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It can be easy to miss the forest for the trees when you’re running a restaurant or working in the hotel industry. A restaurant manager can be so hyper-focused on restaurant accounting and which restaurant KPI to include in their restaurant marketing strategies that they miss the bigger picture.
But you don’t operate your restaurant in a vacuum. Occasionally, you have to zoom out and take stock of your business’s fundamental strengths and weaknesses when compared to competitors and customer expectations. It’s the only way you’ll be able to position yourself for long-term success.
That’s where the SWOT analysis comes in. SWOT stands for strengths, weaknesses, opportunities, and threats. It’s how businesses zoom out to look at their position within the larger commercial environment and aim to maximize profits, work on guest retention, find growth opportunities, and maximize revenue. It's more than learning the cost of how to get a liquor license, it's about every aspect of your restaurant. Let’s look into exactly how to do it.
Strengths And Weaknesses of A Restaurant
The first step is looking at the strength and weakness of a restaurant business. Involve trusted employees, such as servers, who interact with customers to help you build out your SWOT. They’ve often got a great idea of what people are thinking.
Strengths: What Do You Do Best?
Do you know what excites customers about your bar or restaurant? You may have figured some of this out when looking into how to increase customer satisfaction in a restaurant. It’s what keeps them coming back or what brought them there in the first place.
Common strengths include:
- Knowing how to price a food menu
- Unique menu or menu items—food or cocktail drinks, or something like a food and wine pairing menu
- Decor, ambiance, and environment
- Neighborhood or location (close to a highly trafficked subway stop, for example)
- Outdoor dining options
- Menu quality
- Customer satisfaction
One of the most important restaurant and bar manager duties is keeping your ear to the ground and coaxing this feedback out of your customers. Alternately, read all the online reviews you can find or start giving guests feedback surveys.
Weaknesses: What Are You Lacking?
As you do your strength analysis, you’ll realize that not every piece of feedback from your customers is positive. This is good. These are your weaknesses, and the only way to address them is to be aware of them.
Common bar and restaurant weaknesses are:
- Poor customer service
- Long wait times (for food or seating)
- High prices (see helpful psychological pricing strategy on wine bottle prices and alcohol pricing)
- Noise levels
- Cleanliness (see our restaurant cleaning checklist)
Again, pore over all your customer reviews, listen to your floor lieutenants, talk to customers, and/or institute a survey.
Opportunities And Threats
Strengths and weaknesses are the internal forces that you have a decent amount of control over. The next step, opportunities, and threats are the external factors that affect the creation and execution of your restaurant business plan.
Restaurant Competitor Analysis: Restaurant Threats SWOT
Threats are the external version of weaknesses. As in, they’re weaknesses, but you can’t identify them by looking inward.
Some common threats to a restaurant business include:
- Any new restaurants in your neighborhood opening.
- New restaurants that directly compete with your customers opening anywhere in your city.
- Successful competitor promotions and specials. They might seem harmless, but remember, competitor bar promotion ideas are an attempt to take business away from you.
- Any new competitor menu items.
- Industry-wide threats to the restaurant industry as a whole—like B2B business wholesale prices increasing due to drought or a public health crisis.
Scan the strengths of your competitors and tease out what makes them popular. The best way to analyze a restaurant's competition is to read competitor reviews and info on the hospitality industry. Take note of any wide-ranging pricing changes or new, more restrictive laws.
Market Analysis Example for Restaurant: Opportunities
Opportunities are areas where our restaurant can grow. Opportunities are based on your weaknesses, competitive analysis, cultural forces, and customer behavior. And, importantly, they’re actionable. Taking advantage of these opportunities can increase your profit margin.
If your venue makes it impossible to have patio seating, then outdoor dining isn’t an opportunity. Its absence can be a weakness, but if it can’t be reasonably implemented, it’s not a good opportunity.
Some common opportunities for bars and restaurants are:
- Not embracing diet preferences. Veganism, vegetarianism, paleo, gluten-free, etc. There are many dietary strategies and restrictions. Dig a little deeper into your customer base and their other haunts. Chances are catering to a diet or lifestyle is a big opportunity for your business.
- Engagement. Things like happy hour ideas, bar promotions, and restaurant marketing ideas. If you’re not seeing benefits from those, it’s an opportunity. Because they all work when done right.
- Any weaknesses you may have noted that you can address, like how to price a menu, menu variety, customer service levels, restaurant tech issues, etc.
