Industry Analysis Limited Service Eating Places Industry

2832 Words Nov 13th, 2007 12 Pages
Part I – Industry Definition
Limited-Service Eating Places Industry

"Limited-Service Eating Places in the US" (NAICS 72221 and SIC 5812) is an industry that consist mainly of establishments that provide food service where customers usually order and pay for the items before eating. This industry, which accounts for more than one third of the entire restaurant dining industry, is categorized into three main segments (Bramhall). The first segment is limited service restaurants, which include drive thru and take out facilities. This segment currently has the largest market share. These establishments tend to specialize in limited menu items, such as hamburgers, pizza, sandwiches, and/or chicken (Basham 9). The second segment includes
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Establishments can try to deliver a competitive advantage by ensuring quality service and reducing customer wait time.
While barriers to entry for this industry are low, these barriers are continuously increasing. The industry consists largely of small independently owned establishments. This is further evident in the information provided later regarding the nature of the participants. Even though many large companies hold a decent amount of the market share, many small independently owned establishments account for the largest share at 79.63%. Entry into the industry is mainly done through franchise operations. According to the National Restaurant Association, small operators run more than seven of every 10 restaurants (Basham 19).
This industry receives no government assistance and the level of regulation is high. Franchising operations are regulated through Federal and State Governments. A federal regulation that has greatly impacted this industry is the recent increase in minimum wage from $5.15 to $7.25. This of course means that the employment costs for establishments will significantly rise. In addition to this many states have enacted a minimum wage that is even higher than the federal rate. Currently seventeen states, including New York, New Jersey, Oregon and Washington, have enacted this regulation (Basham 17). And lastly, another compensation issue that continues to arise is the issue of healthcare.
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