Restaurant Business: Expected to Rise 4-5% in 2018 (Current Issue No. 2904)

​        At present, more restaurateurs are setting up in department stores and other large retail facilities. The current expansion in new shopping malls and giant proprietary retail facilities, together with more space for dining facilities therein, has created more room for restaurateurs – including chain outlets as well as other large business and small food retailers, who are either launching a business or expanding their coverage – to provide more dining options at shopping complexes and sizable retail establishments, versus in the past when a majority of customers at such facilities largely patronized only food-chain branded restaurants.

        The additional dining space in shopping complexes and retail giants provides a good opportunity for new comers, but their entry will of course intensify the competition among those restaurateurs.

         In addition, some operators are facing a challenge in higher operating costs such as rents in prime locations, as well as increased labor costs that are affecting every group of restaurateurs. KResearch expects that restaurant business will have a total value of around THB411 billion-THB415 billion in 2018, growing 4-5 percent over 2017, due in part to such rising costs. Therefore, restaurateurs will need to raise their food and beverage prices to cover their additional cost burdens.

        In 2018, branch expansion seems to be continuing as the main strategy to gain more revenues because most additional revenue typically comes from new branches. Since customers tend to shift to the fresh experience and flavors offered at newer branches, existing branches nearby often see lower revenues thereafter, or slower growth in customer patronage. Therefore, chain operators are facing a big test in how they select the right locations for their new outlets to achieve expansion in their customer base without marginalizing the revenues at their existing branches.

       They may perhaps expand to locations where the competition has not become so intense and may have more reasonable rents. They may also foray into new locations with recently available space for dining services such as at some petrol stations that aim to offer more comprehensive services in response to changing lifestyles, or at office buildings in busy business districts where target customers have high purchasing power, or hospitals that seek to offer more services to serve patients and their visitors.