What's on the menu for the US restaurant industry this year? In a word, competition; in fact, that's the Blue Plate special, it's also more intense than ever, according to the 2013 Restaurant Growth Index (RGI), which Nielsen compiles annually for Restaurant Business.

The RGI, which charts restaurant openings and sales to identify the nation's hottest markets, pegged last year as one of volatile divergence. That's because Nielsen tracked a $3.8 billion dip to $472.4 billion in total industry sales and a surge in new restaurant openings—47,161. Comparatively, sales grew $17.5 billion to $476.2 billion in 2011—a year that saw a decrease of 16,000 restaurants.

That sales uptick in 2011 is what helped fuel the spike in openings last year, but the glut of new restaurants is milking the industry's bottom line. Last year, per-restaurant sales dropped 7 percent to $666,116 from $719,276. Likewise, restaurant sales fell year-over-year by $24 per person (to $1,509 from $1,533) despite the fact that per-person income increased an average of 0.07 percent.

Even though aggregate sales were down in 2012, the top 10 markets in the 2013 RGI were more profitable relative to the average market than their top 10 counterparts were in 2011. If we add the index scores for the top 10 markets in this year's RGI, we have 4,731, well above the 4,052 points in last year's.

So what do those index numbers mean exactly? The restaurants in those markets are going gangbusters. They also suggest that competition sharpens in a shrinking market and magnifies the difference in performance between the best and the average operations.

Here's how Nielsen arrives at its RGI figures:



The Top 5 Restaurant Markets

We have a new market in the top spot this year: Ocean Pines, Md., the No. 6 market last year. This market constitutes the eastern most county in Maryland, which includes the entire length of the state's Atlantic coast, and is home to the popular vacation resort area of Ocean City.

With a large influx of tourists, this market has very strong per-capita restaurant sales, which is what drives the RGI score.

Findlay, Ohio made it to the No. 2 spot this year, jumping all the way from the No. 99 spot in 2012. This market, which has strong ties to the Toledo metropolitan area, saw its restaurant sales nearly double year-over-year. Nielsen's Business Growth Index (BGI), which tracks changes in the number and size of all businesses over time, ranks this market in the top 10 nationally for overall economic growth. Much of that growth has come from recent corporate developments in the town, which is now home to Marathon Petroleum and a global tech center for Cooper Tire and Rubber Co.

Liberal, Kan. took the No. 3 spot this year, as this market more than doubled its restaurant sales from 2012. Much like those in Findlay, businesses in Liberal have many openings, which, when coupled with a shortage of housing units, inspires visitors and temporary residents to eat out more frequently. The success of Liberal's semi-pro Bee Jays baseball team, frequent national and state champions, also draws more visitors to the area.

Sevierville, Tenn.—gateway to Smoky Mountain Nation Park and last year's #3 market—dropped to No. 4. The average restaurant sales per person for the market tipped $4,400 last year, but dropped to roughly $3,600 per person this year, which is still more than double the national average. More net restaurants (14) were added to this market year-over-year, creating a bit more competition.

Boone, N.C., reached the fifth spot this year, rising from No. 37 in 2012. Boone is a tourist destination, drawing 225,000 each year. It's also home to Appalachian State University, which has seen dramatic growth in the last decade and ranks in the top 5 percent for general business growth in Nielsen's BGI. The influx of students and tourists helped drive up its 2013 RGI score.

Among the top 50 markets by population, Orlando and Las Vegas rank high, with Las Vegas swapping places with Orlando for the top spot in 2013. Nevada also tops the state-level market rankings this year. Generally speaking, tourism dollars and disproportionate restaurant sales as percentage of per person income consistently keeps these markets high in the ranks.

How We Ranked Them

The RGI 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 help 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.

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 in assessing opportunities for future restaurants.

For more information and the 2013 RGI Index, please click here.

John Torres, VP, Product Innovation, Nielsen, and Song Lin, Sr. Analyst, Nielsen