A PEST analysis is a business tool that can help determine the macroeconomic factors that will impact a business. Specifically a PEST analysis measures the political, economic, social and technological factors that impact a business. A PEST analysis of a restaurant can be useful for determining if the environment is appropriate for such a business.
Political factors deal with the degree to which the government influences and controls businesses. For a restaurant, the most important factors will be health regulations relating to food preparation. A restaurant will be affected by factors that affect other businesses as well, such as tax rates and labour laws.
Economic factors are extremely important to a restaurant. This is because restaurants are a luxury, not a necessity; people must have the disposable income to spend at a restaurant. Economic growth is, therefore, extremely important for restaurants. A restaurant will also be affected by the economic factors that affect most businesses such as the cost of capital and inflation.
The social factors of a market will have a huge impact on a business. For example, in a very health-conscious market, a restaurant should offer healthy foods, while in a market where people prefer high fat foods, they should not. Another important social factor is the attitude that people have toward restaurants and eating out; a restaurant stands a much better chance in a market where people prefer to eat out than in one in which people prefer to stay at home.
In general, the restaurant industry is a low-technology industry. If there are strong technological demands in a market, this may make it difficult to enter the market. In the restaurant industry, specialised equipment is the largest technological factor. For example, if all the pizzerias in a market use specialised ovens to cook their pizzas quickly, then it will likely be necessary to acquire such an oven to compete with these restaurants.