Restaurant Industry SWOT Analysis: A Guide On Doing It Right

Every entrepreneur must clearly understand the strengths and weaknesses that exist in his business. Any smart and intuitive restaurant owner will also be aware of the opportunities (both hidden and distinct) and threats that influence the way in which the business grows or diminishes.

While entrepreneurs must use the best restaurant website builder for increased sales and brand building, they must always engage in self-evaluation and gain fruitful business insights using the SWOT analysis method.

What Is a SWOT Analysis?

SWOT is nothing but:

S – Strengths

W – Weaknesses

O – Opportunities

T – Threats

Restaurants can use the SWOT analysis method to assess their own performance in comparison to the general industry parameters. This assessment is done by identifying various internal and external factors that might be a restaurant’s strength, weakness, opportunity or threat.

Any factor that is well under the control of the restaurant or can be managed by it can be categorized under strengths and weaknesses whereas the ones that are out of its control must be brought either under opportunities or threats. It is important to note that every single factor will have its own substantial effect on the restaurant.

Once the factors are allocated to each of these four categories, it becomes easy for a restaurateur to get a comprehensive picture of what is working in their favor and otherwise. Restaurants can gauge their performance against that of their competitors, make greater use of their successful marketing strategies and risk-mitigation initiatives.

Why Should a Restaurateur Conduct a SWOT Analysis?

Irrespective of the restaurant type, understanding the strengths and weaknesses in detail and being aware of the biggest opportunities and threats will strengthen the business in the long run.

A SWOT analysis is just a simple exercise that a restaurateur undertakes to decide on a particular future course of action that he can take based on the learnings. A SWOT analysis will help the restaurant owner secure a greater profit margin, enhance the customer’s dining experience, keep patrons and new customers happy and beat competition in a meticulous manner.

Situations When a Restaurant SWOT Analysis Is Useful:

When a restaurant owner wishes to explore a new business opportunity, a whole new venture or wishes to try a new product in the existing restaurant.

When a restaurant owner wishes to implement the latest trends and also evaluate their appeal.

When a restaurateur wishes to introduce and implement a new technology or operational process in the business.

When the restaurant owner wishes to respond to a competitor’s new marketing strategy or development.

When SWOT analysis is done during one such situation, the restaurant owner can evaluate the true position and future potential of the business. This will help him make informed decisions and proceed in the right direction.

SWOT analysis can also be done when certain issues need to be addressed. This may include problems regarding staffing, change in public image or reputation, operational efficiency, etc. When such issues are noted down during a SWOT analysis, the restaurant owner either finds a solution using the strengths mentioned or is able to pick-out the perfect strength factor that can help him overcome the issue. A missed opportunity or a possible loss from threats will help overcome grave consequences.

SWOT analysis helps restaurant owners to visualize the current situation in a realistic manner and proceed as per requirements.

Here is a possible list of the Strengths, Weaknesses, Opportunities and Threats that a restaurant may have.

STRENGTHS

i) Cleanliness:

Large restaurants usually maintain their standards of cleanliness and neatness. But, if you maintain a tidy and clean environment even in your small dining facility, you are likely to draw people’s attention. This nice vibe that surrounds your clean, tidy restaurant is definitely a strength for you.

ii) Low-cost Service Options:

Five-star hotels offer quality at an exorbitant price that all individuals cannot afford. If you offer the same standard of service at a much lower price, people are likely to swarm you for many more years to come, making this an important strength that you can always rely on.

iii) Better Customer Service:

When customers walk into a restaurant, they look for good food, well-dressed waiters with good communication skills, adequate parking spaces with security, a great atmosphere and educated staff to make their overall experience memorable. Only when all these features are available as part of the restaurant’s service package, people unwind and enjoy the environment with their mind and spirit. If a modest restaurant is able to provide all these services, it is sure to be a great advantage and strength for the business and its goodwill.

iv) Variety:

Customers love restaurants that offer them a great variety in every category like soups, appetizers, main courses, salads, desserts, etc. A menu that offers several choices and variety leaves a positive impact on the customers as they feel that the restaurant has a team of expert chefs who make it possible for a small restaurant to offer such great variety. This image of a well-trained crew is your restaurant’s strength.

