We are now witnessing a post-pandemic recovery for the HORECA industry. Unfortunately, lockdowns and COVID-related limitations took a toll on the restaurant business all over the world. With the pandemic over, vacant restaurant spots are being reopened and new businesses registered. Demand for catering, cafes and restaurants is once again what it was. Market research shows that starting a restaurant in 2024 is a feasible business idea.
About the reviewer
Alex Silensky, co-owner of a leading business consulting agency, OGS Capital, is an expert at consulting startups, conducting feasibility studies and developing business strategies.
Benefits of a feasibility study in the restaurant industry
To evaluate a business concept against existing market dynamics, restaurant feasibility studies are carried out by professional business consultants. These studies focus on anything from demand for another restaurant in the area to demographics, competition and viable location options.
The most important step for a restaurant is to identify the best potential market. Understanding the needs of a target market means that the business can cater to the demand. Creating demand for a menu that’s hard to comprehend for the target audience, will result in the risk of failing as a business.
Why some restaurants don’t make it
For each business, it’s a unique recipe for success or disaster. The reason behind why some restaurants don’t make it, is some sort of compilation of the following factors:
- Location;
- Human Resources;
- Fluctuations in costs;
- Competition;
- Low demand.
Location
Choosing a location is very important. Not many people will travel far just to eat. For instance, if a restaurant is located in a rural area, away from the big roads, there has to be something extra to make the trip worthwhile for the consumer .
Human Resources
For the HORECA industry, human resources are part of the businesses brand image. At least for the high-end cafes, restaurants and bars. Attracting and keeping experienced employees is a challenge, and may require more resources than initially planned. One of the challenges faced by restaurant startups is building a strong team.
Competition
Competition for the restaurant industry divides into two main blocks: other restaurants and delivery services. Ironically, delivery services pose a threat to the restaurant business. Busy schedules of the majority of the population cut down on time spent dining out.
Conclusion
Market research carried out by Datassential shows a projected 5.5% growth rate for the restaurant industry. Unfortunately, the statistics also show a high dropout rate within the first year of opening. Apart from something global, like the pandemic, that affects the industry as a whole, there are a number of factors that affect the livelihood of a restaurant. Feasibility studies help to make the business concept relevant for the target market.