Dining Dynamism: Restaurant start-ups remain strong despite slowing year to date 

Dr. Chad Moutray

In May, there were 22,918 business applications filed for new accommodation and foodservices establishments, according to seasonally adjusted figures from the Census Bureau. These data, which are part of the Business Formation Statistics series, compile applications for an Employee Identification Number (EIN). It is important to note that this series focuses on business applications only. It does not highlight openings or closings. 

Business applications in the accommodation and foodservices sector edged up from 22,648 in April following three straight months of declines, down from 26,663 in January. Moreover, applications have eased significantly since peaking at a record 31,862 in May 2021.  Despite pulling back over the past three years, start-ups in the accommodation and foodservices sector remain well above the pre-pandemic trend. 

The chart below shows an upward trend in business applications from January 2010 to February 2020. If we were to extend this pre-pandemic trend, there would currently be nearly 16,575 accommodation and foodservices business applications, with the actual number notably higher than that. 

Indeed, business applications jumped considerably post-pandemic, and even with some stabilization, that new trend remains well above what was seen in the years before it. As a society, we have become more entrepreneurial in general, and this occurrence extends to restaurants, foodservice operations and accommodations, which is now 38.3% above trend.

The Business Formation Statistics data begin in July 2004, and over that period, accommodation and foodservices business applications have averaged 5.45% of total applications. In May, it was 5.41%. Much like the data discussed above, the business applications rate in the sector peaked at 6.34% in May 2021, an all-time high, and have pulled back since then. 

The current business formation rate for the sector is not far from the historical average despite the sizable leap in applications post-pandemic. This suggests that total applications have also soared since February 2020, which they have. 

There were 423,945 total business applications in May, with these data largely pulling back over the past 10 months from 473,722 in July 2023. In the aftermath of the pandemic, Americans leaned heavily into starting their own businesses, with a record 545,914 applications files in July 2021. 

The number of applications has settled somewhat since then but remain highly elevated and above the pre-pandemic pace in a manner similar to accommodation and foodservice establishments. If we were to extend the pre-pandemic trend, there would be roughly 330,710 business applications today, or 28.2% fewer than the actual figure.