Name – Vikrant Kumar

Enrolment No. –
14715101720
Subject – Entrepreneurship
Development
Restaurant Industry PESTEL Analysis
 1. Introduction

 There is no doubt that the food or restaurant industry is one of the largest and most
profitable businesses globally. The restaurant industry is thriving! Thanks to the
people’s inclination towards experimenting with food and their ever-changing
preferences. It is one of the main reasons behind culinary diversity.
 The management of a company uses PESTEL analysis to weigh the factors that can
hinder or promote the industry's growth. Restaurant Industry PESTEL
analysis can identify how political, economic, socio-cultural, technological,
ecological, and legal issues can impact the conditions of the restaurant industry.
 2. Background of Restaurant Industry

 France takes pride in opening the first restaurant ever in the world. According to
researchers, in 1765, A. Boulanger, a soup vendor, first introduced the restaurant concept.
Even today, the French makes a significant contribution to the restaurant industry. The name
restaurant refers to public eating place.
 It is not just famous in France, but worldwide. There are broadly two categories, fast food,
and casual dining. The functioning is similar to that of any retail store. Today the dining
options are abundant, so the competition between them is pretty stiff and intense.
 3. Restaurant Industry PESTEL Analysis

 More and more people are willing to try their luck in making a fortune in the restaurant
industry. Investors are eager to assess the situation before investing in this business, owing
to the growing competition in this sector. PESTEL is one such business tool that empowers
investors to evaluate the external factors that directly impact the business environment.
 PESTEL is an acronym for Political, Economic, Social, Technological, Environmental, and
Legal factors. This business strategy enables companies to study these macro-environmental
factors to plan the company’s finances better. Such software is beneficial, especially, for
start-ups helping them target the potential market. PESTEL analysis restaurant
industry predicts growth opportunities as well as a potential threat for the industry.
 Political Factors:

 These factors assess the extent to which government policies interfere in the business. It can be
the laws related to health and safety, taxation, trade policies, labor law, environmental law,
restrictions on trade, and more.
 Political stability ensures how much a business will flourish. Government policies may change
over time, owing to the changing scenarios of the area where this industry operates. Companies
must be flexible to adapt to these changes and plan business strategies accordingly.
 The health and safety-related policies affect the restaurant industry the most. Businesses must
take care of cleanliness and hygiene while carrying out cooking, packing, and delivering
operations to abide by the guidelines related to health and safety.
 Taxation that affects the purchase and quality also influences the industry. It differs from
country to country. Companies must plan their finances well, keeping this factor in mind.
 Economic Factors:

 These factors help businesses plan their short-term and long-term goals. Economic
factors encompass economic growth, interest rate, exchange rate, inflation, the
purchasing power of the consumer, and more.
 In general, the growing tendency of people to eat out has ensured better revenue for the
restaurant industry. The increasing disposable income of people has given it a boost.
 Growing labor costs can be a matter of concern for the restaurant industry. It will lead to
less profit for the owners.
 Similarly, fluctuating taxes on raw materials and ingredients can result in high prices of
products. Thus, affecting the prices on the menu. A slow-growing or unstable economic
growth is also a threat to the industry.
 Social Factors:

 Socio-cultural aspects that help the businesses develop a supply-demand model come under
this factor. They are- traditions, cultural values & beliefs, population growth, age distribution,
career attitude, and more. By studying these factors, companies can also determine a potential
market.
 PESTEL analysis restaurant industry suggests that growing awareness about organic food is a
social factor. It might affect the growth of the restaurant industry in the coming years.
 The busy lifestyle of people has increased people’s dependence on ready-made food instead of
home-cooked food. It has proven to be a boost for the economy of the food industry.
 The growing population and its increasing demand, sensitivity towards transgender employees
are some other social factors directly or indirectly influencing the restaurant industry.
 Technological Factors:

 Factors including innovation, automation, technical awareness, and more influence the
production, distribution, and communication operations of a business come under the
technical parameters.
 Technological advancement such as accepting payments via smartphones, ordering food
online, and operating CCTV cameras from mobile phones has opened up, new revenues
for the restaurant industry. Automation is the future of the restaurant industry.
 The introduction of the latest software to manage the accounts of companies can lead to
fewer errors and more profit.
 Technology has also given companies the scope to experiment with their promotion
strategies to reach more people quickly and leave a long-lasting impression.
 Environmental Factors:

 The ongoing environmental crisis has given rise to awareness about environmental
factors. These include scarcity of raw material, recycling, pollution, carbon footprint,
and others. Companies must follow the rules as sustainability is the key to success.
 The primary criterion in the restaurant industry is cleanliness. Apart from that,
businesses must also develop strategies for recycling and waste management.
 The restaurant industry must work in collaboration with the government. It will help to
lower the risks of environmental damage, which can occur because of them.
 The food industry must recognize and appreciate the tendency of their consumers to
shift to a plant-based diet owing to the damage the meat industry might contribute to
the environment. They must focus on materializing the long-term benefits of this shift.
 Legal Factors:
 Factor related to advertising, consumer rights, health concern, and product safety comes under
this legal factor of PESTEL analysis. The breach of government policies becomes a legal matter.
 Legal factors play an essential role for restaurant industries, especially the ones operating
globally. With the changing legislation, businesses must also change their strategies to grow and
expand.
 Food quality and hygiene criterion are two crucial factors that come under the product safety of
the legal factors.
 Besides the safety standards, maintaining minimum daily wages and the welfare of the
employees are also some vital aspects that the restaurant industry must consider if they want to
grow steadily in any given environment.
 The restaurant industry is the most profitable since food is a basic necessity for
survival. This industry operates round the clock. One of the many reasons for this
success is that this industry offers a great deal of variety, right from price, cuisine,
to ambiance. People can choose from a wide range of options. Nonetheless, all
businesses are controlled by these external factors. PESTEL analysis restaurant
industry suggests that companies must consider these factors to achieve short-term
and long-term goals.
Thankyou
!