Today's Restaurant Industry

The restaurant industry runs the range from gourmet restaurants to hot dog stands.

Worldwide there are about eight million restaurants operated by approximately 300,000 restaurant
companies and individual entrepreneurs. Their combined total revenues are $2,457.1 billion and are
expected to climb to $3,482.5 billion by 2016.' Outside of the United States and Canada, the most
dynamic region for food service sales growth is the Asia-Pacific region, where sales are projected to reach
$1.5 trillion by 2017.

Latin America, Middle East-Africa, and Eastern Europe will experience dynamic food service sales growth,
but Western Europe, a more mature marketplace, will have more moderate gains.

In the United States, restaurant revenues are about $709.2 billion, and the restaurant industry employs
almost fourteen million people in about one million establishments. The overall impact of the industry on
the U.S. economy is estimated at $1.8 trillion. Restaurant industry sales equal 4 percent of the U.S. gross
domestic product. The percentage of the food dollar spent away from home is 47 percent.?
• The American restaurant industry is truly an equal-opportunity employer. It employs
more minority managers than any other industry; 59 percent of restaurant managers
are women, 14 percent are African-American, and 17 percent are Hispanic. Someone
entering the food service field might work for a small, independent operator who runs
a fine-dining restaurant, pizza parlor, or ice cream stand. Working at an independent
operaHon is good training for future entrepreneurs. Eight in ten restaurant owners
started in an entry-level posiHon. Another career track might begin in the
management training program of a large corporaHon like Darden, which operates the
full- service restaurants Olive Garden, Longhorn Steakhouse, Seasons 52, the Capital
Grille, Bahama Breeze, Eddie V's, and Yard House. There are many opportuniHes in the
quick-service field with McDonald's, Starbucks, and other companies.
• The Walt Disney Corpora1on runs a huge number of diverse food opera1ons and
ac1vely recruits hospitality graduates to manage its theme park restaurants and snack
bars. Airline meals are supplied by in-flight catering operators such as Gate Gourmet
Interna1onal. Many big banks, insurance companies, and adver1sing agencies have
execu1ve dining rooms run by professional food service managers. Contract food
companies such as Aramark, Sodexo, the Compass Group, and others place managers
in execu1ve or employee

• dining facili1es; in schools, colleges, and universi1es; and at tourist aFrac1ons such as
the Get Center and J. Paul GeFy Museum in Los Angeles. As you can see, there are
many care choices in the restaurant industry.
 Restaurant Industry Segments
• The restaurant industry includes many different types of facili4es and markets. For
Repor4ng and other purposes, the industry can be divided into the following
segments:

• Ea4ng and drinking places

• Lodging
• Transporta4on
• Recrea4on and sports
• Business and industry
• Educa4onal
• Healthcare
• Retail
• Correc4ons food service
• Military food service
• Contractors
 Eating and Drinking Places
Ea#ng and drinking places cons#tute the largest segment of the restaurant industry,
accoun#ng for almost 70 percent of total industry sales. This segment includes full-
service restaurants, quick-service restaurants, commercial cafeterias, social caterers, ice
cream and frozen custard stands, and bars and taverns. Almost 86 percent of this
segment's sales are made by full-service and quick-service restaurants, which offer the
most opportuni#es for hospitality students. For this reason, most of this sec#on deals
with these industry segments.

Full-service restaurants. There is a wide variety of full-service restaurants. According to

one generally accepted defini#on, full-service restaurants are restaurants that:
 Full-service restaurants
Full-service restaurants are generally categorized in terms of price, menu, or atmosphere.

Price. When the focus is on price, restaurants can be categorized as luxury, high-priced, mid- priced, or
low-priced establishments. An example of a luxury restaurant is Per Se in New York City, where dinner
for two-appeDzer, entrée, dessert, coffee, and accompanying boGle of wine — would cost over $200 per
person. Luxury restaurants are generally small and independently operated. They feature well-trained,
creaDve chefs and employ skilled dining-room servers headed by a maître d'hôtel and a cadre of
captains. Some luxury restaurants offer table-side cooking. To provide the necessary — and expected -
high level of service, luxury restaurants employ more kitchen and dining-room employees per guest
than do other types of restaurants.

