Food Service in the Hospitality Industry


 

Chapter 1: FOOD SERVICE SEGMENTS

Learning Objectives

  • To understand the importance of food service within the hospitality industry
  • To differentiate between commercial and non-commercial food service establishments
  • To identify segments within commercial food service and the factors used to differentiate segments
  • To identify segments within non-commercial food service and the unique features of each segment
  • To describe key trends impacting food service establishments
  • To articulate professional career options within food service

 

CHAPTER OUTLINE

  • Food service in the hospitality industry
  • Commercial food service
  • Non-commercial food service
  • Trends and emerging issues in food service
  • Professional careers in food service
  • Conclusion

 

Key Terms

  • Casual Restaurants
  • Casual Upscale Restaurants
  • Commercial Food Service
  • Family Restaurants
  • Food Trucks/Street Food
  • Hyper-Local Sourcing
  • Non-Commercial Food Service
  • Quick Casual Restaurants
  • Quick Service Restaurants
  • Theme Restaurants
  • Upscale/Fine Dining Restaurants

 

Food service is a dominant segment of the hospitality industry that represents a significant proportion of the economy. The restaurant industry is approximately an $800 billion dollar industry. The average household spends nearly 50% of its food dollar in restaurants.1 Food service is also significant employer. Approximately fifteen million individuals are employed in food service establishments, and 10% of the U.S. workforce is employed in restaurants. It is estimated that over one million food service establishments exist in the U.S. This statistic is noteworthy in and of itself, but also in comparison to the 53,000 U.S. lodging establishments.
 
Given its dominance and importance, students of hospitality management should possess a working understanding of the food service segment of the hospitality industry. As such, the purpose of this chapter is to educate the reader on different segments in food service. Most of this chapter is devoted to discussing commercial food service establishments. A commercial food service establishment is that whose main purpose is creating and selling food and beverage. Non-commercial food service establishments are discussed later in the chapter. A non-commercial foodservice establishment is embedded in an organization where food and beverage is not the primary business focus, such as in healthcare, education, the military, and transportation. Food service is continually evolving, and this chapter will highlight some of the notable trends and emerging issues. Finally, this chapter will discuss a variety of career options that might be of interest for those seeking to pursue a professional career in food service.

 

Commercial Food Service

The majority of food service establishments are in the commercial sector. These establishments vary in numerous respects, and it is not an easy task to categorize the vast array of establishments into neatly defined segments. There were once clearly defined segments, but today lines across segments are blurred in many respects. These limitations notwithstanding, we will discuss eight primary segments: 1) quick service 2) food trucks/street food 3) quick casual 4) family 5) casual 6) themed 7) casual upscale  8) upscale/fine dining. Each segment will be differentiated by service level, quality of menu offerings, and price point. These attributes will be discussed within each segment along with other unique characteristics.

 

With McDonald’s alone spending nearly one billion dollars on advertising each year, readers are certainly familiar with the quick service segment. Quick service restaurants (QSRs), commonly known as fast food by the general public, are those where the customer orders at a counter, pays prior to receiving the product, and picks food up at the counter. Drive-thru service is also commonplace in the QSR segment. Service level is minimal, fast, and efficient. The food quality is low cost value with average checks under $8.00. QSR establishments may be open for all three meal periods (breakfast, lunch, and dinner) with some operations providing 24-hour service. In 2015, McDonald’s began offering breakfast all day, although the verdict on the success of this rollout is still out. QSR establishments are unquestionably chain dominated, and are they child friendly with specific children’s menus. Most “pizza shops” fall into the QSR segment as well. Some establishments may be coined QSR-Plus, such as Chick-fil-A, Five Guys Burgers and Fries, and Shake Shack, who provide higher quality offerings and realize higher check averages. Traditionally, McDonald’s, Burger King, and Wendy’s dominated the QSR segment, but dominance has begun to shift. McDonald’s still occupies the number one position in sales, but the number two and three spots go to Starbucks and Subway.3 Subway tops the list with the most number of units/restaurants. Today there is more competition among key players within QSR, and QSR establishments are competing with the quick casual segment as well.

