If you want to run a successful and long-lasting restaurant, you can’t just focus on your own business; you have to look at what your competitors are doing too.
To not only survive but also thrive in the competitive restaurant industry, you need to devise a restaurant competitive analysis that will help you finetune every aspect of your operation to draw in more customers. Here’s how!
What Is a Competitive Analysis for Restaurants?
A competitive analysis is an assessment of your competitors, with the purpose of identifying both strengths and weaknesses that will allow you to outsmart them, identify growth opportunities, and avoid potential pitfalls.
When conducting a competitive analysis for restaurants, look at both direct and indirect competitors. Analyze their pricing, business practices, customer service, menu items, marketing, as well as branding.
What is a competitive advantage for restaurants?
The goal of competition analysis is to give your restaurant a competitive advantage, which is what makes your restaurant a preferred choice over your competitors.
A competitive advantage is made up of a variety of factors that enable you to provide superior products and services which will, in turn, attract new and returning customers to your restaurant.
Is the Restaurant Industry Competitive?
The answer to that is a big resounding “yes.” In fact, the restaurant industry is one of the most competitive industries you can be a part of. As of 2023, there are more than 700,000 restaurants in the US alone.
But don’t let competition in the restaurant industry scare you from trying to accomplish your dream. All that means is you have to come up with a unique concept, exquisite menu, and stellar customer service. And, of course, conduct a thorough restaurant competitive analysis.
Who are the competitors of a restaurant?
But who counts as your competition? It is any food business that has the same target market, even if it’s not necessarily the same type of restaurant.
Read more: 7 Most Profitable Types of Restaurants You Can Open
You will have direct competitors and indirect competitors. Direct competitors are those that are more similar to your business, sharing a cuisine and service model. Indirect competitors might operate differently but cater to the same types of customers.
How to Conduct a Restaurant Competitive Analysis in 7 Simple Steps
Before we get into a competitive analysis example for a restaurant, keep in mind that you will be looking for both strengths and weaknesses, so you can emulate the former and sidestep the latter.
1. Identify your direct and indirect competitors
First things first, you need to look at the local food scene to find potential competitors in your area. That area can expand or contract based on a variety of factors such as population density, restaurant density, or setting (urban vs. rural).
Look for competitors that mirror your restaurant (e.g.: other traditional Sicilian restaurants), as well as adjacent competitors (e.g.: other Italian restaurants or restaurants serving a different cuisine but with the same vibe).
Once you’ve created a list of all direct and indirect competitors, it’s time to start your restaurant competition analysis.
2. Look at their menu and pricing
Start with their menu and pricing, since this is the cornerstone of every restaurant business. What kind of dishes are your competitors selling and how much are they charging for them? Is there an extremely popular dish on their menu that customers seem to love?
Look for the information on their website or in online reviews. Oftentimes, people post photos of a restaurant’s menu when they review it.
Is there anything else that sets their menu apart? Maybe they’re only using organic, locally grown ingredients or serving a large variety of vegan and vegetarian dishes.
When it comes to menu pricing, you don’t have to necessarily charge less than they do, as long as you use quality ingredients and you provide value for the money.
That said, your dishes do have to stand out if you want people to pay more at your restaurant than they would pay at a competitor’s place.
3. Examine their day-to-day operations
Put your Sherlock Holmes hat on and visit your competitors. See how they run their restaurant, especially during busy periods.
How is their customer service? Are they doing something different as part of their main steps of service? Is there something particularly appealing about the ambiance?
You will judge things differently as an actual customer of the locale rather than just an outside observer. While you’re there, also look out for things they might be doing wrong so you can avoid making the same mistakes.
Observe both their customers and employees to see how they engage with each other, how the staff works together, if they’re upselling or not, and so on.
4. Check out the kind of technology they’re using
Technology has become kind of a given in the restaurant industry in the past few years. From POS systems to tableside ordering, online ordering, and so on, tech tools that make restaurants’ and customers’ lives easier are a must-have.
Are your competitors accepting orders online for pickup and delivery? Are they allowing their customers to pre-order meals when booking a table or scheduling their orders in advance?
What they do, you should too. And there’s no better way to do it than by using GloriaFood’s free online ordering system.
With a slew of ordering features like online ordering, dine-in ordering, pre-orders, and scheduled orders, you will give customers the technology they crave when visiting their favorite restaurant.
Plus, it comes with built-in marketing tools that will enable you to boost sales and attract a variety of customers with tempting promos, irresistible emails, and more.
Get started with online ordering by following the steps in the video tutorial below:
5. Evaluate their marketing strategies
How are your competitors promoting their restaurants? Are they active on social media? Do they run regular food promotions? Organize exciting events and themed parties?
Look at any strategy they use to attract customers, whether it’s discount coupon codes, freebies, or half-off dishes. You too can create all of these promotions and more using the promo engine integrated into our online ordering system. Here’s how:
Consider unique marketing avenues such as partnering up with local influencers or celebrating food holidays with parties and events. This will set you apart from your competitors.
Free downloadable resource: Food Holiday Calendar & Promotion Ideas for 2024
6. Look at their online reviews
Online reviews say more about a restaurant than their marketing ever will. Most customers will leave honest reviews that address both the positives and negatives of dining at a restaurant.
Check your competitors’ online reviews to see what people are saying about them. Maybe they’re clamoring for a dish or service that you’re able to provide instead of them. Which leads us to our last point…
7. Find any gaps that you can fill
One of the main goals of restaurant competitive analysis is to identify any areas where you could outshine your competitors, whether that’s improving on something they do well or doing something they won’t.
Remember that you don’t have to imitate your competitors in order to be successful. Customers are not looking for more of the same but for something better. Instead, use them to identify opportunities for your own restaurant.
To give you a competitive advantage restaurant example, let’s say you’ve discovered that your competitors’ customers are complaining about the high prices of cocktails.
Turn that into a competitive advantage by starting happy hour and promoting it locally to draw those customers to your restaurant instead with discounts and promos on cocktails.
That’s a Wrap
Doing competitor analysis in a restaurant is crucial for your business’s longevity and profitability. No restaurant owner was born with all the knowledge required to run a business, so you can learn from your competitors’ successes and failures alike.
While a restaurant competitive analysis can’t guarantee you’ll never make mistakes of your own, it can help provide you with a solid list of dos and don’ts, as well as strategies for boosting restaurant growth.
