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Hungry for Opportunity? The Best Spots for Restaurant Growth in 2015
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Hungry for Opportunity? The Best Spots for Restaurant Growth in 2015

Eat in or dine out? That’s a common question that pops up at dinnertime in millions of American households each and every night. And while consumer confidence and saving trends paint a picture of relative restraint in the U.S., a look at how much we’re spending at restaurants suggests that dining out is more popular than ever. In fact, data from Nielsen shows that U.S. spending at restaurants and bars has been rising steadily since 1992.

Dining out is part of the American communal experience, and the restaurant industry continues to do its part to feed our hunger for great out-of-home meals. Back in January 1992, Americans spent just over $17 billion at restaurants and bars. As of April of this year, that figure stood at $51.2 billion. And to keep pace with growing demand, the restaurant industry steadily rolls out new offerings. In the 52 weeks ending April 15, 2015, roughly 2,922 new restaurants came on line in the U.S., and total restaurant sales totaled roughly $550 billion.

But while U.S. consumers love to eat out, not all parts of the country offer the same potential when it comes to patronage, sales and growth. The 2015 Restaurant Growth Index (RGI)—compiled for Restaurant Business by Nielsen—breaks down growth by market and highlights how growth in the industry is primarily driven by tourism, as noted by the top two spots in this year’s index: Nevada and Hawaii. In each of these markets, the number of visitors visiting each month often significantly outpaces the resident population.

According to tourism research firm Destination Analysts, the average U.S. consumer takes 4.3 leisure trips per year, with 46.9% of consumers indicating that restaurant options are the most important factor in determining their travel destination. And with national gas prices lower than they were in 2014, many Americans are hitting the open road this year, a factor that definitely affected the rankings of this year’s RGI. In fact, the biggest jumps came from markets with small towns that sit at the crossroads of major highways. For example, Dumas, Texas, which sits at the crossroads of Highway 87, Highway 287 and Highway 152, jumped 339 spots from No. 665 last year to No. 339 this year.

Where the Opportunity Is

Best Markets for Restaurant Growth
 
Worst Markets for Restaurant Growth
 

Rank

Market (Core-Based Statistical Area) Rank Market (Core-Based Statistical Area)
1 Kahului-Wailuku-Lahaina, Hawaii 1 Los Alamos, N.M.
2 Kapaa, Hawaii 2 Urbana, Ohio
3 Las Vegas, Nevada 3 Sunbury, Penn.
4 Sevierville, Tenn. 4 Boone, Iowa
5 Starkville, Miss. 5 North Vernon, Ind.
Source: Nielsen

How We Ranked the Markets

The Restaurant Growth Index ranks both metro and micro markets, where a metro area contains a core urban area of 50,000 or more population, and a micro area contains an urban core of at least 10,000 (but less than 50,000) population. Each metro or micro area consists of one or more counties encompassing the core urban area (while integrating adjacent counties that have a high degree of social and economic similarities).

The RGI is designed to assist restaurants screen markets and find attractive areas for expansion and growth. These market rankings represent underserved areas that signal strong restaurant sales relative to the national average.

Here’s what the RGI formula looks like:

The RGI uses restaurant sales collected by the U.S. Census of Retail Trade and per capita income reported by the U.S. Census Bureau and updated by Nielsen. Restaurant location data comes by way of Nielsen through Infogroup. Sales figures conflate visitors and residents of each market. So, smaller markets that are tourist destinations with high transience and heavy thru traffic tend to index high. Market size should be considered in addition to market rank (at all levels of geography: State, CBSA, ZIP) in assessing opportunities for future restaurants.

For additional information, refer to the complete ranking of the 2015 Restaurant Growth Index.