Some luxury restaurants are tourist aGracDons famous the world over, such as the Eiffel Tower
Restaurant in Paris. Others, such as Nobu in New York City, cater to "regulars" - members of the jet set,
movie stars, corporate execuDves, and others who lead the lifestyle of the rich and famous.
Typically, such establishments are owned or co-owned by a chef who supervises the cooking in
the kitchen. While fine-dining restaurants have historically featured French cuisine, this is no
longer the case. Today's top restaurants o?en feature regional special@es and fusion cuisine,
which blends ingredients and flavors from all over the globe. The industry is led today by
innova@ve young chefs, many of whom have been trained in the United States at places like
the Culinary Ins@tute of America in Hyde Park, New York, and Johnson & Wales University,
headquartered in Providence, Rhode Island.

High-priced restaurants are also usually independently owned and operated, but most have
larger sea@ng capaci@es than luxury restaurants. Menus are extensive, and service can range
from formal at New York's Per Se to casual at Joe's Stone Crab in Miami Beach.

Every year, Restaurant Business ranks the top 100 independent full-service restaurants in
America in order of total sales. The Top 20 list appears in Exhibit 1.
 Menu
• Restaurants such as steak houses and seafood restaurants are full-service
restaurants defined in terms of menu. For example, Outback Steakhouse
specializes in beef, while Red Lobster features shrimp, crab, and lobster on its
menu. Ethnic restaurants feature a specific cuisine as their disAncAve theme.
Quality Italian features Italian food, for example. Other ethnic restaurants serve
Chinese, Greek, Japanese, Korean, or Indian food, to name a few.
 Atmosphere
Some restaurants are known primarily for their atmosphere-that is, for their unique
architecture, decor, and/or setting.

Other Categories. Full-service restaurants can be categorized in other ways besides price,
menu, or atmosphere. For example, there are casual restaurants. Casual restaurants are
distinguishable by their combination of decor, informal atmosphere, and eclectic menus that
draw from ethnic and traditional offerings. Almost all casual restaurants are chain-affiliated.
Olive Garden, T.G.I. Friday's, and Ruby Tuesday are all casual restaurants, one of the largest
segments within the full- service category (see Exhibit 2). Applebee's and Chili's are two of the
largest chains in this segment. Part of Applebee's success is the attention the chain devotes to
the location of each restaurant. Although there is uniformity in the chains concept, 40 percent
of Applebee's menu items are tailored to regional food preferences.
 Family restaurants
Another mainstay in the full-service restaurant category —cater to families, with
an emphasis on sa8sfying the needs of children (see Exhibit 3). Family
restaurants serve breakfast, lunch, and dinner, offering tradi8onal menu items.
Their pricing falls between casual dinner houses and quick-service restaurants.
A major source of revenue for some family restaurants (such as Cracker Barrel)
is an on-site giI shop.
 Quick-service restaurants
The dis'nguishing features of quick-service restaurants are that they offer a narrow selec'on of food,
provide limited service, and focus on speed of prepara'on and delivery. Quick-service restaurants focus
on convenience. Burger King, KFC, and Taco Bell fall into this category. Because convenience is such an
important element of a quick-service restaurant's appeal, many stay open from early morning un'l very
late at night.

Exhibit 4 lists the top twenty-five restaurant chains. Note that the vast majority are quick-service
restaurants. One-quarter of quick-service restaurants specialize in ham-burgers, and the leader of the
pack is McDonald's, with more than 35,000 units serving nearly 68 million customers each day in over
100 countries. The largest McDonald's in the world is in Orlando, Florida; it seats more than 400 people
on two levels. One of the most dis'nc've McDonald's loca'ons is in the underground of the world-
famous fine arts museum in Paris, The Louvre. McDonald's is a leader in innova've marke'ng
approaches. Some McDonald's units offer computers with limited Internet access and computer game
kiosks for kids
Starbucks, the second-largest restaurant chain, started as Starbucks Coffee; however, in 2011
the word "Coffee" was dropped from the @tle to reflect the chain's increased emphasis on
food and its expanded food menu. Chipotle Mexican Grill was not listed in the top twenty-five
restaurant chains just a few years ago but is now the fourteenth-largest chain. The company's
mission statement, en@tled "Food with Integrity," calls aMen@on to its use of organic
ingredients.
The type or number of menu items alone does not determine who is successful in the quick-
service category. A commitment to good service and providing nutri@onal menu choices has
taken center stage. McDonald's guarantees hot food; fast, friendly service; and double-check
drive-through accuracy . Hospitality-school graduates tend to look at careers in quick-service
restaurants last, preferring to work for major fine-dining restaurants. But quick-service
companies offer graduates a chance to assume posi@ons of great responsibility quickly, and
the pay is very good, due to their liberal bonus and incen@ve plans.
 Lodging
Food op%ons at hotels vary from fancy restaurants to casual cafes and even fast
food spots. Hotels make a lot of money from food sales, with billions of dollars
earned each year. Nowadays, hotels are working hard to promote their dining
op%ons. According to Jean-Georges Vongerich- ten, an outstanding chef who
operates hotel and free-standing restaurants in the United States, Europe, and
Asia, "the expecta%ons for a hotel restaurant are far superior to what they were
ten years ago. This is true for both the United States and Europe!'
 Transportation
Travelers eat at highway stops; on airplanes, ships, and trains; at airport terminals and train sta5ons; and at other facili5es in the
transporta5on market—a market that enjoys about $2.3 billion in sales each year.

