CHARLOTTE, N.C., Oct. 24, 2018 /PRNewswire/ -- LendingTree®, the nation's leading online loan marketplace, today released its study on the best cities to open a restaurant. The study found that while traditional foodie destinations like New York and San Francisco are saturated with restaurants, up-and-comers have room to grow. The restaurant population in cities like Milwaukee, Cincinnati and Minneapolis cities is less dense than in other areas, and labor costs are lower.
LendingTree analyzed the 50 largest U.S. cities to see which offer prospective restaurateurs the best shot at success. Many top spots are in once-overlooked Midwestern cities now experiencing urban renewal. The least promising cities have historically been the restaurant industry's most competitive.
To find out where prospective restaurant owners may have a better chance at succeeding, LendingTree looked at four factors within the 50 largest metros in America:
Average estimated annual revenue. Using the reported monthly deposits of more than 5,400 restaurant owners who sought loans on the SnapCap by LendingTree business loan platform, researchers estimated their annual revenues and adjusted them based on prices in their particular city.
Estimated payroll costs per employee. To get a sense of where labor costs may have a smaller impact on restaurants, the study looked at total annual payroll and employees for restaurants in each metro, as reported in the County Business Patterns survey from the U.S. Census Bureau to calculate the average annual cost per employed person.
Number of restaurants per 100,000 households with incomes of $50,000 or more. These households spend the most on eating out, according to the Bureau of Labor Statistics, but some metros may be underserving these households eager for new restaurant choices.
Number of restaurants per 100,000 residents aged 35-54. Gen Xers have a greater appetite for restaurant spending than millennials or baby boomers, according to the same BLS survey. This may present an opportunity for cities dominated by this generation with relatively few restaurants.
Opportunity is ripe in 'flyover country'
Final score: 82.5
Milwaukee ranked highest in the study, earning a score of 82.5. There are 709 restaurants per 100,000 households with an income of $50,000 or more. Among residents between the ages of 35 and 54 – the age group that spends the most on dining out – there are 591 restaurants per 100,000 people.
Final score: 78.4
While Cincinnati's restaurant scene is prosperous, the majority of eateries in the city are chain establishments. Residents tend to prefer independent restaurants, creating a prime opening for prospective local restaurateurs.
Final score: 77.4
Ranking No. 3 in the study, Minneapolis has even fewer restaurants among the designated demographics. There are 629 establishments per 100,000 households with $50,000 or more in income, and 574 restaurants per 100,000 residents between the ages of 35 and 54 years old.
Entrepreneurs face challenges in culinary capitals
The lowest-ranking metros are cities with world-renowned restaurant scenes. The local restaurant industry is overcrowded in these places, making it difficult for new restaurant owners to be successful.
50. New York
Final score: 17.3
New York ranked last at No. 50, earning a score of 17.3. The adjusted median revenue is relatively low, $224,640, and payroll costs are high at an average annual payroll per employee of $22,581. There are 993 restaurants per 100,000 households with incomes of $50,000 and 791 establishments per 100,000 residents between the ages of 35 and 54.
49. San Francisco
Final score: 24.8
San Francisco, in the No. 49 spot, is about as equally dense but restaurants in the area rake in more money. The normalized median revenue for restaurants in the city is $361,440, but the average annual employee payroll is $23,325, which means even higher labor expenses than New York.
48. New Orleans
Final score: 32.3
The third least promising place to open a restaurant is New Orleans. Though far smaller by population compared with New York and San Francisco, the Southern city has more a competitive restaurant scene. There are 1,069 eateries per 100,000 households with $50,000 in income, and 759 restaurants per 100,000 residents between the ages of 35 and 54.
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