Years ago, food trucks and street food vendors would not have been included in a textbook chapter, but today they are a popular and steadily growing segment. The famous Halal Guys food cart on 53rd Street and 6th Avenue in New York City is rumored to generate over one million dollars in annual sales. Similar to QSR establishments, food truck/street service is counter-based and limited, due to their small street-side presence. Patrons order and pay at the counter, take their food away, eat right on the sidewalk, or may sit at a few tables nearby. These operations typically have a limited menu; they find a few things to do very well (e.g., falafel, grilled cheese, or crepes). These establishments are not necessarily the hot dog and pretzel stands they once were with a reputation of serving poor quality food (“roach coaches”). Some may still provide lower quality food, but others provide a higher-end menu, sometimes with gourmet offerings. In fact, the trend in food trucks/street food is toward the higher end. Check averages span a few dollars to over $20. Pepe, a Washington DC based food truck inspired by Jose Andres, a Spanish trained chef who worked at El Bulli, the number one ranked restaurant in the world for several years, offers a sandwich priced at $20. Unlike QSRs, food trucks/street food vendors are typically independents, but chains are beginning to emerge, such as The Taco Truck in New York, Massachusetts, and New Jersey. Food trucks and street vendors have been innovative using social media as marketing strategy. Kogi is a famous taco truck in Los Angeles that has utilized social media to amass a cult-like following by tweeting their various locations numerous times throughout a day.

The quick casual (also known as fast casual) segment is fast growing, exciting, and is taking market share from QSR and the family and casual dining segments. Much of the growth in this segment can be attributed to dominant players such as Chipotle and Panera. Other key players in this segment include Noodles and Company and Pei Wei Asian Market. Service is limited similar to QSR. One of the major points of distinction of quick casual vis-à-vis QSR is the quality of their menu. Chipotle cooks from raw ingredients and prepares items like guacamole from scratch. Panera offers high quality sandwiches, soups, and salads and fresh baked goods daily. An emphasis is placed on freshness, and many items are prepared in front of the customer. These establishments often have metal versus plastic cutlery, ceramic plates and bowls, and more upscale and trendier décor to further differentiate themselves from QSR. Millennials and other customers are demanding higher quality food, and they are willing to pay a little more for it, choosing quick casual over fast food. Average guest checks for quick causal typically span $8.00 to $12.00. The quick casual segment is largely dominated by chains.

The five segments to be discussed next are full-service establishments. Customers no longer order at a counter and take their own food to a table. Rather, they are seated, typically receive menus, and are waited on by servers, who are central in orchestrating the dining experience. Food may now be delivered in courses (appetizer, main course, and dessert). Payment occurs at the end of the meal, and gratuities (tips) are now expected. We see alcohol served in many full-service establishments, although in some states alcohol is served at Chipotle.

Family restaurants include a mix of chain and independents. Notable examples of family restaurant chains include Bob Evans, Cracker Barrel, Denny’s, Friendly’s, IHOP, and Perkins. You will also find many independent restaurants, local diners, and “mom and pops” in this segment. Home style cooking dominates this segment, and family style restaurants are typically open for breakfast, lunch, and dinner. With respect to family restaurant chains, there is limited or no alcohol service, most offer breakfast all day, and many are open 24 hours. These establishments focus on value, and average checks range from $6.00 to $12.00. Buffet restaurants can also fall into this category. With the increasing popularity of quick casual restaurants and greater health consciousness among many Americans, buffet restaurants have been declining in certain regions of the U.S. While Americans once valued the all-you-can-eat for a fixed price concept, they are now more health conscious than ever before.

