Chapter 3 – Market and Industry Analysis

Planning your pop up may seem dull when you just want to get your teeth into putting on your event, but this part of the process is the way you iron out problems and pitfalls before making them—don’t shy away from it!

—Abigail Alldis and William Alldis, How to Run a Pop-Up Restaurant or Supper Club

Chapter Warm-Up

Prechapter Reading Material

• Discover emerging consumer trends with this guided exploration of TrendHunter.com. You will have the option to email yourself your results for personal reference.

Prechapter Exercise

• Take a moment and review the IBISWorld database in the research guides (log-in may be required). Identify three key market trends and three key industry trends that characterize the following:
  • global full-service restaurant industry
  • US full-service restaurant industry
  • Pennsylvania full-service restaurant industry

Chapter Outline

• Planning and Researching Your Pop-Up Restaurant
• Market Segmentation and Demand Analysis
• Budget and Pricing Decisions
• Duration
• Bootstrapping
• Planning for Success

Planning and researching your pop-up restaurant

Conducting research to identify gaps in the market and trends in the industry is a critical step before deciding on and finalizing a restaurant concept. Locating and understanding market gaps, or areas of unmet need in the market, allows for a meaningful and targeted response with a concept that not only excites but entices demand for products and services with seasonal or infrequent availability to diners. To ensure a sound understanding of market gaps and industry trends, it is important for the pop-up restaurateur or hospitality manager to access a wide cross-section of data sources that can provide valuable insight into the market and industry.

Data may be divided into primary and secondary sources. Primary data are data collected directly by the researcher from a respondent. Secondary data are data collected by another source and made available to the researcher. Examples of data-collection methods include surveys, interviews, questionnaires, polls, observation, reviews, and publicly accessible reports.

When planning and researching a pop-up restaurant, there are a number of sources of data available to the hospitality manager. These include locals, residents, food magazines, food critics, local chefs, restaurateurs, big-city “foodie” venues, trade and professional association publications, future competitors, online reports, and research databases.

Resources for analyzing the restaurant and dining industry include research from professional organizations and market research firms. The National Restaurant Association reports a range of industry metrics, including an annual culinary trends forecast. The Pennsylvania Restaurant and Lodging Association offers news about the hospitality industry in the state, including in their quarterly magazine aimed at industry professionals. The market research firm Richard K. Miller & Associates publishes a yearly Restaurant, Food and Beverage Market Research Handbook.

It is also useful to understand the local restaurant and dining market. Dining guides from destination marketing organizations / convention and visitors bureaus (DMOs/CVBs), such as the Pennsylvania Americana Region dining guide or VisitPA “Foodie Fun” guide, provide information about food and beverage establishments in the region. DMO/CVB dining guides reveal the local culture, including culinary events and traditions; regional cuisine, flavors, and ingredients; and an understanding of market demographics and price points.

Demographic data from the US Census Bureau, including median household income, age distribution and family characteristics, and race, ethnicity, and country of origin information can also support consumer profiling to inform restaurant concept design and marketing strategies.

Market segmentation and demand analysis

Among the most important principles of accessing and using data is ensuring that the “voice” of future customers is heard. This is the single most important stage before deciding on your pop-up concept. Market and industry knowledge will help the restaurateur or hospitality manager gauge food tastes, preferences, and trends in popular culture and, in turn, develop a pop-up concept relevant to these realities. Learning from other restaurateurs will also help you avoid problems and pitfalls. To this end, food blogs, social media sites (e.g., Instagram, Twitter, Snapchat, Facebook), and other social networking sites are used by restaurateurs and their followers to not only learn from a variety of sources but also inform and engage members of the target audience about pop-ups when implementing the pop-up’s marketing and sales plan (chapter 4).

Duration

Perhaps the single most important step to determining a budget for expenses and revenues relates to the duration of the pop-up. Will the pop-up run for one evening? Three days? One week? Three times per quarter? The duration of the pop-up establishes financial limits for projecting the number of covers (i.e., plates, guests) to be served and the accompanying revenue associated with the number of covers. The second most important step is determining the budget of the location, or capacity, of the pop-up. Will the pop-up be held in a small, medium, or large venue? To achieve sales targets, a smaller venue will require “turning over” covers at a higher rate than the larger venue. For example, let us compare a thirty-seater capacity venue with a six-seater capacity. To achieve a sales target of one hundred covers, the thirty-seater venue will have to turn over covers at a rate of approximately 3.4 times the venue capacity (30 * 3.4 = 102). On the other hand, the sixty-seater venue will have to turn over covers at a rate of approximately 1.75 times the venue capacity (60 * 1.75 = 105) to achieve a sales target of one hundred covers. Understanding the relationship between venue capacity and the number of covers will also help the restaurateur make critical pricing decisions.

Bootstrapping

Restaurateurs are always reviewing budget plans to see how they can reduce costs. Cost reduction is an important component of planning for the pop-up restaurant given the temporary nature of the experience. Taking steps to borrow equipment, engage informal labor (e.g., qualified family or friends), or market in-house are all examples of a concept known as bootstrapping.

Bootstrapping helps the hospitality manager offset otherwise costly, long-term investments with temporary, short-term cost alternatives. Renting kitchen equipment for a nominal or zero-cost fee instead of purchasing new equipment is an example of bootstrapping. Cross-training current employees instead of hiring new ones is another example of bootstrapping, as is engaging special groups of individuals such as students seeking to earn internship hours. Obtaining permission to utilize a venue for free or for a nominal rent provides a further bootstrapping example. In the case of pop-up restaurants, venues must be flexible and have the ability to be retrofitted and dismantled with relative ease, thereby supporting the temporary nature of the event.

There are, however, major elements of budget and pricing decisions that may not be bootstrapped. Examples include specialty foods and beverages and expert talent and skills, such as those provided by an executive or master chef, sommelier, or specialty-trained service persons.

Planning for success

• What is success? (Baras 2015)

Planning for success is a crucial part of the concept and design phases of the pop-up restaurant. Knowing what a successful outcome looks like and understanding how to measure this outcome form an important part of planning and doing research. Key success factors (KSFs) or key performance indicators (KPIs) provide a basis on which to conduct a focused evaluation of whether the pop-up restaurant achieved its project goals. KPIs may be related to service quality or financial return.

KEY TERMS

• Budget
• Competitor profile matrix
• Key success factors (KSFs) or Key performance indicators (KPIs)
• Market analysis
• Market segmentation
• Planning
• Pricing
• Research

REVIEW Questions

1. 1. What are primary and secondary data sources? How are they different?
   2. What are the benefits and pitfalls of using primary data?
   3. What are the benefits and pitfalls of using secondary data?
   4. Why is it important to undertake research before deciding on a pop-up restaurant concept?
   5. Having a pop-up run over two or more evenings, is generally favorable to setup costs. Why?
   6. What have you learned about your target market that you did not know before? How will this influence changes to your pop-up restaurant concept, if any at all?
   7. Why is social media marketing most favored in advertising and promoting pop-up restaurants?

Review Activity

1. 1. Read the Market Summary (pp. 18-20) and Dining Out – Demographics (pp. 48-50) sections of the Restaurant, food & beverage market research handbook 2024 by RKMiller (ebook, requires PSU authentication). Compare this information to what you find in the Pennsylvania Americana Region Dining guide, VisitPA Foodie Fun guide, and Census Profile for Reading city, Pennsylvania. What restaurant and consumer trends do you suggest incorporating into your pop-up plan?
   2. Using hashtags (e.g., #popuprestaurant, #popup, #foodie) perform an information search on Twitter or other social networking site. What can you tell about the market for pop-up dining? Share your findings with the class.