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CHAPTER 3: ENTREPRENEURSHIP IN THE RESTAURANT BUSINESS
Learning Outcomes:
At the end of this chapter, the student will be able to:
• Learn about the different generations as target market for the
restaurant business.
• Understanding the type of restaurant concepts.
• Apply the SWOT analysis in creating a restaurant concept.
TARGET MARKETS
No single food-service operation has universal
appeal. This is a fact that many newer
entrepreneurs have trouble accepting, but the
reality is that you will never capture 100 percent of
the market. When you try to please everyone, you
end up pleasing no one. So, focus on the 5 or 10
percent of the market that you can get, and forget
about the rest.
With that said, who is eating at restaurants? Let’s
look at the main market categories of food-service
business customers:
Generation Y. This generation also tagged the “millennial generation,” th e “echo” or the
“boomlet” generation, includes those born between 1980 and 2000. Generation Y is the most
ethnically diverse generation yet and is more than three times the size of generation X. They are
prime target for a food-service business. Members of generation Y go for fast-food and quick-
service items. About 25 percent of their restaurant visits are to burger franchises followed by
pizza restaurants at 12 percent.
Generation X. Generation X is a label applied to those who were born between 1965 and 1980.
This group is known for strong family values. While earlier generations strived to do better
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financially than their parents, Gen Xers are more likely to focus on their relationship with their
children. They are concerned with value, and they favor quick-service restaurants and midscale
operations that offer all-you-can-eat salad bars and buffets. To appeal to this market group,
offer a comfortable atmosphere that focuses on value and ambience.
Baby boomers. Born between 1946 and 1864, baby boomers make up the largest segment of
the U.S population. Prominent in this generation are affluent professionals who can afford to
visit upscale restaurants and spend money freely. During the 1980’s, they were the main
customer group for upscale, trendy restaurants. In the 1990’s, many baby boomers were two-
income households with children. Today, those on the leading edge of the boomer generation
are becoming grandparents, making them a target of restaurants that offer a family-friendly
atmosphere and those that provide an upscale, formal dining experience.
Empty nesters. This group consists of people in the age range between the high end of the
baby boomers and seniors (people in their early 50s to about age 64). Empty nesters typically
have grown children who no longer live at home, and their ranks will continue to increase as the
baby boomers grow older and their children leave home. With the most discretionary income
and the highest per-capital income of all the generations, this group typically visits upscale
restaurants. They are less concerned with price and are more focused on excellent service and
outstanding food. Appeal to this group with elegant surroundings and a sophisticated ambience.
Seniors. The senior market covers the large age group of people age 65 and older. Generally,
the majority of seniors are on fixed incomes and may not often be able to afford upscale
restaurants often, so they tend to visit family-style restaurants that offer good service and
reasonable prices. “Younger” seniors are likely to be more active and have more disposable
income that “older” seniors, whose health may be declining. Seniors typically appreciate
restaurants that offer early-bird specials and senior menus with lower prices and smaller
portions, since their appetites are less hearty than those of younger people.
Kindly check the video below on How to identify your target market.
VIDEO GUIDE:
Please check the video guide below of ‘5 Traits of Successful Entrepreneurs’
https://www.youtube.com/watch?v=LeIePgFDAQI
How to Start a Restaurant?
Restaurant Service Styles
Restaurants are classified into three primary categories:
quick-service, midscale and upscale. Quick-service
restaurants are also known as fast-food restaurants.
These establishments offer limited menus of items that
are prepared quickly and sold for a relatively low price.
In addition to very casual dining areas, they typically
offer drive-thru windows and take-out service.
When people think of fast-food restaurants, they often
think of hamburgers and French fries, but
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establishments in this category also serve chicken, hot dogs, sandwiches, pizza seafood and
ethnic foods.
Midscale restaurants, as the name implies, occupy the middle ground between quick-service
and upscale restaurants. They offer full meals but charge prices that customers perceive as
providing good value. Midscale restaurants offer a range of limited and full-service options. In a
full-service restaurant, patrons place and receive their orders at their tables; in a limited-service
operation, patrons order their food at a counter and then receive their meals at their tables.
Many limited-service restaurants offer salad bars and buffets.
Upscale restaurants offer full table service and do not necessarily promote their meals as
offering great value; instead, they focus on the quality of their cuisine and the ambience of their
facilities. Fine-dining establishments are at the highest end of the upscale restaurant category
and charge the highest prices.
