SWOT Analysis For Restaurant | 5 mins read

How to Conduct a SWOT Analysis for Restaurants

how to conduct a swot analysis for restaurants
Chloe Henderson

By Chloe Henderson

Introduction to SWOT Analysis for Restaurants

Starting a new restaurant can be overwhelming as owners need to develop their model, source labor and inventory, find a facility, and establish a foothold in their market segment. While juggling these tasks, sometimes owners overlook the emerging opportunities and risks.

The SWOT analysis for restaurant startups defines the establishment's strengths and weaknesses so owners can optimize operations and enhance the customer experience.

What is a SWOT Analysis?

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Restaurant owners use the SWOT analysis method to assess their performance alongside the overall market by identifying various external and internal factors. SWOT stands for strengths, weaknesses, opportunities, and threats.

This analysis is also referred to as SWOC, which holds the same meaning, except the "C" stands for challenges rather than threats.

The strengths and weaknesses segments represent the variables that restaurants can control, whereas the opportunities and threats are out of the owner's control. However, all of the elements can have a significant impact on a restaurant.

By looking at all of the categories, establishments can gain a well-rounded view of their performance. Establishments can see how they compare to competitors, their most effective restaurant marketing campaigns, and the policies that can help mitigate risks.

While establishments in the restaurant industry can use the SWOT analysis to evaluate changes, it is typically only used for new restaurants to determine their position within the market.

How to Conduct a SWOT Analysis

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The key to conducting a restaurant SWOT analysis is outlining each category thoroughly, so the evaluation is comprehensive.

1. Define Strengths

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Consumers choose to go to a restaurant based on the level of service they provide their guests. If visitors can't find these services at any other establishment, they are considered a strength to the restaurant. Even if a restaurant business is not the best restaurant in their market, their unique customer experience can boost their competitiveness.

The five major strengths a restaurant can have include the following.

  • Cleanliness
Customers want to see that a restaurant takes care of their facilities, as it reflects how they respect guests and work behind the scenes. When restaurants keep clean lounging areas, restrooms, and kitchens, they attract consumers and increase advocacy.

  • Competitive Pricing
Many fast-food chains appeal to their guests because they offer a low price point that anyone can afford. The same goes for establishments that fall between the fast-food and 5-star realms, which can provide a more luxurious experience at a relatively affordable price.

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  • Excellent Customer Service
Nothing quite shines as bright as excellent customer service does. Aside from cleanliness, restaurants should strive to have organized lounging areas, well-lit parking lots, and friendly staff. By prioritizing customer service, establishments can make guests feel comfortable.

  • Product Variety
Restaurant guests like a variety so they can return and try a new dish. Therefore, establishments should focus on expanding their menu to discover more guest favorites. However, menus should not extend to the point that the staff is unable to stay well-versed in the dishes.

  • Unique Brand Image
A new restaurant has an allure of its own because it represents a unique customer experience. Startups need to take advantage of the short while breaking into the market to establish how they want their brand to be perceived.

2. Define Weaknesses

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While there are several benefits to starting a new restaurant, owners should also be aware of a few weaknesses.

  • Newness
Being the new restaurant is not always a positive when located in a flooded market where customers have already committed their loyalty to other establishments. These types of consumers may take some persuasion to even try a new restaurant, let alone change their loyalty.

  • Restrictive Budgets
Founding a startup requires some major investments in facilities, equipment, labor, and unique services. Unfortunately, many starting restaurants work on a shoestring budget until they establish their customer base, making it difficult to supplement daily operations.

  • Generality
Often due to limited funds, many restaurants are unable to create a unique customer experience and eventually blend in with their competitors. If businesses cannot differentiate themselves from surrounding companies, there is no telling why customers would choose one restaurant over another.

  • Location
A restaurant's building is the first thing guests see and how they develop their first impression. Therefore, if restaurants cannot afford a facility in a clean, touristy area, it is unlikely that they can attract new customers.

3. Identify Opportunities

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Restaurants are always seeking opportunities to expand their customer reach and profit margins. By studying market trends, owners can discover the following.

  • New Market Niches
As technology advances and customer demand changes, there are always new market niches forming. Restaurants should monitor these trends to identify unique services to implement into their model to expand their target audience.

  • New Residential Developments
Nearby residential developments represent future opportunities for new customers. While it may take years until restaurants experience an influx of guests, they should prepare their operations to withstand higher volumes of orders.

  • Competition
When a residential area is developing, restaurants also have the opportunity to find a market area that competitors haven't yet discovered. By establishing a foothold in the unique segment, restaurants can stifle incoming competition.

4. Identify Risks

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Establishment-specific and industry-wide are the two types of threats that restaurants need to understand. Establishment-specific risks are threats that exist in competition with a similar restaurant business plan. On the other hand, industry-wide threats are risks that apply to all restaurants within the market.

Other specific threats that restaurants should watch out for include

  • Big Competition
When established restaurants reside in the same area, startups may find it challenging to attract customers. New restaurants may need to invest more in marketing promotions to extend their customer reach.

  • Operational Costs
Establishing the restaurant is only half the feet. Owners must also continue to supplement rent, utilities, maintenance, and staff salaries. Unfortunately, these financial obligations are often what shut down startups.

  • Competitors' Pricing
It is difficult to compete with competitors when they are able to offer low prices. If new restaurants can match competitors' pricing, they risk losing customers.

By using the business SWOT analysis method, restaurants can capitalize on their strengths while improving their weaknesses.