Food Service
This chapter presents information on foodservice outlets,
beginning with an examination of the size of this growing
market and the major market segments such as fast food
and full-service outlets. Next, developments in the foodservice
industry are covered, including restaurants' responses
to consumer demand and policy issues related to the healthfulness
of restaurant foods.
A Large and Growing Market
The foodservice industry is nearly equal in size to food retailing:
- The food marketing system, including food service and food retailing, supplied about $1.02
trillion worth of food in 2005.
- Of this total, $496
billion was supplied by foodservice facilities that
serve meals and snacks for on-premise or immediate consumption
(food away from home).
Commercial foodservice establishments accounted for about
85
percent of food-away-from-home expenditures in 2005, or
about $423 billion. This category includes full-service
restaurants, fast food outlets, caterers, some cafeterias,
and other places that prepare, serve, and sell food to
the general public for a profit. Some are located within
facilities that are not primarily engaged in dispensing
meals and snacks, such as lodging places, recreational
facilities, and retail stores.
Full-service and fast food restaurants—the two
largest segments of the commercial foodservice market—account
for more than 77
percent of all food-away-from-home sales. Full-service
establishments have waitstaff, and, perhaps, other amenities
such as ceramic dishware, nondisposable utensils, and
alcohol service. In contrast, fast food restaurants use
convenience as a selling point; they have no waitstaff,
menus tend to be limited, and dining amenities are relatively
sparse.
Fast food used to be the most rapidly expanding segment
of the food-away-from-home market. As part of their growth
strategy, fast food companies built more outlets closer
to consumers’ homes and work places to make it more
convenient for consumers to purchase meals and snacks. Recently,
these companies have been moving into nontraditional locations,
such as department stores. For example, Taco Bell can
now be found in some Target outlets and McDonald’s
is in Wal-Mart stores.
Rising incomes and demographic trends in the United States
are expected to support the continued expansion of the
food-away-from-home market at least over the remainder
of this decade and the next, with the greatest impact
on full-service restaurants. Higher income households
tend to spend more money on food away from home, especially
in full-service establishments. At the same time, the
aging of the U.S. population will exert a negative influence
on the demand for fast food (see also The
Demand for Food Away From Home: Full-Service or Fast Food?).
Noncommercial foodservice operators accounted for about
15 percent of all food-away-from-home expenditures in
2005. These operations prepare and serve meals and snacks
as an adjunct, supportive service in institutional and
educational settings, such as schools, nursing homes,
child care centers, and hospitals.
Foodservice providers not only compete with each other,
but also face competition from other types of retailers
entering the away-from-home market, such as supermarkets
and convenience stores with ready-to-eat entrees.
Industry Faces Consumer Demand, Health Issues
Changes in consumer demand might lead to changes in the
mix of foods and services offered by the foodservice industry.
Any shift in market share between fast food and full-service
restaurants could influence the strategies of restaurants
in both segments. For example, if trends favor full-service
restaurants, the market could shift to include more full-service
restaurants offering a wider range of menu selections
and dining amenities. In response, fast food restaurants
might introduce comparable foods and services.
As evidence of the influence of consumer demand on the
foodservice industry, restaurants are increasingly offering
more healthful choices for nutrition-minded consumers.
Eating out was long associated with eating more lettuce
and potatoes, but less of other types of vegetables and
fruits, such as grapes, apples, and citrus. Now, even
fast food chains have added vegetable salads and fruit-based
items to their menus (see also Understanding
Fruit and Vegetable Choices: Economic and Behavioral Influences).
Restaurant foods, on average, tend to be higher in calories
and lower in many nutrients than foods prepared at home;
however, the growing popularity of restaurant foods combined
with their typically lower nutritional quality does not
suggest that consumers desire unhealthful foods or that
they fail to make health-conscious selections when dining
out. Restaurants may be able to sell foods of lower dietary
quality than home-cooked foods because patrons value the
other attributes of restaurant meals and snacks, such
as their convenience and the enjoyment of the dining occasion.
Still, when deciding on where to dine out and how often
to do so, some consumers may base their decisions on only
partial information about the nutritional quality of the
foods sold by restaurants (see also Let’s
Eat Out: Americans Weigh Taste, Convenience, and Nutrition;
Away-From-Home Foods Increasingly
Important to Quality of American Diet).
The foodservice industry is under pressure to provide
more information about the nutrient content of foods.
Unlike manufacturers of packaged foods, restaurants are
currently required to provide nutritional information
only when making a nutrient content or health claim about
a particular food item being served. For example, Subway
Restaurants chooses to list the caloric content of many
of its sandwiches on drink containers. Burger King and
McDonald’s voluntarily provide similar information
on the back of place mats, on posters, in pamphlets, or
online.
In 2004, a working group on obesity at the Food and Drug
Administration (FDA) recommended that FDA encourage restaurants
to provide more, and more readily available, nutrient
content information at the point-of-sale. The FDA subsequently
contracted with a nonprofit organization, the Keystone
Center, to design, convene, and facilitate a forum on
away-from-home foods. In 2006, that forum released its
own set of recommendations, which included promoting lower
calorie foods at restaurants and providing consumers with
caloric information in a standard format that is easily
accessible and easy to use (see also Nutrition
Labeling in the Food-Away-From-Home Sector: An Economic
Assessment).
Holding Down Costs Also Key
In addition to complying with regulations and meeting
consumer demand, foodservice operators striving to be
profitable must hold down costs. Costs account for an
estimated 86 cents out of every dollar in sales at eating-and-drinking
places, compared with 76 cents for all U.S. industries.
Wages take 34 cents of each dollar. Physical inputs, including
domestic agriculture, domestic food products, and imported
goods, account for another 26 cents. Similarly, expenses
for transportation, trade, and other services take about
26 cents out of every dollar in sales in eating-and-drinking
places (see also The Impact
of Minimum Wage Increases on Food and Kindred Products
Prices: An Analysis of Price Pass-Through).
Efforts to maintain profitability have supported an industrywide
initiative, the Efficient Foodservice Response (EFR).
A goal of the initiative is to foster cooperative business
practices between foodservice operators and their suppliers
for the sake of responding to consumer demand and, simultaneously,
holding down costs. For example, to expand its menu, a
restaurant could train additional kitchen staff, identify
suppliers of additional ingredients, expand storage facilities
for the additional ingredients, and expand facilities
for disposing of waste. Alternatively, the restaurant
might ask its suppliers for more prepared (value-added)
meals, seek out suppliers who offer a complete line of
such meals, and require additional services, such as category
management and joint inventory management, to monitor
inventories of these value-added meals.
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