Kindly check the video below on ow To Start A Restaurant With NO Experience.
VIDEO GUIDE:
Please check the video guide below of ‘How To Start A Restaurant With NO
Experience | Restaurant Management 2020’
https://www.youtube.com/watch?v=IwR3lDovX4Y
Selecting a Food Concept
Restaurant patrons want to be delighted with their dining experience but they don’t necessarily
want to be surprised. If you’re anticipating a family-style steakhouse (based on the name or the
décor of the establishments), but you find yourself in a more formal environment with a
bewildering and pricey gourmet menu, the surprise may keep you from enjoying the restaurant.
Concepts give restaurateurs a way to let patrons know in advance what to expect and also to
provide some structure for their operation. Here are some of the more popular restaurant
concepts:
Seafood. Quick-service seafood restaurants generally offer a limited range of choices, often
restricted to fried seafood. Midscale and upscale seafood restaurants offer a wider selection,
prepared in ways other than fried, such as baked, broiled and grilled. Seafood can be a risky
area on which to focus, as prices are always changing, and many kinds of seafood are
seasonal. Also, quality can vary fresh and meet your standards of quality. If you are not happy
with what a distributor offers, you can be sure your customers won’t be, either.
Steakhouses. Steakhouses are part of the midscale and upscale markets. Midscale
steakhouses are typically family-oriented and offer casual environment with meals perceived as
good values. In terms of décor, comfort is emphasized and western themes are popular.
Upscale steakhouses offer a more formal atmosphere and may serve larger cuts of meat that
are of better quality than those served in midscale restaurants. Upscale establishments also
charge higher prices, and their décor may be similar to that of other fine-dining establishments,
offering guests more privacy and focusing more on adult patrons than on families.
Family-style restaurants. As the name implies, these establishments are geared toward
families. Since they charge reasonable prices, they also appeal to seniors. They offer speedy
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service that falls somewhere between that of quick-service places and full-service restaurants
their menus offer a variety of selections to appeal to the interests of a broad range of customers,
from children to seniors. Family-style restaurant prices may be higher than those at fast-food
restaurants. But these establishments provide table service to compensate. The décor of family-
style restaurants is generally comfortable with muted tones, unremarkable artwork, and plenty of
booths and wide chairs. Booster seats and highchairs for children are readily available.
Casual-dining restaurants. These establishments appeal to a wide audience, ranging from
members of Generation Y to Generation X to baby boomers with families to seniors, and they
provide a variety of food items, from appetizers and salads to main dishes and desserts.
Casual-dining restaurants offer comfortable atmospheres with midrange prices. Many centers
on a theme that’s incorporated into their menus and décor.
Ethnic restaurants. Ethnic restaurants enjoy a significant share of the U.S restaurant market.
They range from quick-service places with limited selections to upscale eateries with a wide
variety of menu items. Their menus typically include Americanized versions of ethnic dishes, as
well as more authentic food. The three most popular kinds of ethnic restaurants are Italian,
Chinese and Mexican. Other popular ethnic restaurant types include Indian, Thai, Caribbean,
English, French, German, Japanese, Korean, Mediterranean and Vietnamese. An even wider
variety of ethnic restaurants can thrive in areas with a culturally diverse population, such as
large metropolitan areas.
Pizzeria. You have two primary choices when starting a pizzeria. One is a to-go restaurant in a
modest facility with a specialized menu highlighted by pizza and beer, limited seating and a self-
service atmosphere. The other is a full-service pizza restaurant with a menu that features not
only a variety of pizzas, beer and wine, but also Italian entrees like spaghetti, ravioli and
lasagna, side dishes such as salads (or even a salad bar), and a few desserts. The foundation
of a pizzeria ism of course, the pizza. If you don’t know how to make a good pizza, hire a good
pizza cook. Invest in top-quality ingredients and preparation methods, and make every pizza as
if you’re going to eat it yourself. Do that and your customers will keep coming back for more.
Sandwich Shop/Delicatessen. One reason sandwich shops are so successful is that they
enjoy high profit margins. Sandwich shops and delicatessens can also change their menus
quickly and easily to adapt to current tastes. For example, with the growing interest in health
and nutrition in the United States, sandwich shops and delicatessens have started offering more
low-fat, healthy ingredients in their sandwiches, salads and other menu items. In addition, many
sandwich shops and delis have been able to keep up with workers who eat at their workplaces
by adding delivery and catering to their sit-down and take-out operations. Sandwich shops and
delicatessens can differentiated by the foods they serve. Most sandwich shops serve only
sandwiches, possibly with some side dishes or desserts. A delicatessen usually offers a more
extensive menu, including sandwiches, prepared meats, smoked fish, cheeses, salads, relishes
and various hot entrees.
