Blog #2: Influences of Supply and Demand in the Restaurant Industry

            The supply and demand of the restaurant industry significant effects the price of the food offered. The basic law of demand states that when the price of a product is increased, the demand will decrease. As well, IBISWorld explains, consumer sentiment has a major influence on how consumers prefer to use their expenditures of discretionary items, including dining. For instance, during the recession, there was an increase in the demand for lower-priced value meals. This makes sense because one of the main factors that can cause an increase in demand for cheaper food is income. If many consumers begin to lose their source of income, or have it lowered, then luxury spending such as restaurant dining will decrease and, as stated before, an increase in cheap dining.

            Another form of demand that has recently increased in the industry is the demand for healthier foods. For many restaurants, this is a huge threat since they will have to begin to offer healthier options if they want to keep their consumers. This can affect restaurants such as McDonalds. Franchises and dining establishments such as McDonalds are known for their unhealthy and fatty foods. Due to this new demand for healthy foods, McDonalds and begun to adjust their menus to suit the wants of the consumer. Many restaurants must adapt to this type of demand because it is caused by the taste of the consumer. The taste of the consumer is very important because it is based on the changes in the taste that make restaurants change their food options.

            Supply has also played a key role in restaurant dining. With an increase in the amount of suppliers, competition also increases. This is important because now restaurants do not only have to worry about the demands of their consumers, but also compete with other restaurants, including price wars. As well, the supply in terms of expectations can affect the restaurant industry. First Research has forecasted that there will be growth in the industry between 2012 and 2016. This means that many suppliers, being the restaurants, will want to save their financial resources so that they can use them when they have the opportunities.

            Supply and Demand is very important in this industry as it dictates the marketing strategy of each restaurant. No restaurant should be making their food unhealthier as it goes against the demand of the consumers. At the same time, no restaurant should make the price of their food substantially greater than those they are contending with since their competitors will gain the advantage in attracting consumers. It is financial suicide to go against the supply and demand for any restaurant in the industry.

Cited Sources:

Nima Samadi (September 2012). Restaurants will add healthy items to capitalize on renewed demand. Retrieved from http://clients1.ibisworld.com.proxyau.wrlc.org/reports/us/industry/default.aspx?entid=1678

First Research (August 20, 20122). Restaurants. Retrieved from http://mergent.firstresearch-learn.com/industry_full.aspx?pid=27