Restaurants Drive The Economy

The National Restaurant Association (NRA) estimates that on a typical day in America, 133 million individuals will patronize a restaurant of some description, generating approximately $1.5 billion in sales. As a result, food and drink sales have increased from $42.8 billion in 1970 to $379 billion in 2000 and reached $558.3 billion in 2008 -- 4% of the US Gross Domestic Product. Overall, the economic impact of the restaurant industry exceeded $1.5 trillion in 2008.

Like most industries, restaurants took an economic hit starting in early 2009. For the first time in recent memory, food and drink sales showed a slight drop in 2009 and 2010 but have rebounded in 2011, despite the loss of operating units. The NPD Group, a Chicago-based marketing firm, reported that 9,450 restaurants closed during the 12-month period beginning April 1, 2020. Nearly 92 percent of the closures, or 8,650 units, were independents, the steepest dive in that category since the firm began collecting the data in 2001.

Tough times have always eliminated the weaker operators -- usually independents -- and provided opportunities for the stronger players. The fact that the industry could lose so many operating units and still maintain its traditional overall sales figures speaks to the continued rise of chain restaurants. The strongest generator of new jobs as the economy struggles to recover has been the food and beverage sector.

Opening a typical 6,000-square-foot casual dining restaurant like a Chili's or Olive Garden can cost as much as $2.5 million. That price tag includes $1.5 million or more to build and finish out the building, a process that can employ 30 to 40 carpenters, electricians, plumbers and finishers. Fixtures, furniture and equipment for a 150-seat restaurant -- stoves, refrigerators, dishwashers, etc. -- can cost $250-300,000, including $15-20,000 for place settings and cookware.

Then there's the payroll. A typical casual dining restaurant with $3 million in yearly sales may employ 100 people or more and have an annual payroll of close to $1 million. About 30% of sales goes toward buying food -- much of it from local producers and distributors. Then there's the other outside services such as laundry, janitorial, repair and utilities. The list goes on.

To put the industry in a more personal light, the NRA estimates that over 70% of the country's eating and drinking establishments are single-unit, independent, largely "Mom 'n Pop" operations. These small businesses have a large impact.

• Every dollar spent by consumers in restaurants generates an additional $2.34 spent in our nation's economy.
• Each additional dollar spent in restaurants generates an additional $0.99 in household earnings throughout the economy.
• Every additional $1 million in restaurant sales generates an additional 37 jobs for the economy.

Chains vs. independents