Coffeehouse. With more than 400 billion cups consumed every year, coffee is the world’s most
popular beverage. But beyond the beverage itself, people frequent coffeehouses and espresso
bars for variety of reasons: to meet with friends, for a quick lunch and drink to perk up the
afternoon, or simply to start off each morning with a great cup of coffee. Most successful
coffeehouses have heavy foot traffic and high-volume sales. The majority will serve up to 500
customers per day and manage up to five customer turnovers during the lunch hour, despite
having limited floor space and modest seating capacity. Profit margins for coffee and espresso
drinks are extremely high, you’re dealing with a product that’s more than 95 percent water. At
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the same time, your average ticket amount is around $3, so you need volume to reach and
maintain profitability. Besides specialty roasted coffee by the cup, most coffeehouses also have
espresso-based drinks (cappuccinos, lattes, etc.), assorted teas, bottled water and fruit juices,
along with an inviting assortment of baked goods, a selection of desserts, and coffee beans by
the pound.
Bakery. With the emergence of strip malls and competition from supermarkets that have in-
store bakeries, “bread-only” retail bakeries have almost disappeared from United States.
Bakeries today offer cakes, scones, bagels and coffee drinks, and sometimes even a full dining
menu, including sandwiches, hot entrees, beer and wine. Consumers love fresh bakery goods,
but the market is extremely competitive. As you develop your particular bakery concept, you’ll
need to find a way to differentiate yourself from other bakeries in town.
Kindly check the video link below on How To Choose One of 10 Different types of
Restaurant Business Concepts!!
VIDEO GUIDE:
Please check the video guide below of ‘How To Choose One of 10 Different
types of Restaurant Business Concepts!!’
https://www.youtube.com/watch?v=0pzyF58Yyek
Working in a Restaurant
Dealing graciously with customers and
playing the role of an elegant host are only
part of a restaurateur’s many duties. Food-
service business operators spend most of
their time developing menus; ordering
inventory and supplies; managing
personnel; creating and implementing
marketing campaigns; making sure their
operation is in compliance with a myriad of
local, state and federal regulations;
completing a wide range of paperwork; and
performing other administrative chores.
Certainly, the financial opportunities are
there-as well as the fun aspects of the business- but starting, running and growing a food-
service business is also hard work.
Regardless of the type of food-service business you intend to start, the best way to learn the
ropes is to work for a similar operation for a while before striking out on your own. Doing so will
give you significant insight into the realities and logistics of the business.
Successful restaurateurs agree that the best preparation for owning a restaurant is to work in
someone else’s first. Think of it as getting paid to be educated. Certainly, you should also plan
to work in a restaurant for at least a few years doing as many different jobs as possible. And if
you’re not actually doing it when your own restaurant is unexpectedly shorthanded.
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Ideally, you should work in a restaurant similar to the type you want to open. You may find out
that you don’t like the business. Or you may find you’re more suited to a different type of
operation than you originally thought. Hopefully, you’ll discover you’re in exactly in the right
place.
“As soon as I started working in a restaurant, I realized this way my passion,” says Scott Redler,
“when you have a busy restaurant, and you’re watching everything happen as it should, it’s just
wonderful feeling of satisfaction.” Redler has worked in various restaurants for 11 years, he
opened Chinese fast-food place at the age of 26. That venture failed within eight months, then
Redler went to work for a large restaurant company, where he eventually advanced to the
position of senior vice president, overseeing 15 operations. But he still yearned for his own
place, so he developed the concept that became Timberline Steakhouse & Grill in Kansas
(which he sold in 2011). He recognized that the fast, casual segment was gaining momentum,
so he created Freddy’s Frozen Custard, which offers hot dogs, hamburgers, and (as you might
expect) frozen custard. Freddy’s Frozen Custard franchise operation with 60 stores. As long as
there are people that have money, there are lots of people who are willing to satisfy their needs.
Entrepreneurs are individuals who seeks opportunities for business. They are creative,
resourceful and they are willing to take risk in business.
In discovering business opportunities, the following factors or resources have to be evaluated.
