Italian Restaurant

Industry Sub-Division

Active restaurants in Israel can be classified according to a number of parameters:

Prestigious restaurants modernly designed and furnished: this type of restaurant carries a wide selection of Italian wine.

Regular restaurants are simply furnished. Some of these restaurants also have an external pizza sales counter.

 

Market Characteristics

  • High closure rates- the industry is characterized by one of the highest opening and closure rates among businesses. One of the reasons for this is the industry's reputation of “easy money” without a need in professional knowledge.{}100{>Chains and franchises- a number of well-known large chains are active in the market selling franchises and providing professional counseling and aid to the entrepreneur (note that purchasing the franchise involves a very high investment_
  • Chains and franchises- a number of well-known large chains are active in the market selling franchise rights and providing professional counseling and aid to the entrepreneur (note that purchasing franchise rights carries a very high investment. Chain restaurant survival rates are relatively higher.

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  • Orders from restaurants running a delivery service have increased in the last year.

 

 Customers: Defining the Target Market and its Size, Market Segmenting

Potential industry clientele includes people seeking recreation, segmented according to a number of factors:

  • Need- the need in fulfilling hunger, recreation, or a combination of the two.
  • Private/corporate use.
  • Income level will determine dining frequency (mainly pertains to private customers), and the chosen restaurant’s prestige level.
  • Geographical vicinity- the more prestigious the restaurant, the less significant this parameter.

 

Competition

The industry is highly competitive. Competitors can be divided into two main groups:

  • Direct competitors- various Italian restaurants targeted for a similar market segment and located in the same geographical vicinity.
  • Indirect competitors: Prestigious restaurants located in farther geographical vicinity also constitute competition as the geographical vicinity and accessibility parameters are less significant.
  • Prestigious coffee shops offering Italian food such as pasta, pizza, and ravioli on their menu.
  • Various types of prestigious restaurants (French, for example) may also present prestigious Italian restaurants with additional competition. 

 

 

 

 

 

 

 

Vendors

Equipment Vendors

Kitchen equipment- there are various vendors in Israel offering restaurant kitchen needs solutions. It is important to confirm that vendors also offer support and service for equipment.

Dining area equipment including tables, chairs, tablecloth, etc. There are many vendors supplying this type of equipment.

Tableware-plates, cups, cutlery, etc.- there are many vendors supplying this type of equipment. Cost varies according to tableware quality. A yearly 5% wastage rate should be taken into account in regards to breakable equipment.

 

Food and drink vendors

There is a wide variety of food and drink vendors in Israel. Principle importance in choosing vendors, aside from price, is credibility and quality of supplied product. One should discern whether it is more profitable to work with one vendor as opposed to working with a number of vendors.

 

Marketing Resources

Marketing resources depend upon the restaurant’s nature and potential clientele, and therefore a single method cannot be specified. Notwithstanding, a number of marketing and advertising methods are listed below:

  • Advertising in relevant media according to the restaurant's potential clientele. Chain restaurants may benefit from national marketing and advertising, including television.
  • Public relations- engaging a PR agent to convey information to the press (mainly recreation and gossip columns), arrange events, parties etc.
  • High importance is credited to reputation and regular customers.

 

Factors Affecting Success:

Location, service, competition, and dynamics.

 

Entry barriers

  • Investment in remodeling and designing the restaurant.
  • Investment in equipment
  • Local authority licensing process.

Financing:

Industry Revenue And Profitability

Revenue is affected by the type of restaurant, location, and price levels. The restaurant’s price level reflects its classification. Listed below are price levels per average meal at Italian restaurants in recent years.

 Year

2001

2002

2003

 

Prestigious restaurant

945 – 1,176

988 – 1,230

1,016 – 1,264

 

Regular restaurant

784 – 1,210

820 – 1,266

843 – 1,301

 

Yearly revenue per worker in

recent years in NIS thousands:

 

 

 

17-20%

22-24%

Average material consumption

           

 

 

 

 

Typical terms of payment:

  • Vendor Credit-Vendor credit terms vary according to buying and bargaining power of both parties.
  • Customer credit: customers pay in cash or by credit card. An alternative payment option is by vouchers distributed at places of employment (mostly in the high-tech industry).

 

Risk level:

The food and restaurant industry is a high-risk industry- there are many new business, but the number of failed or closed businesses is high as well. The highest investment required is in appropriating and remodeling the location, an investment which will be completely lost in case of failure. A partial return on the supply investment may be possible, as the market is abundant with used supplies.

 

Licenses and Certifications:

In order to open a restaurant, one must obtain a license from local authorities, and the ministry of health, after qualifying for such a permit.

In addition, a police permit is also required if alcoholic beverages are served.

 

Tips:

The establishment of a restaurant should be meticulously reviewed- business locality, physical locality, in addition to financial and marketing aspects. This review along with correct planning and aid of professionals will decrease the chances of failure.

Note that food has a short shelf life and high depreciation. It is important to avoid purchasing a large amount of inventory in order to prevent wastage.

Success rates of franchised restaurants are relatively high. Large chains are equipped with marketing consultation services and/or financial services, in order to assure their reputation. Purchasing franchise rights is costly, and the entrepreneur’s independence is hindered.

A kashrus certificate is a major consideration and is important to many customers. A kosher restaurant must compose its menu according to kashrus requirements, pay an inspector, and may not be operated on Saturdays and religious holidays. Kashrus requirements may hinder activities, especially for prestigious restaurants. A non-kosher restaurant, on the other hand, may suffer the loss of many customers who only eat kosher food. The decision to open a kosher restaurant should be made only after issues of geographical area, competition, and potential clientele have been thoroughly examined according to the owner's beliefs.

It is recommended to consult with your local Business Development Center regarding business establishment and operations. In addition, the book: Guide for Entrepreneurs- Recipes for a Successful Restaurant, published by the Business Development Center, may also be consulted.

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