Supply & Demand in the Restaurant Industry

Supply and demand market forces drive the restaurant industry.

The restaurant industry is controlled by the market forces of supply and demand as most any other business. During the boom years of the 1990s the industry expanded and thousands of new restaurants opened. Recession resulted in reduced expansion.

Demand Increases

According to The Motley Fool, the number of restaurants and bars in the U.S. nearly doubled after 1990. The strong economy and easy access to credit drove a strong demand for food service. Increased demand created an increase in the available supply.

Supply Lessens

The economic recession that began in 2009 had the effect of reducing the supply of restaurants available. People had less money to spend and restaurant chains responded by reducing the rate of expansion, closing some units and laying people off. According to a survey of restaurant industry executives conducted by People Report in 2009, 88 percent of executives surveyed reported a reduction in the number of restaurants and staffing cuts.

Other Effects

The changing economy created a greater demand in customers for perceived value. Restaurants stressed value in advertising and many fast food chains expanded value menu options to drive sales.

References

• The Motley Fool: Is the Restaurant Industry Doomed?
• People Report: Restaurant Industry Response to the Economic Downturn -- Slower Growth, Less Staff, and Smaller Paychecks

Resources

• Nation's Restaurant News: Wendys/Arbys Look to Menu to Drive Sales