Cruise lines put a great deal of emphasis on their food service. Industry surveys cite the food served shipboard as one of the top
reasons for taking a cruise and selec5ng a specific line. Royal Caribbean Interna5onal's 168,666-ton Quantum of the Seas carries
4,180 passengers and a crew of 1,500; fully 30 percent of the crew works in the kitchen. Royal Caribbean has won numerous
interna5onal awards for its food. Some of the other cruise lines contract their food and beverage service out to Apollo Ship
Chandlers, an award-winning company cited for its outstanding food service by Onboard Services Magazine.

Food service in airports and train terminals is oTen provided by restaurants frequently limited- menu restaurants — and contract
food companies such as Aramark that bid for the opportunity to sell food in the terminals. Most airlines buy their in-flight meals
from Gate Gourmet Interna5onal or LSG Sky Chefs, although it should be noted that airlines are serving fewer in-flight meals
today, par5cularly in tourist class. Airport food service is changing as well. Increased security means that people get to airports
earlier and stay longer, which gives them more 5me to eat and shop, including buying meals to eat in the terminal or take on
board their planes
 Recrea&on and Sports
• The recrea'on and sports market includes food service facili'es located at sports arenas, stadiums, race tracks,
movie theaters, bowling alleys, amusement parks, municipal conven'on centers, and other a:rac'ons. All
together, this is a $14.2 billion market. In many cases, recrea'onal-market food service facili'es are concessions
run by contract food companies such as Centerplate and Sports Services, a division of Delaware North
Companies.

• The food served at recrea'onal facili'es varies greatly. For example, theme parks such as Walt Disney World sell
everything from lollipops in kiosks to lobster tails in gourmet restaurants. Yankee Stadium has a loca'on where
baseball fans can see butchers from Lobel's, one of New York City's most famous butcher shops, preparing prime
steaks to be served in loca'ons throughout the stadium. The concessionaire is Legends Hospitality Management,
the thirteenth- largest contract food service management company, which was formed by the New York Yankees
and the Dallas Cowboys to operate concessions and catering at the home stadiums of those two iconic
franchises. Aramark has the food service contract for five Na'onal Basketball Associa'on and six Na'onal Hockey
League teams.
 Business and Industry
• The business and industry market consists of non-food service business a that offer on-site food service
to their employees. Most businesses that provide employee meals use contract food companies such as
Sodexo, Aramark, and the Compass Group. These companies manage employee restaurants, food
courts, execuAve dining rooms, coffee bars, catering services, and convenience stores for office building
employees. In many large office buildings, all of these types of faciliAes and services are available. Food
trucks are now a part of the business and industry food service scene as well. For example, the contract
food company Bon AppeAt, a division of the Compass Group, introduced a grilled cheese food truck at
the SeaGle headquarters of Starbucks in addiAon to operaAng three restaurants in the building.

• Contract food companies face increasing compeAAon in the business and industry market from quick-
service and casual-dining restaurants and have responded by entering into agreements with some of
these companies to operate franchises or by developing compeAng concepts.
 Educa&onal
The educa(onal market includes schools that operate their own restaurants and schools that contract
with food service companies to manage their food service. This more than $30.3 billion annual market
is made up of food service in colleges, universi(es, and primary and secondary schools. One of the
biggest changes in college food service programs has been the gradual shi? from mandated meal plans
to à la carte opera(ons. Due in part to this shi?, many college food service operators have become
revenue producers instead of revenue consumers for their colleges.