In turn, casual restaurant establishments position themselves with a relaxed atmosphere (relative to upscale establishments), moderately priced food, and higher quality than QSR. Typically lunch and dinner are served in casual restaurants, but not breakfast as with family-style establishments. Alcoholic beverages are now introduced broadly in this segment. Popular casual chain restaurants include Applebee’s, Chili’s, Olive Garden, Outback Steakhouse, Red Lobster, Red Robin, and TGI Friday’s. On the independent side, many ethnic restaurants, such as Chinese and Mexican, and sports bars fall within the casual restaurant segment. Casual restaurants focus heavily on tabletop marketing pieces to entice patrons to order appetizers and specialty alcoholic beverages. In a similar vein, servers are trained and encourage to “up-sell” appetizers, desserts, and alcoholic beverages. Average guest checks are generally in the range of $8.00 for lunch and $15.00 for dinner. While popular, casual restaurants are losing market share to quick casual establishments.

Theme restaurants are an extension of casual restaurants. The major distinction is that theme restaurants focus on a specific theme. For example, Hard Rock Café focuses on rock-and-roll memorabilia, Rainforest Café centers on a jungle theme, and T-Rex is a Prehistoric themed restaurant. These restaurants are chain dominated, but there are a few independents, such as the Jekyll & Hyde Club in New York City. These establishments do serve alcohol, but many are child-focused given their themes. A major focus is on décor and architecture over food and beverage. In fact, some of these establishments cost as much as $15 million to build. These restaurants are often found in major shopping malls and major tourist areas so they can draw on high volume. Given the high costs to building these restaurants and the high cost of real estate, theme check averages are notably higher than casual establishments (in the rage of $13.00 for lunch and $23.00 for dinner).

The casual upscale (also known as polished casual) segment is a minor step below upscale restaurants. This segment is arguably one of the most difficult segments for individuals to grasp conceptually. Restaurants in this segment are similar to upscale restaurants in service and food quality with average checks in the range of $16.00 for lunch and $50.00 for dinner. A major distinction is that they turn tables quickly in comparison to upscale restaurants where the dining pace is more leisurely. Casual upscale restaurants generally serve lunch and dinner; whereas upscale fine dining restaurants typically only serve dinner. Casual upscale establishments have expensive decor, some may use linen, they have a full-bar and a high quality wine list, and most items are prepared from scratch with highest quality ingredients. There are numerous independently owned and operated casual upscale restaurants. However, the major players in this segment are chains, including Great American Restaurants, Hillstone Restaurant Group, and J. Alexander’s. For the most part, chain restaurants in this segment do not want the connotation of being a part of a chain, but rather would like to be perceived as unique independent restaurants. Hillstone Restaurant Group, for example, varies the names of its restaurants (e.g., Houston’s, Bandera, and R+D Kitchen), menu, and décor based on location to help achieve a unique independent feel.

Upscale fine dining establishments are at the top of the restaurant “food chain.” Upscale fine dining restaurants have a strong focus on providing the highest level of product and service, and their décor has an upscale look and feel. Upscale restaurants will often have a wine cellar to meet guests’ expectations. (Some wine cellars are rumored to have more than $7 million worth of inventory.) Upscale establishments employ highly trained professional servers who are typically only responsible for one or two tables at the same time. Average checks can easily exceed $500.00. Unlike casual upscale, independents dominate the upscale fine dining segment. High end steakhouses, such as Pappas Bros. Steakhouse, Peter Lugers, and Ruth’s Chris Steak House, fall into this segment. Alinea in Chicago and Eleven Madison Park in New York City are other examples of independent upscale fine dining. Many restaurants in this segment have an à la carte or a fixed price (prix fixe) menu. An à la carte menu prices each item separately; whereas everything is included for one price with a fixed price menu. Thomas Keller’s The French Laundry fixed price menu is over $295 per person at the time of writing this chapter. The French Laundry menu also has several “add-ons” that could easily extend the average check to over $500, excluding alcohol. Many upscale dining establishments and their chefs strive to earn a coveted Michelin Star, a top spot in one of the several international lists, or a positive review online. Such accolades help these establishments maintain their exclusive status in a highly competitive business environment.

