Wednesday, February 27, 2019

Why Are Restaurants' Profit Margins So Low

Why Are Restaurants'
The restaurant industry in the U.S. Is vast
and is a part of daily life in America with 57 percent of us eating at a restaurant at
least once a week. In fact, for the first time in recorded history,
U.S. Consumers are spending more money at restaurants than at grocery stores.

With the restaurant industry growing and becoming
more prevalent every year, here are 5 things you need to know about the restaurant industry:
Number one: In 2016 there were more than 1 million restaurant locations in the U.S. And
they generate annual sales of $780 billion. Number two: According to the U.S. Bureau of
Labor Statistics, in 2017 the restaurant industry employed 12 million peopleenough to fill
Chicagos Soldier Field almost two hundred times over.

Number three: 425,000 of the 1 million restaurants
located in the U.S. Are either independently owned or ran by a franchiseewhich means
many of these establishments are considered small businesses. You see, while franchised restaurants are
associated with a larger corporate body, the franchisee who owns and operates the establishment is not much different than the mom-and-pop diner down the street. Number four: The average profit margin for
U.S.

Restaurants usually hovers between 4 and 6 percentmeaning for every dollar in
sales, the business owner only collects 4 to 6 cents. However, profit margins have historically
been known to drop to as low as 1.4 Percent. Number five: 33 percent of restaurant revenue
goes towards paying wages, which means that government mandated increases in the entry-level
wage can be really hurt an independent restaurant owner or franchisee. A business owner can only raise prices so
much before customers start going away.

The restaurant industry plays a vital role
in both the lives of ordinary Americans and the U.S. Economy..

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