Industry Profile Summary: French Restaurant
French Cuisine is characterized as warm, clean, and appealing. It is an integration of good food, high prices, and a pleasant atmosphere. French restaurants are normally prestigious gourmet restaurants where unique and expensive dishes are served, and each customer is assigned a waiter.
The restaurant industry exists in order to fulfill two of its customers’ basic needs:
Hunger, the most basic need, which all types of restaurants are intended to fulfill,
and the need for recreation. In many cases, a restaurant is considered a preferred place of recreation. This need is usually accompanied by an expectation for appropriate service and attitude.
- High closure rates- the industry is characterized by one of the highest opening and closure rates among businesses. One of the reasons the industry’s reputation for “easy money” with no need for professional knowledge.
- Chains and franchises- a number of well-known large chains are active in the market selling franchises and providing professional counseling and aid to the entrepreneur (note that purchasing franchise rights involves a very high investment). Chain restaurant survival rates are relatively higher.
Customers: Defining the Target Market and its Size, Market Segmenting
Potential industry clientele includes people seeking recreation, segmented according to a number of factors:
- Need- the need in fulfilling hunger, recreation, or a combination of the two.
- Taste preferences will determine the type of restaurant chosen by the customer.
- Private/corporate use.
- Income level will determine dining frequency (pertains mainly to private customers), and the chosen restaurant’s prestige level.
- Geographical vicinity- the more prestigious the restaurant, the less significant this parameter.
The industry is highly competitive. Competitors can be divided into two main groups:
- Various French restaurants targeted to a similar market segment and located in the same geographical vicinity.
- Other recreational businesses that fulfill the same needs: prestigious restaurants located in farther geographical vicinity also constitute competition as the geographical vicinity and accessibility parameters are less significant.
- Various types of prestigious restaurants (Italian, for example) may present prestigious French restaurants with additional competition.
Marketing resources depend upon the restaurant’s nature and potential clientele, and therefore a single method cannot be specified. Notwithstanding, a number of marketing and advertising methods are listed below:
- Advertising in relevant media according to the restaurant's potential clientele. Chain restaurants may benefit from national marketing and advertising, including television.
- Public relations- engaging a PR agent to convey information to the press (mainly recreation and gossip columns), arrange events, parties etc.
- High importance is credited to reputation and regular customers.
Factors Affecting Success:
A number of parameters may affect the restaurant's success. Among them:
- Location-the restaurant’s location is important to its success. Before establishing a restaurant, one should inquire as to the potential clientele in the area as well as relevant competition.
- Customer service- quality of service is a central factor and key to the restaurant’s success. Customer allegiance will be gained by a restaurant that stresses good service.
- Industry competition and dynamics- success is affected by alternatives available to customers interested in experiencing new flavors and locations. This parameter will mainly affect restaurants intended for recreational purposes.
- Investment in remodeling and designing the restaurant.
- Investment in Equipment
- Local authority licensing process.
Industry Revenue and Profitability
Revenue of a French gourmet restaurant is affected by the type of restaurant, location, and price levels. Revenue at a prestigious French restaurant was estimated to range between 1,250,000-3,000,000 NIS in 2003.
Material usage percentage (including depreciation and spices) is approximately 27-29%.
Typical Terms of Payment:
- Vendor Credit- vendor credit terms vary according to buying and bargaining power of both parties.
- Customer credit:-customers pay in cash or by credit card.
The food and restaurant industry is a high-risk industry- there are many new business, but the number of failed or closed businesses is high as well. The highest investment required is in appropriating and remodeling the location, an investment which will be completely lost in case of failure. A partial return on the supply investment may be possible, as the market is abundant with used supplies.
Licenses and Certifications:
In order to open a restaurant, one must obtain a license from local authorities, and the ministry of health, after qualifying for such a permit.
In addition, a police permit is also required if alcoholic beverages are served.
Business insurance (for content and inventory), third party insurance, employer’s liability insurance, loss of income insurance, and food poisoning insurance. In addition to the above, an insurance agent should be consulted in regards to the need for additional insurance.
The establishment of a restaurant should be meticulously reviewed- business locality, physical locality, in addition to financial and marketing aspects. This review along with correct planning and aid of professionals will decrease the chances of failure.
Note that food has a short shelf life and high depreciation. It is important to avoid purchasing a large amount of inventory in order to prevent wastage.
Most gourmet French restaurants do not hold a Kashrus certificate in order to avoid limitations on the food selection offered.
It is recommended to consult with your local Business Development Center regarding business establishment and operations. In addition, the book: Guide for Entrepreneurs- Recipes for a Successful Restaurant, published by the Business Development Center, may also be consulted.
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