, go sit in the restaurant of one of your close competitors and see who comes in their restaurant, and see if you can figure out how far away they are coming from- you can even ask them!

5) Now count how many restaurants in the circle you drew are charging prices that overlap your price range. (If you figured $2.5 to $6.50, and someone charges $4 to $9, count them, if they charge $6 and up, don't bother)

6) Count how many, at any price, there are of restaurants in the same food category as you are.

7) These are your competitors- make a list of each under distance, price, and category. The ones that appear in more than one category are the biggest threats and the ones you should keep an eye on. They are also the ones you should include in the plan, when it later asks for specific competitors.