CHAPTER ONE
INTRODUCTION

BACKGROUND
The restaurant industry consists of restaurants, bars, and other away-from-home eating facilities. The National Restaurant Association (NRA), an industry trade group based in
Washington, D.C., estimated that industry sales in 2001 totaled $399 billion and predicted that industry sales will hit $576.9 billion by 2010. According to the National Restaurant Association
(1999), an estimated 844,000 establishments offered prepared food in the United States in 2001 and the number of restaurants in the U.S. is forecasted to increase to 1,001,305 by the year 2010
(Figure 1.1).

1200

1000

1000

831

800
577

600
400

376

200
0
Sales (billions)

Locations (thousands)
2000

2010

Source: National Restaurant Association (1999)
Figure 1.1 Restaurant Industry Sales and Locations

1

There are a variety of possible locations for restaurants including a freestanding unit, located in shopping mall outlet, food court, or a multiple concept unit within an existing facility designed for another business such as a gas station and convenience store. It may be leased space, a building the retailer purchases, or a new structure built to specification. Each has its own advantages and disadvantages for specific types of restaurants (James, Walker, and Etzel, 1975;
McGuire, 1993; Powers, 1997; Hsu and Powers, 2002). The cost of land, lease expenses, and building varies with the location of the restaurant. Metropolitan areas are more expensive than nonmetropolitan areas. Also, these costs vary considerably with the design and type of restaurant. Freestanding restaurants are more expensive than smaller kiosks or drive-through restaurants (Khan, 1992; Khan, 1999).
Restaurateurs are struggling with and thinking hard about where and how to expand
(Steintrager, 2001). For today’s restaurateur, few things are