Another change in college food service is the growing use of brands. Today's students grew up ea(ng at
branded restaurants and they expect to see these familiar brands at school. Brands such as Starbucks,
Wendy's, and Subway, among others, are found on campuses across the country.
More than 49.8 million primary and secondary school students eat lunch at

school each day. One company, Chartwells School Dining Services a division of

the Compass Group), manages the food service at seven public schools in

Chester, serving 5,000 students per day. The challenge for Chartwells and other

contract companies is to provide nutritional meals that are similar to the quick-

service food that appeals to students.

 Healthcare
The healthcare market consists of three principal segments: hospitals and other medical
centers, nursing homes, and re6rement communi6es. community-sponsored meal centers for
senior ci6zens). Many experts believe that there is enormous poten6al for food service
management companies in the healthcare market. This can be a@ributed to a combina6on of
factors— rapidly changing lifestyles, an aging popula6on, skyrocke6ng medical costs, restricted
federal funds, and a lack of family support systems. Sodexo, Aramark, and the Compass Group
have over 2,000 healthcare accounts in North America and the United Kingdom. Each of these
companies provides everything from bedside meals for pa6ents to food service in staff and
visitor dining rooms and cafeterias, some of which feature mall-style food courts with such well-
known brands as Burger King, Wendy's, Starbucks, and Subway.
• Many healthcare facili-es run their own food service departments, some of which
can be quite extensive. One example is the Florida Hospital Medical Center, which
serves as a community hospital for Orlando and as a major ter-ary referral hospital
for central Florida and much of the southeast United States, the Caribbean, and La-n
America. It has a Nutri-onal Services Department that boasts impressive food service
sta-s-cs. It serves seven hospitals, provides meals for 1,785 beds, serves 1.8 million
meals each year, and grosses almost $12 million in retail food sales. Many hospitals
operate vending machines, visitor coffee shops, employee cafeterias, special dining
facili-es for doctors, daycare food programs for employees' children, regular pa-ent
food programs, and special pa-ent food programs that can include gourmet meals
(with accompanying wines) served in pa-ent rooms.
 Retail Store
Americans are increasingly ea-ng food prepared outside the home, with a rise in
restaurant sales and take-out and delivery services. This trend reflects a growing
preference to buy ready-made meals and enjoy them at home, where people are
spending more -me for leisure and entertainment. Supermarkets and convenience
stores are capitalizing on this by expanding their take-out food op-ons, oBen at the
expense of tradi-onal restaurants. Supermarkets are geCng larger, adding more
space for pre-cooked meals, salad bars, and even in-store dining areas. Some are
even hiring chefs for open kitchens to highlight the freshness of their ingredients.
Addi-onally, supermarkets are crea-ng food courts to aDract customers back from
restaurants.
 Correc&ons Food Service
Correc&onal ins&tu&ons, like state and federal prisons and local jails, are a dis&nct segment of the food
service industry. These ins&tu&ons face challenges in a;rac&ng and keeping food service staff due to
limited career growth opportuni&es. However, the unique environment can appeal to some. Prisons
need to offer a varied menu that meets religious and medical dietary needs, while also allowing some
crea&vity in prepara&on and presenta&on. TheA is a significant issue, requiring strict controls, and
limited budgets oAen constrain the quality and variety of food provided. Economies of scale are
important for cost management. Aramark, a major provider in this sector, operates food services in over
500 correc&onal facili&es in North America. The company also offers other services like laundry and
commissary management. Aramark's "Inmate to Workmate" program provides inmates with culinary
training and skills to help them transi&on back into the community.
 Military Food Service
• Military food service is a very specialized area. Nevertheless, it deserves
men7on because of its diversity in terms of geography, type of facility, and size.

• Jobs in military food service range from space shu<le food prepara7on, to
aircra= carrier or nuclear submarine mess opera7ons, to Army, Navy, Air Force,
Marine, and Coast Guard officers' club management at bases all over the world.
Both civilian and military personnel are employed by many of these facili7es.
 Contractors
Contract food management companies are the major operators of non-
commercial food service. The largest are Compass Group, Aramark, and Sodexo
(see Exhibit 5). Contract food management companies are hired to operate
restaurants and other food service outlets in convenCon centers, sports arenas,
tourist aDracCons, colleges and schools, office buildings, manufacturing plants,
and healthcare faciliCes.

Contractors are hired by businesses and other clients that want to provide food
service to patrons and/or employees, yet do not want to get involved in an
acCvity (preparing and serving food) that is outside their experCse.