Restaurants are typically categorized as either Limited Service Restaurants or Full Service Restaurants, each with subsegments. Learn more about the restaurant industry below:
Limited Service Restaurant (LSR)Restaurants that offer counter service where patrons generally order or select items and pay before eating. Food and drink may be consumed on premise, taken out or delivered to customers. In some hybrid concepts, runners bring food to tables. The LSR segment was worth $284.8 billion in 2020, and is expected to be worth $401.9 billion in 2025. Sub segments of limited service include quick service and fast casual. Quick-Service Restaurants (QSR)
- 81% of limited-service restaurant segment
- Examples: McDonald's, Starbucks, Subway, Taco Bell, Domino's
- Heavily dominated by chain operators: about 86% of total sales in this segment were generated by the top 200 chain operators
- Key Segment Trends
- Off-premise occasions, such as delivery and takeout, continue to grow substantially year over year.
- Demand for frictionless ordering continues to grow, with customers increasingly likely to expect mobile ordering.
- Operators are prepared to reinvent in-store experience to emphasize cleanliness and safety.
- Role of Equipment Within Segment
- With the rise of smaller or nontraditional floorplans in emerging chains, restaurants may look for flexibility and accommodation in their food equipment placement for efficiencies.
- As restaurants continue to struggle with labor shortages, technology and equipment that reduce labor costs will be highly influential in operators' purchasing decisions.
- Due to limited space in their kitchens, operators often use ventless cooking equipment.
- Equipment specific to food waste reduction can help operators engage in waste reduction and sustainability efforts.
Fast-Casual Restaurants
- 19% of limited-service restaurant segment
- Examples: Panera Bread, Chipotle, Panda Express, Jimmy Johns, Wingstop
- Has seen continuous monumental growth in the years leading up to the pandemic.
- Key Segment Trends
- The build-your-own option has been a key driver for fast casual.
- Operators are sourcing locally, as well as using organic and free-trade products, in order to appeal to their customers' sensibilities.
- Delivery opportunities continue to grow, and operators may consider investments in improving the value equation for these occasions.
- Brands are focusing on convenience, quality and value.
- Role of Equipment Within Segment
- The need for speed and creating efficiencies are essential.
- Equipment specific to food waste reduction can help operators engage in waste reduction and sustainability efforts.
- Kitchens have downsized, so equipment must fit into more compact spaces.
- With a focus on fresh, refrigeration can play an important role, including front of house applications such as grab-and-go.
Full Service Restaurant (FSR)Restaurants that offer table service and wait staff are Full Service Restaurants. Patrons pay after eating in these restaurants. Most offer a relatively broad menu of meals and snacks for immediate consumption primarily on premise, although some may also offer takeout and catering services. The segment was valued at $180.6 billion in 2020, but saw a 52% decline due to the pandemic and had to quickly adapt to takeout and delivery models. The FSR segment is primarily composed of three sub segments: casual-dining, midscale, and fine-dining
Casual-Dining Restaurants- 76% of FSR segment; $137.4 billion of sales in 2020
- Examples: Olive Garden, Buffalo Wild Wings, Chili's, LongHorn Steakhouse
- Dominated by small chains and independently operated restaurants, which make up 63.6% of the segment's sales.
- Key Segment Trends
- A higher percentage of visitors are ordering from digital channels such as apps or websites, so tech integration is important.
- Large chain accounts have had challenges in creating a differentiated and unique experience, and chain growth is well below independent casual-dining.
- Chains have been trimming menus for years, but the pandemic accelerated these cuts.
- Role of Equipment Within Segment
- As casual-dining restaurants move to incorporate more global fare, specialized equipment will be required.
- Due to varied and extensive menus, versatility in equipment is key.
- With an increase in delivery, the need for heated holding cabinets may become more prominent.
Midscale Restaurants- 16% of FSR segment; $28.9 billion of sales in 2020
- Examples: IHOP, Cracker Barrel, Bob Evans, Frisch's Big Boy
- Declined by 67% in 2020 due to the pandemic; sales expected to reach $50 billion by 2025
- Dominated by small chains and independently operated restaurants, which make up 63.4% of the segment's sales.
- Key Segment Trends
- Increased demand for family meals.
- Wide age range of customers with varying preferences require varied menus.
- Eased restrictions on sales of alcohol for takeout and delivery has emerged as a differentiator.
- Role of Equipment Within Segment
- Extensive menu item offerings require versatility in cooking equipment.
- Larger portions require cooking and refrigeration equipment that is tailored for high-volume kitchens.
- Smaller equipment required for healthier options with smaller service size.
Fine-Dining Restaurants- 6% of FSR segment; $14.3 billion of sales in 2020
- Examples: Ruth's Chris Steak House, The Capital Grille, Flemings, Morton's
- Dominated by small chains and independently operated restaurants, which make up 84.7% of the segment's sales.
- Key Segment Trends
- Offered more affordable takeout menus during the pandemic, and may continue to do so during slow business times.
- Multi-sensory dining and chef's table experiences are predicted to return to the forefront in 2021.
- Service centered on warmth, and overall "casualization" of fine dining show operators are trying to broaden the appeal of their restaurants.
- Role of Equipment Within Segment
- Smaller and/or open for fewer hours, so cooking needs are not as extensive as other segments.
- Front-of-the-house equipment needed for a multi-sensory experience.
- Larger fine-dining restaurants are using more compact and multipurpose equipment.
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