RESTAURANT BUSINESS

Current Restaurant Business in London



Abstract

Whilst researchers have explored the relationship between innovativeness and business performance in different organisations, such studies in services such as restaurants are scarce. The purpose of this paper is to examine the current restaurant business in London and identify salient factors influencing the service performances of restaurant business over time. This paper develops a set of benchmarks that helps fast-food restaurants monitor their service-delivery process, identify relative weaknesses, and take corrective actions for continuous service improvements using analytic hierarchy process and competitive gap analysis.

Current Restaurant Business in London

Introduction

Owing to gradual changes in London life styles, citizens now spend more money on restaurant food than they do on higher education, personal computers, new cars, movies, books, magazines, newspapers, videos, and recorded music. In 2004, London spent $148.6 billion on restaurant industry and accounted for 64.8 percent of the restaurant sales of the London that consumed fast food most in the world. In other words, the average London spends $492 per year on restaurant business. Despite the popularity of restaurant business, restaurants have historically operated on slim-profit margins ranging from 4 to 7 percent. The low-profit margin of the restaurant industry stemmed from the continuous wholesale-food price inflation. For example, the wholesale-food price rose 7.6 percent in 2007 and 8.5 percent in 2008. To make it worse, the revenue of the London restaurant industry declined by 4.7 percent in 2009. As such, restaurants have experienced intense competition in the recent years due in part to the saturation of a restaurant market and the worldwide economic downturn. With tighter profit margins and increasing competition ((Ren, 2006, pp. 77).

Recent research has suggested that innovativeness contributes to restaurant business performance. Because of its possible impact on business profitability and differentiation, innovativeness plays a key role in the formation of restaurant business strategy. In addition, a large number of prior studies concerning innovativeness have been carried out in different firms focusing on products and processes. However, even though the services sector has become a tremendously large part of the modern economy, empirical research related to services seems to be quite insufficient in empirical economics and innovation research. Our understanding of the innovativeness and the organisational effectiveness process is often limited to research into manufacturing sector companies in western economic systems.

In a complex economic system such as that of London, little knowledge exists regarding operating effectiveness (OE) and cost efficiency (CE) in the service industry. That is surprising, because services were long thought to be laggards in the area of innovation. This perception still exists and is a major reason why innovation in services remains under-researched. Hollenstein (2000) noted that this unsatisfactory situation is partly due to conceptual problems and partly due to a lack of data. On the one hand, there are many well-established competitors with great marketing, personnel, financial, and other resources. On the other hand, we witness that changes in customer tastes and dietary habits as well as national, regional and local economic conditions and demographic trends have made ...