 

Non-Commercial Food Service

Non-commercial food service can be defined as food service operations where food and beverage are not the primary focus of a business, but rather where food and beverage is present to support or supplement a “host.” A variety of labels have of been used for this segment over the years, including institutional, non-commercial, contract feeding, on-site food service, and most recently managed services. Organizations can choose to manage food service themselves, which is referred to as self-operated (self-op), or they can contract food service out to company that specializes in feeding and related services. Three of the dominant players today in non-commercial food service include Aramark, Compass, and Sodexo. While the success of a commercial restaurant is often determined by its sales volume in dollars, non-commercial success is often rated by participation (volume of people). This is especially true in cases where food is free or partially subsidized by the host company for its employees.

The segment is somewhat misunderstood and sometimes has the connotation of only serving school lunches, hospital food, and meals in a nursing home. This segment does serve these operations, but is more diverse and spans everything from elementary school meals to fine dining. This segment also sometimes has had a reputation of only serving uninspired food. However, companies like Google have highly trained chefs that prepare and serve very high quality food. They focus on local, organic, and sustainable offerings. Apple Inc., at its new multi-billion dollar headquarters, features a garden where chefs are able to select fruits, vegetables, and herbs from the property. This emerging trend has been coined hyper-local sourcing.

A wide variety of business and other organizations house non-commercial food service operations. These segments are discussed briefly below.