1. MARKETS - The number of prospective buyers, the presence of competitors, and the
prices and quality of goods and services have to be analyzed. Are the needs of the
consumers fully satisfied> if not, then business opportunities exist in areas where
consumer satisfaction is weak or incomplete.
2. INDIVIDUAL INTEREST - Business interest of individuals vary. There are those who are
interested in agriculture. Others are inclined to industries. Not a few like to be
employees. Interest should match business opportunities. For example, owning a house
close to a university would be a good place to sell food for lunch or run a boarding
house.
3. CAPITAL - Money is very important in putting up a business enterprise. The availability
of funds should fit the type of business to be organized. One who has a limited capital
start with a microbusiness. Many in schooled individuals started with such business, and
many of them are very much successful in their endeavors.
4. SKILLS - The entrepreneur should have the proper skills in the business he is going to
undertake. Example, if the person wants to open a restaurant, it would be beneficial to
him if he has some cooking skills or related restaurant skills. It is not advisable to
depend on somebody to run the business for you, a hands on entrepreneur is most likely
to succeed compared to an absentee entrepreneur.
5. SUPPLIERS OF INPUTS - It is not enough that there are sufficient buyers of goods and
services. It is equally important that there are steady suppliers of raw materials and other
inputs of the business. Obviously, if there are no materials to be used in production, a
business man has nothing to produce and sell. If production is delayed due to lack of
materials, then it is not good for the businessman. His business is likely to lose
customers.
6. MANPOWER - The success of any business enterprise primarily depends on the
efficiency of its employees. In putting up a business, make sure that experts or trained
personnel are available. This is an essential requirement to make the business feasible.
7. TECHNOLOGY - Tastes and preferences are not permanent. They are heavily
influenced by innovations and innovations are the product of technology. New products
and new services represents improvement which are intended to improve consumer
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satisfaction. Entrepreneurs should be aware of the presence of technology to improve
their products or services.
SWOT Analysis
SWOT is an acronym for Strengths,
Weaknesses, Opportunities, Threats.
It is a planning tool used to understand the
strengths, weaknesses, opportunities, and
threats involved in a project or in a business. It
involves specifying the objective of the business
or project and identifying the internal and
external factors that are supportive or
unfavorable to achieving that objective. SWOT is
often used as part of a strategic planning
process.
The term “SWOT ANALYSIS” is in itself an
interesting term. Many believe the SWOT is not
an analysis, but a summary of a set of previous
analysis-even if those were not more than 15
minutes of mini-brainstorming with yourself in
front of your computer. The analysis or more correctly interpretation comes after the S W O T
summary has been produced.
Definition
A process generates information that is helpful in matching an organization or group’s goals,
programs, and capacities to the social environment in which it operates. Note that in itself is only
a data capture - the analysis follows.
Strengths
• Positive tangible and intangible attributes, internal to an organization.
• They are within the organization’s control.
Weakness
• Factors that are within an organization’s control that detract from its ability to attain the
desired goal.
• Which areas might the organization improve?
Opportunities
• External attractive factors that represent the reason for an organization to exist and
develop.
• What opportunities exist in the environment, which will propel the organization?
Identify them by their “time frames”.
Threats
• External Factors, beyond an organization’s control, which could place the organization
mission or operation at risk.
• The organization may benefit by having contingency plans to address them if they
should occur.
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• Classify them by their “seriousness” and “probability” of occurrence.
Kindly check the video link below on What Is a SWOT Analysis & When Do You Need
One? | WordStream
VIDEO GUIDE:
Please check the video guide below of ‘What Is a SWOT Analysis & When Do
You Need One? | WordStream’
https://www.youtube.com/watch?v=wOlWjkaZp94
Kindly check the video link below on How Do you Conduct a SWOT Analysis For Your
Business & Utilize it? | WordStream
VIDEO GUIDE:
Please check the video guide below of ‘How Do you Conduct a SWOT
Analysis For Your Business & Utilize it? | WordStream’
https://www.youtube.com/watch?v=9ets_5qSAo4
DISCUSSION QUESTIONS:
1. Explain what is SWOT analysis?
2. Why is technology an important resource in business?
3. Give examples of strengths of a company?
REFERENCE/S:
BOOK SOURCE: Entrepreneurship in Tourism & Hospitality by: Dr. Rene D. Osorno and Dr.
Grayfield T. Bajao
