What is a SWOT analysis of a restaurant, and why is it worth doing? Should casual dining restaurants conduct it? How about small cafes, food trucks, and fast food restaurants?
In this article, we will show a restaurant SWOT analysis guide and explain how restaurant owners can conduct it step by step. Let’s start with a definition.
What is a SWOT analysis for a restaurant?
A restaurant’s SWOT analysis evaluates its strengths, weaknesses, opportunities, and threats. Here’s a breakdown:
- Strengths: Internal factors, such as a strong brand reputation, unique cuisine, loyal customer base, or prime location, give the restaurant an advantage over competitors.
- Weaknesses: Internal factors that disadvantage the restaurant, such as poor customer service, limited menu options, high employee turnover, or outdated facilities.
- Opportunities: External factors that the restaurant could exploit to its advantage, such as emerging food trends, growing demand for delivery services, partnerships with local suppliers, or expansion into new markets.
- Threats: External factors that could negatively impact the restaurant, such as intense competition, economic downturns, changing consumer preferences, or regulatory changes affecting the food industry.
The SWOT analysis was created in the 1960s by Albert S. Humphrey, who developed it at the request of the United States Armed Forces. Humphrey aimed to determine why some companies are more effective at recruiting employees than others.
SWOT analysis is used in various fields, including management, marketing, strategic planning, restaurant management, education, etc.
Restaurants should regularly revise and update their SWOT analysis to remain proactive and adjust to the evolving market conditions of the restaurant industry.
Although a SWOT analysis is typically included in a restaurant business plan or marketing strategy, it can be performed whenever a crucial decision is made.
Is it worth conducting a SWOT analysis for a restaurant business?
Absolutely! With a SWOT analysis of a restaurant, you can determine the internal and external factors and characteristics that affect the profitability of your restaurant.
This is an excellent opportunity to scrutinize various aspects of your business, evaluate your strengths and weaknesses, and develop and enhance your business, ultimately impacting your company’s financial results.
The restaurant reporting feature within the online ordering system enables an effortless review of your restaurant’s financial performance over any chosen time frame.
When to do a SWOT analysis?
If you plan to open a restaurant, remember to include a SWOT analysis in your restaurant business plan.
If you already operate a restaurant, conducting a SWOT analysis every six months is a good idea. This allows you to assess whether the changes implemented in your business due to the previous analysis have yielded results.
Below, you will find a restaurant SWOT analysis guide. Let’s see the steps required for conducting a SWOT analysis.
Step 1. Define the purpose of the SWOT analysis
The goals of a restaurant’s SWOT analysis can vary. For instance, you can focus on improving financial results. (It is typically one of the primary restaurant goals). However, an additional goal may involve changing the restaurant’s current strategy.
Sample goals of SWOT analysis for a restaurant
- Improving the quality of service
- Changing the restaurant’s offerings to adapt to customer expectations and needs
- Increasing competitiveness in the market through:
- Price adjustments
- Enhancing service quality
- Menu changes (utilizing menu engineering techniques)
- Analyzing the effectiveness of marketing activities to implement new, improved strategies
- Building customer loyalty
- Creating an action plan to achieve the restaurant’s strategic goals
When determining the purpose of the SWOT analysis, involve all decision-makers, including the restaurant manager and co-owners. This will provide a more comprehensive insight into your business’s situation and potential development paths.
Step 2. Define the strengths of your restaurant
To define the strengths of your restaurant, ask yourself the following questions:
- What makes your restaurant popular with customers?
- What makes customers come back to you? (In other words, what do you do best?)
- What things/dishes/elements of your restaurant do your customers like?
- What sets you apart from other restaurants? (e.g., You are the only one who offers table ordering via a QR code menu)
- What resources do you have that give you a competitive advantage? (e.g., You offer an attractive restaurant loyalty program for your customers)
Examples of the restaurant’s strengths
- Location of the restaurant in an easily accessible place with high foot traffic
- Offering varied menu items
- Offering a seasonal menu
- Excellent waiter service
- Great restaurant marketing that attracts new customers in the competitive market
- You offer vegetarian and vegan meals
- Possibility to dine in the atmospheric garden of the restaurant
- Positive opinions of restaurant guests
- A local restaurant with a long history and tradition
- Possibility to organize special events (weddings, birthdays, etc.)
- High quality of ingredients used in the dishes
- Good restaurant website with an online ordering system
Step 3. Determine your restaurant’s weaknesses
Just as you emphasize your restaurant’s strengths, you must also identify its weaknesses by considering areas where it falls short.
It may sound brutal, but awareness of weaknesses allows you to address them and improve your business’s situation. Weaknesses can lead to negative online reviews or issues with returning customers, which is why it’s so important to identify them.
- What is the reason for your restaurant customers’ dissatisfaction?
- What information appears in negative restaurant feedback?
- What issues/aspects are most frequently discussed in negative reviews?
- Why don’t customers come back?
- What resources do you lack that are available from your competitors? (e.g., You don’t offer online ordering)
- Are your customers canceling orders? If so, what reasons do they give?
- What are you not doing that you could start doing to improve quality?
What could be restaurant weaknesses examples?