  • Business and industry (B & I). When we think B & I, employee cafeterias may come to mind. Clients range from manufacturing plants, remote site feeding (e.g., oil fields on the North Slope in Alaska), to Goldman Sachs in New York City. Services may include vending, self-service convenience stores, cafeterias feeding hourly employees, dining rooms feeding managerial and other white collar employees, and upscale catered events.
  • College and university. The amount and types of food service operations in higher education depend on the size and type of school. Traditionally universities had dining halls where students would go through cafeteria style filling up their tray as they went through the line. Now there are more options, more stations, and more made-to-order food. We also see smaller tables to mimic eating in a restaurant. Many universities use food service offerings as a recruiting tool to lure prospective students, and it is not uncommon for students and parents to tour state-of-the-art food service facilities during campus visits. In the past, different dining halls on the same campus were basically the same. Today dining halls try to differentiate themselves and compete for student patronage. Universities can be self-operated, or they may contract out their food service operations. Many universities also have retail dining areas or food courts similar to a mall where students can find many familiar QSR brands.
  • K-12 education. Kindergarten through twelfth grade food service primarily involves providing lunches in both public and private schools. These programs are subsidized to various degrees by the U.S. federal government, and nutritional requirements, set by federal regulations, must be met to receive federal dollars. Many schools also offer breakfast and after school snacks, and some even offer dinner to ensure nourishment throughout the day. School nutrition programs are focusing more on purchasing local products and doing nutrition education to help improve the eating behaviors of students. Programs also offer snack foods and catering for school functions to help increase sales. School food service may be either self-operated or contracted out.
  • Healthcare. Healthcare feeding in a traditional hospital setting includes patient feeding, employee feeding, and guest feeding. Hospitals may also have catering that can range from casual to large upscale fundraising events. The size and scope of offerings largely depends on the size and location of the hospital. Rehabilitation clinics, long term care facilities, and traditional nursing homes also provide patient feeding.
  • Continuing care retirement communities (CCRCs). CCRCs are a relative newcomer and are becoming more important with the Baby Boomers at or nearing retirement age. Nursing homes may come to mind when you think of a CCRC, but a CCRC is closer to a resort. Many guests are still very active, and CCRCs fulfill individuals’ needs for activities, accommodations, and fine food. There is a growing need for management talent in CCRCs, and many hospitality programs are adding courses in this area to their curricula.
  • Sports and entertainment arenas. Sports and entertainment arenas typically contract out their food service operations. Offerings range from popcorn and peanuts to fine dining full-service restaurants. There may also be catering in the box suites. Often the food at an arena mimics an area’s most popular and unique items. In Pittsburgh’s Heinz field for example, you can find the famous Primanti Bros. sandwich, which is stuffed with coleslaw and fries. AT&T Park’s $8 Gilroy garlic fries in San Francisco have become famous in their own right. For the Olympics, Aramark is the food service provider, feeding athletes, coaches, staff, officials, and the press. This is food service on a grand scale serving over 3.5 million meals and 10,000 people per hour with diverse dietetic and cultural needs.5
  • Parks and recreation. U.S. national parks such as Yellowstone and Yosemite contract their food service out to companies like Aramark, Sodexo, or Xanterra, which is the largest operator of park-based hotels, restaurants, and stores. Concessions, upscale dining, and catering are commonly found at most parks. There is an emphasis on sustainability and fitting in with the overall look and feel of a park. Food service at theme and amusement parks may be self-operated or contracted out. Their offerings are as varied as the park themselves, but typically include snack food or “park fare,” casual sit down dining, and upscale formal restaurants.
  • Corrections. Correctional facilities must feed inmates and employees, and they typically forbid individuals from bringing food into a facility from the outside. Accordingly, non-commercial food service in an important component of a jail or prison system. Furthermore, food plays an important role in maintaining inmate morale in this environment.
  • Military. This segment involves feeding military troops and affiliated support organizations. While much of the feeding is in “mess halls,” there are more upscale dining options offered in officer’s clubs. There are also balls and galas that can be upscale in nature as well. Higher ranking officers such as Generals are often assigned their own culinary team to prepare daily meals and cater special events.
  • Airline. The airline industry has food service in the airports, ranging from fast food to casual sit-down restaurants. The Burger King or Subway in the airport is most likely managed by a contracted food service company. In-flight food service is of course another area that falls in this category. Two of the major in-flight food service providers are Gate Gourmet and Sky Chefs.
  • Trains. Onboard dining options can range from snacks to full-service meals in the dining car, often requiring reservations. On many long distance trains there may be an attendant with a snack cart who travels from car to car. Bar-buffet cars are a unique part of the train experience, where the quality of the food and wine can rival that of a gourmet restaurant.
  • Cruises. One of the first questions asked of someone returning from a cruise is, “How was the food?” Dining on cruise ships has evolved over the years to allow for more options and flexibility with some outlets open 24 hours. Royal Caribbean’s The Allure of the Seas is currently the world’s largest cruise ship with more than 20 dining options, ranging from casual snacks to fine dining (and everything in between). We are now also see branding on cruise ships with concepts like Starbucks.

 

Trends and Emerging Issues in Food Service

One of the newest trends is the “experience”. Customers now are expecting an authentic interactive experience while patronizing our restaurants. It is no longer enough to merely provide a great product and service. The experience must also be present in everything we do.

Menus and food preferences are always evolving. Today guests are more knowledgeable about food and more adventurous than ever before. This trend is due in part to the proliferation of television programming specifically tailored to food and celebrity chefs (see the Food Network for example). In line with this trend, we now see more adventurous items on today’s menus, such as bone marrow gratin and pig’s blood pappardelle, just to name a few. The National Restaurant Association highlights that we now see a focus on the sustainability, quality, wholesomeness, and calorie content of menu offerings.6 As an example, Sweetgreen is a concept built around serving high quality organic and sustainable products. Sweetgreen promotes its brand by asserting, “We source local and organic ingredients from farmers we know and partners we trust, supporting our communities and creating meaningful relationships with those around us.”

