The Restaurant Sector, and its four restaurant "segments" defined by NAICS, has been added to Key Financial Benchmarks section of The Retail Owners Institute®.
Now we can get perspective on their financial performance. Whether they offer sit-down dining, fast food takeout, or are a neighborhood cafe, brewpub or juice bar, all have telling financial vital signs.
And they are fascinating!
Here are some of our immediate takeaways as we examined the Five-Year Charts for these Restaurant Segments:
Higher Profits
Overall, the median-performing restaurants enjoy higher pre-tax profits than median-performing retailers. Pre-tax profits for the restaurant segments range from 4.1% to 7.3%, well above the retailers’ average profit of 3.5%.
High Margin Businesses
Any wonder that some retailers are incorporating snack bars and/or beer, wine and even liquor bars in their stores? Changes the in-store experience, keeps customers there longer - and has sweet margins! (Plus, they can absorb the operating expenses versus a stand-alone operator.)
But…Cash Crunch
The Current Ratio for these 4 restaurant segments is grim. Very grim. For each dollar they owe in the next year, they have less than a dollar in current assets. They are constantly in a cash crisis.
Hmm. Is it any wonder that many “alternative lenders” welcome cafes and coffee shops as their customers??
And, Lots of Debt
That on-going cash crisis may explain why the Restaurant Sector has such breathtakingly-high Debt-to-Worth ratios. (And remember, as you look at the Five-Year Trends, the improvements - that is, the decline - in the Debt-to-Worth ratio is likely due to seeing the numbers for only the survivors, those places that are still in business.)
Revealing, Aren't They?
Yes, restaurants are retailers. But the overall financial picture of restaurants is decidedly different than most other retailers.
To take a look for yourself, and see how your conclusions compare, go to the Restaurants Sector of The ROI's Key Ratio Benchmarks. Review all of the Five-Year Trend Charts for these restaurant segments:
- Snack or Juice Bars, Espresso Bars
- Limited-Service Restaurants
- Drinking Places (alcoholic beverages)
- Full-Service Restaurants