Restaurant SWOT Analysis Example
Let’s take a look at how a restaurant business SWOT analysis shakes out in practice. Consider a hypothetical Korean-Mexican fusion restaurant. Two weeks before management convenes to put together their SWOT analysis, the participating managers are told to gather insights from customers, reviews, and competitors as best they can.
During the meeting, the group brainstormed each section together. Here’s the example SWOT analysis for a food business:
SWOT Analysis For New Restaurant
If you were to do a SWOT analysis for a new restaurant, it would largely require the same process. The only difference would be that you don’t have reviews and existing customers to mine for information. But don’t let that stop you.
Your restaurant business plan likely has a lot of very useful things for a SWOT analysis, including competitive research. And you and your investors and management team likely have a good idea of what your strengths are. If you didn’t, you wouldn’t be bothered trying to bring your concept to life.
"Key Takeaway: SWOT stands for strengths, weaknesses, opportunities, and threats. It’s how businesses zoom out to look at their position within the larger commercial environment and aim to maximize profits, work on guest retention, find growth opportunities, and maximize revenue."
Frequently Asked Questions About SWOT Analysis
SWOT analysis is vital for bars, restaurants, and every business in between. A SWOT analysis tells you what you need to work on, what you're doing well with, and where you might be missing out on opportunities. There's always more you can learn about how to conduct a good SWOT analysis. Our answers to these frequently asked questions will get you headed in the right direction.
What Does a SWOT Analysis Explain?
A SWOT analysis explains your strengths, weaknesses, opportunities, and threats. When you do a SWOT analysis of your business it shows you how you're working well, what you need to work on, and what you need to look out for. Overall, a SWOT analysis explains the current state of your business, how you can do better, and what you need to worry about and plan for.
What are Three Rules for Successful SWOT Analysis?
Three rules for a successful SWOT analysis are be specific, avoid grey areas, and stay focused on your business and market. Those three rules will help you perform a SWOT analysis that gives you tangible results you can work with.
How Do You Write a Good SWOT Analysis?
To write a good SWOT analysis, you need to look at your restaurant objectively, and be detailed and specific. The more you can dig into the root of your business, the better your SWOT analysis will be, and the more you'll learn from it.
What are Three Examples of Strengths In SWOT Analysis?
Three examples of strengths is a SWOT analysis are knowledgeable staff, a good relationship with customers, and successful marketing strategies. There are many strengths you'll find in a SWOT analysis of your restaurant, but those three are some that you should be particularly proud of. If you're not finding them in your strengths, work toward them.
What Are the Weaknesses in a Restaurant SWOT Analysis?
Weaknesses are internal factors that put a restaurant at a disadvantage compared to its competitors. This may include factors such as poor location, limited menu options, inconsistent food quality, high employee turnover, lack of marketing or promotional efforts, outdated decor or facilities, and financial challenges.
What Are the Opportunities in a Restaurant SWOT Analysis?
Opportunities are external factors that a restaurant can leverage to its advantage. This may include factors such as a growing market demand for specific cuisines or dining experiences, emerging food trends, partnerships or collaborations with local businesses or suppliers, expansion into new locations or markets, and advancements in technology for online ordering or delivery services.
How Can a Restaurant Use a SWOT Analysis to Improve Its Business?
A restaurant can use the findings from a SWOT analysis to develop strategies to capitalize on its strengths, address its weaknesses, exploit opportunities, and mitigate threats. This may involve actions such as refining menu offerings, improving service quality, investing in marketing or promotions, enhancing the dining experience, optimizing operational efficiency, and adapting to changing market conditions.
Altogether, the SWOT is a restaurant situation analysis. It’s one-half of a thorough restaurant analysis. It’s the right-brained half. A restaurant SWOT analysis doesn’t dig deep into analytics or crunch any numbers. It’s a high-level view of common large, common-sense issues.
The left-brained half is, of course, data analytics. And, in the bar and restaurant context, is more like the left-brained 90%.
You should perform a SWOT analysis every four or six months to recognize and react to problems that aren’t solely identified by data analytics. You should also use a restaurant financial audit checklist for further analysis.
But the rest of the time, you should be doing everything in your power to leverage historical sales data and inventory consumption to make strategic, profitable decisions. And that’s exactly what the industry-leading bar inventory software BinWise Pro helps bars and restaurants across the world do.