The restaurant industry in the US, which stood at $899 billion before COVID-19, is very competitive, given many small to mid-sized players operate in this sector. Although more than 100k outlets went out of business during the pandemic, around 1 million restaurant operators in the US are still there. The numbers clearly suggest that if any prospective restaurateurs want to venture into the sector and remain relevant, they need to build their niche. A well-directed and well-rounded market research can help restaurant operators do the same.
What Is Market Research?
Market research is a fundamental activity that helps develop insights about a sector based on which a successful and efficiently run business is set up. You will hardly find a business succeed without conducting thorough research of their target market and segment. For an upcoming restaurateur, deep market research is the best way to keep up with the latest trends and understand the evolving consumer preferences that you can incorporate into your business for a better take-off.
Importance Of Market Research For A New Restaurant
Now that we understand that market research plays an essential role in the perfect launch of a restaurant business in the US, let us look at the different aspects of market research in more detail.
1. Developing Appropriate Concept
One of the most critical tasks for you as a prospective restaurateur is to decide the target audience, which comes from understanding customer preferences. The target audience will become the basis for developing the appropriate concept for your restaurant. Market research helps identify the potential audience and their changing preferences, spending habits, thought processes, and behaviour, which can be essential in deciding the restaurant’s concept.
For instance, if the market research indicates that your chosen location attracts a young population, you may want to start a Quick Service Restaurant (QSR) based on their food habits. On the other hand, if the research indicates a mix of families and bachelors, then a Full-Service Restaurant (FSR) might be a better option.
2. Selecting The Perfect Location
Location is another very critical aspect of a restaurant because it can affect your visibility and ability to lure customers. Market research provides insight into the consumer traffic in the selected area, which can determine the expected footfall in the future. You must ensure that the restaurant has a clear storefront, adequate visibility & accessibility, and offer great convenience to the consumers. Besides, the concept and location of the food outlet must complement each other.
3. Enhancing Customer Experience
It is nearly impossible for a restaurant to charm all types of customers. For instance, many consumers prefer quiet and intimate settings, while others prefer an energetic environment. The preferences can vary due to various factors, such as generational cohorts. So, market research is a must before the launch of a restaurant as it helps you identify the target demographic so that you can customize the menu and services catering to their needs. In this way, you can offer a more appealing menu that can give way to better customer engagement and eventually customer delight.
4. Maintaining Relevance
Market research at regular intervals helps your restaurant remain relevant in the market. For instance, culinary trends change very frequently, and this is where market research comes into play. Even if you just read the latest restaurant industry journals or review the available secondary research papers, you will find interesting insight into the upcoming trends. Based on your understanding and judgment, you can take advantage of the situation by either incorporating the trends if they are profitable or avoiding them in case they are yet to generate any positive cash flow.
5. Creating Competitive Advantage
In order to become a successful restaurant owner, you need to stay ahead of the competition. In such a scenario, market research is essential as it helps you assess your own marketing abilities compared to others operating in the industry. The research may include tracking online reviews, monitoring social media accounts, reviewing comments of influencers or food critics. It indicates your skills in serving the customers and the effectiveness of promotional activities vis-à-vis the competitors. If you find the competitors doing something well, you must learn from it to at least match them and then try to surpass them by creating a competitive advantage.
6. Building An Effective Business Plan
According to the Bureau of Labor Statistics (BLS), ~20% of the businesses go down in the first year, more than 50% fail to make it past the five-year mark, and 65% go out of business by the tenth year. One of the primary causes of the failure is the lack of a well-thought-out business plan. Just knowing your target demographics and their eating habits is not enough. You need to go beyond and develop a deep understanding of the industry’s changing dynamics, which can only be achieved through exhaustive market research.
For instance, study the historical sector data to predict the future industry developments to some extent. It can also help you create provisions to weather any catastrophic events based on past experiences. Given that a business plan is a priority, market research is also a must for budding restaurateurs.
7. Lowering Risks
Lastly, market research will help you identify the risks associated with the implementation of various decision-based actions. Typically, thorough research ensures that you become more confident with your decisions. If the analysis indicates a significant probability of success, you should go ahead with it. However, it is safe to avoid a business if the market research doesn’t provide much assurance. In this way, market research can help lower different types of risks.
In order to stay afloat in the face of growing competition and evolving customer preferences, you must implement a robust market research process besides the promotional campaigns, POS system, and other similar vital requirements. Excellent market research can help in maximizing your business strengths while minimizing the weaknesses.