While the human element is still very important in service delivery, technology is continually reshaping the experience. For example, many restaurants already offer services such as mobile payments which enable customers to use their smart phones to pay their bills.8 Radio frequency Identification (RFID) is another type of technology being used at various resorts. Disney uses RFIDs in the form of MagicBands, which allow guests to leave their wallets elsewhere because everything from bill paying (charging) capabilities to food preferences will be orchestrated through the RFID chip embedded into a wrist band.9 In addition, many restaurants are using electronic tablets for payment and ordering tableside. The ability to pay the bill at the table speeds up the service cycle and helps to ensure privacy of credit card data.

A hot topic in restaurants is no tipping for front-of-house employees. Danny Meyer, CEO of Union Square Hospitality Group (which includes Union Square Cafe, Gramercy Tavern, Blue Smoke, Jazz Standard, and The Modern) recently introduced a “hospitality included” policy in select restaurants. Danny Meyer sought a way to achieve greater pay equity between front-of-house and back-of-house employees. At Meyer’s restaurants, the tip will now be built into the price of each and every menu item. Criticism notwithstanding, other restaurants have begun to follow suit. For example, Joe’s Crab Shack has recently announced that it will pilot a no-tipping concept in 18 of its restaurants.

Another hot topic is having restaurant patrons purchase tickets for their dining experience. For the most part, restaurant pricing is the same on a Monday as it is on Saturday regardless of demand. Hotels, airlines, and live theatre all charge different amounts based on supply and demand. Nick Kokonas, cofounder of Alinea and Next developed Tock Tickets, a company that handles the ticketing process for restaurants.10 With Tock Tickets, patrons pay in advance for their reservation much like they would for a concert or Broadway show. The ticket prices vary (dynamic pricing) depending on the time of day or day of week. This concept enables restaurants with a high demand to maximize their revenues and minimize “no-shows.”

 

Professional Careers in Food Service

Given the diversity of segments within commercial and non-commercial food service, there are a variety of career options available to students. The most common upon graduation are restaurant manager or assistant manager in a standalone restaurant. Usually entry-level management positions are divided into front- or back-of-the house. One can also pursue entry-level management positions in a hotel or resort as a restaurant, bar, food and beverage, or banquets manager. Individuals then progress toward becoming a general manager in a restaurant or a director of food and beverage in a hotel or resort setting. The next step would be an area or regional manager, followed by an executive position in a corporate office. Recent college graduates also have many opportunities to work in the non-commercial segments of the industry for one of the large managed service companies and move up the career ladder within those organizations. Many also choose to become restaurant entrepreneurs where they can create and implement their own ideas and philosophies.

There are also various options for students who choose not to work in restaurant or foodservice operations. Micros, which is now owned by Oracle, provides many of the point-of-sales terminals throughout the U.S. and worldwide. Micros often hires recent graduates to work in a sales/support role. Ecolab is another company that is often behind the scenes in many restaurants by supplying cleaning and sanitizing equipment and chemicals. Ecolab also typically hires recent graduates to work in a sales/support role. Sysco is the largest foodservice food supplier in the U.S. with over 425,000 customers.11 Recent graduates may begin a career with Sysco in either a sales or sales trainee role to promote Sysco’s various products and services.

 

Conclusions

 

Food and beverage without question is a key component of the hospitality experience. Moreover, food service establishments are a dominant player in the U.S. economy. As this chapter highlights, there is great variety in establishments and segments within commercial and non-commercial food service. These different segments provide unique experiences for customers and guests, and they offer a wealth of career options for those seeking a career in food and beverage. Food service is a challenging and exciting business, and we hope this chapter has provided a useful overview of the breadth of the diversity in food service establishments.

References

 

REVIEW QUESTIONS

  • What is the difference between commercial and non-commercial food service?
  • What are key segments within commercial food service? What are examples of restaurants within each segment? What factors can be used to differentiate each segment?
  • What are examples of establishments within non-commercial food service?
  • What are key trends impacting food service establishments today?
  • What are examples of professional careers within food service?

Review Exercises

Review Questions

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Introduction to Food Production and Service by Beth Egan is licensed under a Creative Commons Attribution 4.0 International License, except where otherwise noted.

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