Your competitor analysis serves many purposes. By understanding your competitors, you position yourself to truly understand your market and create value propositions, differentiators, and a marketing strategy that goes above and beyond the competition. What better way to create an appealing business plan built to attract investors? Show
When you’re choosing your location, you need to map out the local competitive landscape to know exactly who you’re up against. Doing this will also help you determine whether a particular neighborhood is ripe for the picking, or is over-saturated with competitors. In this article, you’ll learn:
What is a competitor?In business, the definition of a competitor is any company in the same industry that offers similar products and services and caters to the same market. For restaurants, a competitor is any business that sells food to the same target market. Competitors can be divided into direct and indirect competition. Direct Competition: Direct competitors are restaurants that are very similar to yours. They sell the same restaurant cuisine, operate under the same service model and appeal to the same target market. A few examples of direct competition are:
Indirect Competition: Indirect competitors are harder to spot. They can sell different types of cuisine or operate under a different service model. But these businesses are competition because they cater to the same target market. While indirect competitors might not offer the exact same meals, they are still vying for the same hungry guests. For example:
What is a competitive analysis?A competitive analysis is the methodical practice of analyzing your competition from a variety of different angles in order to understand the marketplace and define your place in it. To complete a competitive analysis, you’ll look to your direct and indirect competitors and analyze menu items, marketing tactics, business practices, pricing, and brand positioning. Why create a competitive analysis before you choose a location? It may seem counterintuitive to look at competitors before you’ve determined your location, but creating a competitive analysis early on will help you:
Evaluating competitors can also help determine the market’s appetite for your concept. If competition is doing well, your odds for success are higher. If not, you might be taking an unnecessary risk and be forced to reevaluate your concept. How to Create a Competitive Analysis:Open your favorite spreadsheet tool, whether that’s Microsoft Excel, Google Sheets or Apple Numbers, and begin with the following steps. List out competitors by neighborhood and type of competition. To get a lay of the land:
Capture all direct and indirect competitors within a 10km radius of those five to eight potential neighborhoods you narrowed down when choosing a location for your restaurant. At this point, you may have further refined the neighborhoods you’re evaluating, which is great. Pro tip: if you’re gathering competitive information to round out your business plan, include an analysis of competitors whose business model you admire. these competitors won’t add much to your location analysis. however, a successful competitor who has a business model worth emulating will add to your analysis. you can use their business operations and activities to dictate your own. Once you’ve mapped out the competitive landscape, for each individual competitor, perform the following analysis:
You’ll notice in each analysis, we recommend that you perform a SWOT analysis. What is a SWOT analysis? SWOT stands for:
OPERATIONAL ANALYSIS: How and why does their restaurant operate? You can find most of this information on the competitor’s website. In our competitor analysis template, fill in the following information.
MENU ANALYSIS: What do they offer that’s different and how is it priced? What are they known for? Find this information on the competitor’s website. Some restaurants won’t have their menus on their website. If this is the case, you might be able to find pictures of their menu on Yelp or other review sites. On the template we provided, fill in the following information.
PROMOTIONAL ANALYSIS: What are they doing to attract customers? Find this information on the competitor’s website homepage or events page. You might be able to find additional promotional information on the competitor’s social media pages. On the competitor analysis template we provided, fill in the following information.
CUSTOMER REVIEW SITE ANALYSIS: What are their customers saying? Find this information on customer reviews websites like Yelp, OpenTable, TripAdvisor, Zomato. For efficiency, choose one site and complete the fields below using the template we provided:
Learn how to conduct an extensive customer review analysis in the article Restaurant Menu Ideas & Testing. Overall SWOT ANALYSIS: How do they compare to your prospective restaurant? In this section, based on everything you’ve learned about your competitor, form your final impression about them. This section seeks to evaluate how they perform in the market and compare next to your restaurant.
Tips on How To Use Your Competitive Analysis to Choose the Right Location for Your RestaurantCompetition isn’t always a bad thing. There’s no hard, fast rule on what constitutes a “saturated market”, whereby there is so much competition, your restaurant won’t capture an audience. In fact, some business experts advise that you open near your biggest potential competitor. This logic may seem counterintuitive, but your business could benefit from overflow traffic. Say, if that restaurant has a long wait or can’t accommodate a guest. Experts also suggest locating yourself near competition because consumers already associate that location with your offering. We see this all the time. Think of:
If you can confidently determine that you have a superior business model (a concept more targeted to your audience, higher quality food, better recipes, superior service, nicer ambiance etc.) or an offering that separates you from the competition in the mind of diners, then some competition should not dissuade you. Of course, it’s important to note that competition isn’t the end-all-be-all when you’re choosing your location. It is a metric to be taken into consideration with other factors, including demographics, traffic, complementary businesses, the building, the space itself, zoning, and availability. Consider the market share of local competition. While this isn’t an exact science, with the right information, you can estimate the market share of your competitors to determine what’s remaining. To determine the market share of your competitor, you’ll need to know:
For example, there is a population of 80,000 within a 15 minute drive of your competitor’s restaurant. 17,000 of those people make up your competitor’s target market. Estimate that they fill 80 bellies a day based on their seating capacity and general busyness. Estimated Market Share = (Estimated Total Monthly Diners / Target Market Population) x 100 = ( (80 x 30) / 17,000) x 100 = 14% Project this against your own prospective market share and the market share of other neighboring competitors in order to gauge the available market. Locations that have high populations of your target market are preferable. There’s more diner pie to go around to every competitor. Use local competition to re-evaluate your strategic position. Going up against the competition can mean re-imagining your restaurant in a new way. Refer back to your SWOT analysis to identify market gaps and refine your restaurant offering. While it’s common to think that restaurant concepts are born into success from the sheer genius of the restaurateur, often success comes from that restaurateur tweaking their restaurant’s business plan to fill a market gap. Some successful restaurants begin by analyzing the market and creating a concept based on gaps they find. For example: Market gaps by concept: If you analyzed a market and found a lot of quick service, take-out Chinese restaurants, you might consider turning your concept into a fine dining Chinese restaurant or a casual restaurant that caters to the hip, young professional elite. Market gaps by need: A hot vietnamese soup restaurant might perform better in a cold, wet, Pacific Northwest surf town than an ice cream shop. Market gaps by creativity: Develop a unique menu by adding a special twist on common dishes that stand out from the rest of the competition. ConclusionYou’re almost ready to start looking at restaurant spaces in viable locations, but your competitive analysis doesn’t end here. As you move forward, your restaurant concept and plans will continue to be dictated and inspired by your competitors. For the purposes of choosing a location, your competitive analysis should add yet another layer of consideration as you analyze each location. Once you’ve determined a location is a fit based on competition, population, traffic and complementary businesses, it’s time to explore bylaws, zoning, permits and planning. More in Operations
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