WEAKNESSES

The possible weaknesses of a restaurant business could be:

i) Recently Inaugurated:

Although a new restaurant has its own charm, there might be many people within the restaurant’s demographic who still remain loyal to their good-old, existing restaurant. Convincing such patrons to switch brands is not an easy task. Such brand loyalists look for more than a new name to shift their patronage. In order to impress them and encourage them to make their first visit, it is essential to offer them a new and unique experience. If you offer them almost identical services in a new name, there is no chance that they will start supporting you.

ii) Limited Funds:

Without investing a substantial amount in various service areas, it is not possible to offer customers a unique dining experience. Providing services like a good location, well-maintained lawns and gardens or well-trained staff mandates a good deal of capital and resources. Without such noteworthy, unique services, a restaurant is likely to lose a major portion of the market share.

iii) Nothing Unique:

If your restaurant offers nothing unique, you might be able to attract dissatisfied customers from the competitors, but not new or loyal customers towards your brand.

iv) Location:

If your restaurant is not located in a prime spot and is nearly out of the city or market, even if you are offering the same services as your competitors, nobody will be willing to travel that far to enjoy what is available within their reach. Under such circumstances, survival becomes difficult as you will receive only the left-over customers from your competitors.

OPPORTUNITIES

Restaurants must constantly look for opportunities to increase profits by providing a greater variety of food and beverages. One must take advantage of trends and start serving healthy, organic dishes or salads on the menu. If the business during the afternoon is dull, the restaurant must explore ways and opportunities to generate higher traffic. Restaurants can sell some of their culinary offerings like salad dressings or baked items that people can purchase and take home. This is an opportunity. Another potential opportunity lies in providing delivery services, take-out or setting up a drive-through so that the needs of customers who are on the move can be addressed.

THREATS

Here are a few threats and challenges that a restaurant is likely to face.

i) Big Brands Nearby:

If the neighborhood is filled with several reputed brands or restaurant chains, it becomes a great challenge for any restaurant to reach an equilibrium between costs and revenue. Although the business might start churning profits after a certain point, until then, running the show is a great challenge.

ii) Operating Expenditures:

Opening a restaurant is seemingly easy. But, running it, maintaining the standards and retaining the position is by no means easy. Restaurants face several operating expenditures like building rent, staff salaries and other maintenance charges. Continuous expenses on such factors is definitely a threat to the revenue-generation process.

iii) Pricing Strategy of Competitors:

Even successful restaurants decrease prices to eliminate competition from a business rival. As a restaurant owner trying to identify threats and overcome them, you will require several assets to pass through this challenging phase and also beat competition. Competitors also cannot afford reducing their prices too much. Once they understand that you have established yourself in the market, they will stop competing with your pricing strategies.

Benefits of SWOT Analysis for Small Scale Restaurants

If you are a restaurateur running a modest restaurant, you might think that a SWOT analysis is not for you but for big industry giants. But, you are mistaken. Even small businesses can benefit a great deal by engaging in a SWOT analysis.

Following are a few benefits:

i) Get a Comprehensive View:

By conducting a SWOT analysis, a restaurateur gets an opportunity to delve deeper into certain details and gain better insights on business operations. A restaurant business always keeps one busy. Therefore, the possibilities of overlooking key aspects are high. But, by conducting a SWOT analysis, one gains a bird’s eye view of the entire restaurant business and the current position of the brand in the industry.

ii) Improve Marketing and Advertising Projects:

A SWOT analysis can be applied to diverse scenarios. It can guide a restaurateur to evaluate the potential strengths and weaknesses of an upcoming advertising campaign or marketing initiative, a content-based promotion project or even if it is the right time for the restaurant to host or sponsor big events.

Restaurant SWOT Analysis Example

Here is an example of how a SWOT Analysis Form can be filled in by a restaurant owner.

Restaurant Strengths	Restaurant Weaknesses	Restaurant Opportunities	Restaurant Threats
Great Online Ratings	Stiff Competition	Making Online Ordering Available	Increasing Fixed Costs
High Brand Loyalty	Identical Culinary Offerings	Encourage Customers to Leave Online Reviews	Forced Shutting Down of Business
Menu Prices	New Restaurants Opening Nearby	Increase Intensity of Social Media Campaigns	Less Per Capita Income of People In the Demographics
Good Local Knowledge	High Cost of Raw Materials and Suppliers	Develop Brand Locally	Poor Ratings on Customer Review Sites
Customer-centric Approach	Moderate Online Presence	Take Steps to Reach a Wider Audience	Losing High Value Customers
Good Interiors, Pleasant Atmosphere	Absence of a Full-fledged Marketing Team	Introduce New Items on the Menu. Menu Revamp	Losing Good Suppliers
Local Value Added Offering	No Online Ordering	Improve Customer Experience	Unable to Win the Trust of Customers
Prime Spot Location	Small Local Population	Introduce Special Offers	Poor Weather Conditions
Local Staff	Limited Menu Items	Increase the Number of Locations	Economic Slowdown
Guest Loyalty	Lack of Brand Awareness	Reduce Menu Prices	Cancellation of Local Events

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