- A small number of parking spaces
- No deliveries (takeaway only)
- Not affordable prices
- No menu for children
- Inexperienced staff
- Lack of information about allergens/Lack of staff knowledge about allergens
- Dissatisfied employees
- The restaurant’s decor does not encourage customers to spend time there
- Music is too loud
- The lack of brand recognition
- No previous experience in running a restaurant
- Limited financial resources, e.g., a small restaurant marketing budget
- High costs compared to restaurant chains
Step 4. Identify growth opportunities for your restaurant
The next step is to analyze opportunities, i.e., possibilities that can support the restaurant’s growth. These are external factors and circumstances, so pointing them out may be more difficult than determining your restaurant’s strengths and weaknesses.
- What are the current trends in the restaurant industry and restaurant technology?
- What is the competition doing?
- How can you improve the sales process (e.g., creating your own mobile app for a restaurant to not rely solely on third-party portals and food delivery apps)?
- Can you access additional restaurant financing to develop your restaurant?
Examples of possible growth opportunities for your restaurant
- Government or city subsidies for restaurants
- Demand for online orders with delivery
- Possibility of opening additional locations on preferential terms
- Decreasing costs of renting premises
- Introducing happy hours at different times than the competition to make you stand out
- Building a children’s playground next to the restaurant
- Change of ingredients supplier to offer more attractive quality at competitive prices
- Increased interest in e.g., vegan cuisine
- Increasing customer income
- Increased interest in healthy, balanced food with good quality ingredients
Step 5. Determine potential threats to your restaurant
You will also see potential threats as you determine your restaurant’s growth opportunities. Restaurants will always be exposed to risk, and the owner’s responsible for minimizing this risk.
The key question you need to ask yourself is – What difficulties may arise in my restaurant in the future?
What are the possible threats to your restaurant?
- Declining customer income
- Strong competition
- Economic crisis
- Pandemic outbreak
- Changes in the law
- High employee turnover
- Rising food costs
- Increase in the cost of renting premises
- The emergence of competition in the area
- Inflation
- Competition from restaurant chains
Step 6. Determine the strategy based on the SWOT analysis
After completing the SWOT analysis, you can decide on the changes you will introduce in your restaurant’s operations. You can use one of four strategies to develop your restaurant.
Threats
Conservative
Defensive
1. Aggressive strategy
Restaurant owners and managers focus on planning and implementing a strategy that will allow for intensive restaurant development. To achieve success, they focus on the restaurant’s strengths and the opportunities arising from positive industry trends.
2. Conservative strategy
This strategy minimizes negative environmental influences by utilizing the restaurant’s full potential. It involves taking actions to select the best products and ingredients, adapt the restaurant’s offerings to customer requirements and preferences, reduce restaurant costs, and enhance the current offerings (e.g., improving the restaurant menu) to remain competitive.
This strategy aims to maximize the utilization of restaurant resources.
3. Competitive strategy
In this case, the restaurant owner focuses first on the market’s weaknesses and opportunities. The key is to turn weaknesses into strengths that can be used to build a competitive advantage.
4. Defensive strategy
This strategy focuses on keeping restaurants in business by limiting the impact of internal weaknesses and minimizing external threats. Such a strategy aims to keep the restaurant in the market during difficult conditions, such as surviving an economic slowdown. There may be a risk of restaurant operations being closed.
A restaurant SWOT analysis example
In the table below, you can see what an example restaurant SWOT analysis might look like.
Negative
Strengths
- High quality of ingredients used in the dishes
- High brand recognition among customers
- Qualified customer service
- Seasonal menu
Weaknesses
- No children menu
- Takeaway only; no delivery available
- A small number of parking spaces
- No outdoor seating is available
- Lack of marketing activities
- No restaurant loyalty program
Opportunities
- Growing number of customers ordering food with delivery
- Decreasing unemployment rate
- Lack of competition, including other restaurants selling through their own online ordering system for restaurants
- Interest in events (birthdays, weddings, etc.)
Threats
- A small number of orders
- The increase in energy price
- Rising ingredient costs
- It identifies the restaurant’s strengths and weaknesses
- It facilitates market understanding and customer needs assessment
- It analyzes competition thoroughly
- It defines restaurant strategy and enables rapid response to business environment changes
- It boosts restaurant profitability and efficiency
- It enhances proactivity by addressing weaknesses and threats and aids in situational analysis. This awareness helps in coping with worst-case scenarios like the impact of the COVID-19 pandemic on the food industry.
- It can be time-consuming and require significant effort.
- It primarily focuses on internal aspects of the business, potentially overlooking external factors.
- SWOT analysis results may be subjective, so it’s important to involve others.
- It doesn’t offer ready solutions to problems but is a decision-making tool.
Key Takeaways
- A SWOT analysis guides decisions on restaurant development and areas for improvement.
- Strengths and weaknesses relate to internal factors, while opportunities and threats stem from external factors.
- The SWOT analysis assesses the current restaurant situation.
- Conduct a SWOT analysis annually (like updating your restaurant business plan), ideally every six months, to gauge the achievement of your restaurant goals.
- SWOT analysis doesn’t offer ready-made solutions but guides strategic decisions.
- After the SWOT analysis, a restaurant can use one of four strategies: aggressive, conservative, competitive, and defensive.
Frequently Asked Questions (FAQ)
How is SWOT analysis used in the food industry?
SWOT analysis is commonly used in the food industry to assess the internal strengths and weaknesses of a food-related business, such as a restaurant, food manufacturer, or grocery store, as well as the external opportunities and threats in the market.
This analysis helps identify areas for improvement, capitalize on strengths, mitigate weaknesses, seize opportunities, and address potential threats.
