Chapter 1 The Food Service Industry

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Chapter 1The Food Service Industry
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Goals

• Distinguish between commercial and noncommercial
  food service operations.
• Describe various commercial and noncommercial
  food service facilities and discuss the use of
  for-profit contract management companies to run
  noncommercial operations.
• Identify trends likely to affect food service in
  the coming years.

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What is the Food Service Industry?

• Two major segments of the industry
• Commercial want to maximize profits
• Noncommercial seek to minimize expenses

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Types of Commercial Operations

• Freestanding
• Independent owned by an owner/owners
• Chain part of a multi-unit organization
• Franchise owner pays fee to use name, SOPs
• Lodging
• Lobby food service
• Other
• Cafeterias, bars, stands, caterers, vending, etc

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"Restaurants are becoming homes away from home
for today's busy American," Consumer Trends
wine is becoming increasingly popular at
restaurants. increasing use of technology to
make operations more efficient and allow diners
more control over their dining experience
Convenience. Restaurants continue to expand on
existing takeout, curbside pickup, drive-thru,
catering and delivery options. Americans are
starting to take back their mealtimes. Thirty-six
percent of adults say they are eating onthe-go
less frequently now than they did two years ago.
In addition, 48 percent say they eat in their car
less frequently.
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Trends IN Bite-size dessertsLocally grown
produceOrganic produce Flatbread Bottled water
Specialty sandwichesAsian appetizers
Espresso/specialty coffees Whole-grain bread
Mediterranean cuisine Pan-seared items Fresh
herbs Latin American cuisineExotic mushrooms
Salts Grilled itemsPomegranates Grass-fed
items Free-range items Pan-Asian cuisine
OUT Scandinavian cuisineStarfruitOrgan
meats/sweetbreadsEthiopian cuisine Kiwi Edible
flowers/rose petalsBlackened items Low-carb
dough Soda bread Fruit soups German cuisine
Taro Low-carb items FoamsOkra
VichyssoiseMeat salad Consomme Catfish Cold
soups
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Commercial operations Independents Chains
Franchises white tablecloth Casual Family QS
R Caterers Hotels Restaurant industry sales
are expected to reach537 billion in 2007 5.0
increase. 935,000 restaurant-and-foodservice
outlets will employ 12.8 million Americans spend
47.9 percent of their food budget in
restaurants Non commercial (not primary
mission) Healthcare (hospitals, nursing homes)
Education Business Transportation Private clubs
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Top Independents seats
Avg. v covers open 1 Tavern on the
Green, New York City 37.613 1,000 63.46
505,003 1976 2 Joes Stone Crab, Miami Beach,
Fla. 25.573 515 58.00 366,420 1913 3
Tao Asian Bistro, New York City 24.152
350 59.25 350,000 2001 4 Hilltop Steak
House, Saugus, Mass. 24.000 1,500 15.00
870,000 1951 5 Bob Chinns Crab House ILL.
20.497 752 29.32 812,620
1982 6 Old Ebbitt Grill, Washington, D.C.
19.776 508 25.00 750,000 1856 7
Sparks Steak House, New York City 18.700 700
75.00 255,000 1964 8 Gibsons Bar
Steakhouse, Chicago 18.240 290 56.04
312,801 1989 9 Mon Ami Gabi, Las Vegas
18.000 450 60.00 360,000
1999 10 rumjungle, Las Vegas
18.000 433 65.00 300,000 1999 11
21 Club, New York City 17.864
450 143.29 154,439 1929 12 Fultons Crab
House, Fla. 17.808 670
45.57 391,127 1996
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Restaurant AssociatesNew York City
465.0A Brasserie, Cucina Co. (3), Nick
Stefs (3), Patina, Tortilla Jos Subsidiary The
Patina Group launched Patina Catering and event
venue Park Privé in 04.
 Levy RestaurantsChicago 420.0A Cerise,
Fultons Crab House, Jake Melnicks Corner Tap,
Spiaggia Restaurant count does not include dozens
of stadium and arena venues under contract.
Lettuce Entertain You EnterprisesChicago
192.0 Cafe Ba-Ba-Reeba! (2), Everest, Mon Ami
Gabi (4), Nacional 27, Wildfire (5), Wow Bao
Chicagos Greek-themed Papagus will reopen as an
Italian restaurant with input from Trus Rick
Tramonto. Restaurants UnlimitedSeattle
149.0 Kincaids Fish, Chop Steak House (8),
Palisade, Palomino (12), Stanley Seaforts
E-mail dining-club members receive birthday
gifts, drink specials, free meals and more. Back
Bay Restaurant GroupBoston 125.9 Abe Louies,
Atlanta Fish Co., Coach Grill, Joes American Bar
Grill (14), Papa Razzi (13) Abe Louies had
03 sales of 10.7 million no wonder a second
location is planned.
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06 05 ? Name Product Sales Stores 1 1 0
McDonalds Burgers 52,944.0 30,766 2 2
0 KFC Chicken 13,200.0 13,731 3 3 0
Burger King Burgers 12,000.0 11,141 4 4
0 Pizza Hut Pizza 9,100.0 12,572 5 6 1
Subway Sandwiches 9,050.0
24,810 6 5 -1 Wendys Burgers 9,000.0
6,746 7 9 2 Starbucks Coffee/Tea 8,900.0
10,241 8 7 -1 Taco Bell . Mexican
6,400.0 6,090 9 8 -1 Dominos Pizza
Pizza 4,900.0 8,079 10 10 0 Applebees .
Casual Dining 4,306.1 1,804 11 11 0
Dunkin Donuts Doughnuts, Ice Cream 3,800.0
6,500 12 22 10 Tim Hortons Doughnuts, Ice
Cream 3,720.0 2,801 13 12 -1 Chilis G
Casual Dining 3,257.9 1,130
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Advantages and Disadvantages of Chain Restaurants

