In 2020, the restaurant segment was drastically affected due to the Covid-19 pandemic. According to the Brazilian Association of Bars and Restaurants (ABRASEL), about 60% of Brazilian establishments in the sector had to close their doors due to restrictions imposed to contain the spread of the disease. In addition, many entrepreneurs had to adapt to new business models, such as delivery and to go, in order to survive the pandemic period.
A study carried out by the National Confederation of Shopkeepers (CNDL) pointed out that sales in the food away from home sector fell 35% in the year 2020, with the pandemic being identified as the main cause. The same study also highlighted that, even with the reopening of many restaurants in 2021, the sector's turnover was still below pre-pandemic levels.
At that moment, establishment owners needed to look for new strategies to recover and adapt to a still uncertain scenario.
However, current studies indicate a healthy recovery in the restaurant sector throughout 2022 and high expectations for 2023.
ABRASEL disclosed in August last year that the establishments still affected by losses resulting from the pandemic fell from 26% for 19%, the lowest index so far. It also highlights that 45% of companies in the sector were already working profitably. Since, comparing the same period of the previous year, the rate drops to 37%.
Franchising in the restaurant segment also shows promise
The third quarter 2022 report, produced by ABF (Brazilian Franchising Association) explains that, in the last quarter of the year, franchises in the restaurant segment were the second franchise niche to show the highest growth rate (7,9%). At the same time, the sector's total revenue increased by 31%, collecting 11,270 billion reais, since, in the same period of the previous year, the sector earned only 8,605 billion.
In the same way, comparing the total revenue for the year 2020 with the year 2021, we can observe a similar growth than in the single quarter in question of 2022 (7%) confirming an efficient recovery of the sector.
Thus, with the routine of consumers gradually returning to normality, and with the expectation of many people wanting to live experiences away from home, it is expected that in 2023 this scenario of prosperity will remain in the food industry as a whole.
Growth alternatives for the restaurant segment
One of the main goals of any entrepreneur is to expand their business and reach new markets. In the restaurant and food services segment, there are several signs that indicate that it is time to take this step:
- Loyal and growing clientele: When an establishment has a loyal customer base and the number of visits registers constant increases.
- Profitability: When revenue is stable, investments are profitable and there is room to think about new ones.
- High demand: If the restaurant has been struggling to meet customer demand due to lack of capacity, it may be time to consider expanding.
- Increased competition: If there is increasing competition in the market, expanding the business can help strengthen the brand's positioning and increase its share.
Once these signs are identified, it is time to evaluate the alternatives for expansion.
Accelerated growth: franchising of units
One of the most common alternatives for expanding gastronomic ventures is the franchise. This category consists of using the brand and business model already established by the franchisee (the original owner of the restaurant). This grants other people or companies (franchisees) the right to use the franchisor's brand, business model, know-how and support. In return, he receives a franchise fee and a percentage of sales.
For this, the entrepreneur needs to have a well-established and tested business model, with clear operating and support guidelines. The process usually starts with writing a business plan for the franchise, including a detailed description of the business model, operating policies, marketing and training. Next, the entrepreneur needs to find qualified franchisees, usually through a marketing campaign or networking.
Once the franchisee is selected, a detailed agreement is established, which includes the obligations and responsibilities of both parties. The franchisor also needs to provide training and support over time to ensure the success of the franchise.
This is an interesting alternative for entrepreneurs who want to expand the scope of their business without the risk and uncertainty of opening new units on their own. However, it is important to have a well-established business model and understand the challenges involved in franchising.
An overview of the restaurant franchise market
The search of Food Service 2022, a partnership of ABF (Brazilian Franchising Association) with the consultancy Galunion brought some interesting data to the segment. They were presented in Food Service Sector Seminar, event within ABF Franchising Week 2022.
The research sample represents 54% of billing and 44% segment units. Among the data collected, we highlight:
- The number of units in the segment grew 7%, with respect to last year.
- 81% of the researched networks invest in the digitization of their processes and strategies.
- The overall average ticket for the segment reached R$45.80, being the delivery 17,5% bigger.
- 94% of the responding networks stated that they work with delivery
- 82% of chains fully integrated their sales information with the franchising store.
- 46% point to units with a reduced menu as the main alternative for expansion.
- 56% adapted their menus for digital exposure.
- 94% agree that loyalty programs are important.
- The type of establishment that generated the highest revenue were hamburgers, with 27%.
More traditional model: Opening of branches
The opening of branches is an expansion strategy in which an already established company opens new units in different locations, maintaining the same concept, business model and organizational hierarchy of the main unit.
In this model, the brand is expanded, its geographic presence is extended, and yet it has full control over the business.
This type of expansion assumes a greater investment by the company, since there are no franchisees. The business entrepreneur himself must consider factors such as the location, infrastructure and target audience of the new unit and still bear all real estate expenses.
Other expansion alternatives
There are several ways to record growth other than franchising or opening branches. Here are some strategies to consider:
- Product diversification: Expand the product offer to include new items or even delivery and payment methods. But, to avoid losses, market studies are needed to map the potential success of a strategy like this and indicate the best possible actions.
- Identification of new niches: Identifying unattended or implied market niches can be a way to expand the business by serving more specific audiences.
- Partnerships with companies and organizations: Formal partnerships with other entities located close to the restaurant, such as universities, offices and shopping centers, can help expand the brand's presence.
- Digital marketing: Using digital marketing strategies such as social media ads, email marketing and SEO can help increase restaurant visibility and attract new customers. But, if the site is already operating at its maximum capacity, this does not solve the problem.
Choosing the right strategy will depend on the characteristics of the business and the market. It is important to have reliable and up-to-date data at the time of decision-making, to ensure the proper use of available resources and minimize latent risks.
The importance of geomarketing and market mapping for the restaurant segment
THE geomarketing It is a methodology that uses georeferenced market data to understand and meet the needs of a specific audience.
In the restaurant segment, geomarketing is essential for expansion and decision-making, as its analyzes help to identify areas with potential for opening new stores, assessing the competition and defining strategies to conquer new markets.
Market mapping is a study within geomarketing that allows a clear and objective view of relevant information for the business. Among them, we highlight the concentration of people, traffic flow, operation of the competition, consumption habits and mapping of suppliers/employees.
With this data, it is possible to choose the most promising point of sale, as well as identify consumption patterns that can be explored in the future.
Furthermore, geomarketing allows the customization of the offer of products and services according to the target audience of each region. For example, in an area with a high concentration of young people, it may be interesting to offer fast food options at affordable prices. Already in a region with many tourists, it can be advantageous to offer a wide variety of typical dishes of the local cuisine.
In this way, market intelligence operates freely, based on qualified data.
Count on Linkages insights to expand your brand
We are specialists in geomarketing and market mapping.
Our differential lies in translating complex information into tailor-made reports, which not only increase reliable and up-to-date data for your business, but point out lucrative insights to guarantee the best possible interpretation, facilitating its immediate applicability.
Want to know more about our services? Schedule a meeting with us.