Industry Analysis-Restobar
Industry Analysis: Resto- Bar
Restaurant and Bar companies are essentially retailers of prepared foods and alchoholic beverages, and their operating performance is influenced by many of the same factors that affect traditional retail stores. For the most part, resto-bars have business models that are relatively easy to understand, but the various innovations could be brought into the value chain and revenue streams. Nonetheless, there are a number of unique factors to consider when making investment decisions regarding this large and segmented industry.
Competition between restaurants is intense, since dining options abound. And, while there are certainly dominant players in this industry (especially among fast-food purveyors), no one company has the market cornered. Indeed, virtually every restaurant location must compete not only against other publicly traded chains, but also a wide array of small, local establishments. Competitors include everything from traditional hotel and pizzerias to fine-dining restaurants. And, of course, it is relatively easy to forgo prepared foods, altogether, in favor of home cooking, which is usually a less expensive option. Thus, restaurant meals are discretionary purchases, and the industry tends to be highly cyclical.
Sales
Top-line growth is typically generated in two ways, opening locations and boosting same-store sales. Opening new doors is a straightforward strategy, and usually the main driver of revenue when a company is in its early stages. As a chain grows in size, however, it becomes increasingly difficult to capture benefits. The best, most profitable locations are established first, and then managers must be careful not to place restaurants too close together, lest they cannibalize each other's sales.
Store sales is a valuable metric to examine when analyzing restaurants. They are particularly important once a company reaches maturity, since they become the primary driver of growth. Product innovations and menu-price
Restaurant and Bar companies are essentially retailers of prepared foods and alchoholic beverages, and their operating performance is influenced by many of the same factors that affect traditional retail stores. For the most part, resto-bars have business models that are relatively easy to understand, but the various innovations could be brought into the value chain and revenue streams. Nonetheless, there are a number of unique factors to consider when making investment decisions regarding this large and segmented industry.
Competition between restaurants is intense, since dining options abound. And, while there are certainly dominant players in this industry (especially among fast-food purveyors), no one company has the market cornered. Indeed, virtually every restaurant location must compete not only against other publicly traded chains, but also a wide array of small, local establishments. Competitors include everything from traditional hotel and pizzerias to fine-dining restaurants. And, of course, it is relatively easy to forgo prepared foods, altogether, in favor of home cooking, which is usually a less expensive option. Thus, restaurant meals are discretionary purchases, and the industry tends to be highly cyclical.
Sales
Top-line growth is typically generated in two ways, opening locations and boosting same-store sales. Opening new doors is a straightforward strategy, and usually the main driver of revenue when a company is in its early stages. As a chain grows in size, however, it becomes increasingly difficult to capture benefits. The best, most profitable locations are established first, and then managers must be careful not to place restaurants too close together, lest they cannibalize each other's sales.
Store sales is a valuable metric to examine when analyzing restaurants. They are particularly important once a company reaches maturity, since they become the primary driver of growth. Product innovations and menu-price