• Advantages
• Ready access to cash and credit
• Ability to experiment without great risk
• Resources to hire staff specialists
• Greater access to useful comparative financial
  information
• Disadvantage
• Bureaucratic rules and procedures can slow
  response times to market changes

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Advantages and Disadvantages of Owning or
Managing Franchise Restaurants

• Advantages
• Assistance in opening and operating the business
• Franchisor-sponsored training and materials
• Greater exposure and higher revenue because of
  extensive advertising and name recognition
• Lower costs due to volume purchasing
• Tested operating procedures
• Disadvantages
• Franchise contracts restrict style and methods of
  operation, products served, services offered,
  décor, and furnishings
• Franchise contracts usually favor the franchisor

(continued)
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Quick Question

• Which of the following chain operations was among
  the first to offer franchising?
• Howard Johnsons
• McDonalds
• Holiday Inn
• Red Lobster

Answer A
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Hottest Franchise
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Types of Noncommercial Operations

• Business Industry
• Healthcare
• Educational Institutions
• Private Clubs
• Leisure and Recreation
• Transportation
• Other
• Prisons, military, religious, athletic, etc

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NONCOMMERCIAL SEGMENT RESOURCES DIRECTORY
CONTRACT COMPANIES Sodexho Aramark Compass
Group, Americas Division NATION'S LARGEST
SCHOOLS Los Angeles New York City Chicago
Hawaii Philadelphia ASSOCIATIONS
ORGANIZATIONS American Society for Healthcare
Foodservice Administrators National Foodservice
Management Institute Society for Foodservice
Management National Society for Healthcare
Foodservice Management U.S. Department of
Agriculture Food and Nutrition Service School
Nutrition Association National Association of
College and University Foodservice
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campuses with a single administration. Enrollment
numbers listed are the sum of undergraduate and
graduate students at a single campus. Top 10 as
of Fall 2006 51,818 The Ohio State University
- Columbus, OH 51,234 Arizona State University
(Tempe Campus) - Tempe, AZ 50,785 University of
Florida - Gainesville, FL 50,402 University of
Minnesota Twin Cities - Minneapolis / St Paul, MN
49,738 University of Texas at Austin - Austin,
TX 46,719 University of Central Florida -
Orlando, FL 45,487 Texas AM University -
College Station, TX 45,166 Michigan State
University - East Lansing, MI 44,038 University
of South Florida - Tampa, FL 42,914 The
Pennsylvania State University (University Park) -
University Park, PA
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Advantages and Disadvantages of Contract
Management in Noncommercial Facilities

• Advantages
• Large management companies have more resources to
  solve problems
• Ability to negotiate better deals with suppliers
• Greater efficiency and therefore lower overall
  cost
• Allows food service to be operated by experts,
  rather than institution administrators
• Disadvantages
• Management companies can affect the institutions
  public image
• Some people feel that profit-making operators do
  not belong in noncommercial settings
• The institution may become dependent on the
  management company

(continued)
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Quick Question

• Which of the following would be considered a
  commercial food service facility?
• Food service provided by a caterer at off-site
  locations
• Food service in prisons
• Food service in military installations
• Food service in public schools

Answer A
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Food Service Origins

• Hotel Restaurants
• Churches
• First hotel chain
• Early Inns
• Shelter for travelers
• Ale Houses Taverns
• Rented rooms
• Todays hotel restaurants are a part of the
  operations profit plan.

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Food Service Origins

• Freestanding Restaurants
• English Coffeehouses
• Le restaurant
• Chain operations
• Todays restaurants
• Drive-throughs
• Curbside
• Delivery
• Fax/Email ordering

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Food Service Origins

• Noncommercial operations
• Business
• Robert Owens established employee eating rooms
• Boarding houses
• Tremendous growth during WWI WWII
• Hospitals
• Florence Nightingale 1st dietitian
  administrator
• ADA founded in 1917
• Schools
• Cafeteria style service

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Whats to Come

• Home Meal Replacements
• Grocery stores creating competition
• Emphasis on value (cost relative to quality)
• Eatertainment
• Multiple Day Parts
• C-Stores Co-Branding
• Variety

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Quick Question

• Which of the following statements about
  franchising is true?
• Franchisees typically have the freedom to change
  menu items at their individual properties
• Franchise agreements tend to favor the franchisor
• Franchisees typically must pay only initial fees
  to the franchisor
• The franchisor is usually responsible for
  generating funds to start the business

Answer B
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Whatd You Learn

• What are the three types of commercial food
  service operations?
• What is the difference between a chain and
  franchise?
• What is the difference between commercial food
  services and noncommercial food services?
• Independent operations
• Where is the food service industry going?