The Restaurant Business - PowerPoint Presentation

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The Restaurant Business

Chapter 3

Copyright © 2010 by John Wiley & Sons, Inc. All Rights ReservedSlide2

THE RESTAURANT BUSINESSThe word “restaurant” covers a broad range of types of operationsThe term “food service” is even more far reaching and will be more clearly defined in later chaptersThe most important thing for you to take away from this module is how different restaurant types are classified and characterizedSlide3

THE VARIED FIELD OF FOOD SERVICERestaurants are those public places that specialize in the sale of prepared food for consumption on- or off- premiseSometimes, it is not even easy to discern what is and what is not a restaurantRestaurants (and the larger food service industry) represent an important part of North American society – for most of us it is an everyday activityThink of your last “restaurant occasion” Breakfast? Lunch? Dinner? Coffee? Snack? Slide4

THE VARIED FIELD OF FOOD SERVICETogether, Americans spent over $550 billion in food service establishments in 2009, which is double the amount spent some 20 years agoThat represents 48% of American’s “food dollar” (or food budget)This amount is expected to increase into the foreseeable future as Americans continue to seek convenience and activities that suit the typical lifestyles Slide5

THE VARIED FIELD OF FOOD SERVICEThere have been some recent “dips” in food service performance but overall the industry has shown steady growth for the last 10-15 yearsSome of the major trends that are occurring are increases in “off-premise” dining, new and emerging segments (such as “fast-casual”), and a blurring of the commercial and on-site sectorsOverall, the industry continues to grow and is striving to meet consumers ongoing needsSlide6

THE VARIED FIELD OF FOOD SERVICESome segments of the industry with which you should be familiar include:Quick-service restaurants (QSR)Fast CasualCasual diningFine diningOthers include ice cream, coffee shops, food courts, etc.Slide7

CLASSIFICATIONSIn the next segment, we will classify them into “dining” and “eating”

There are many ways to classify restaurants in the industry. We can classify them by price, service level (of type), menu, etc.Slide8

THE DINING MARKET vs. THE EATING MARKETRestaurants serve both social needs (dining) and biological needs (eating); some restaurants serve one or the other while some serve both marketsThe dining market is defined as including those restaurants that primarily serve our social needsPeople will eat in restaurants (that makeup the dining market) to escape from boredom, to socialize, to be waited on, to have a different experience, and for convenienceSlide9

THE DINING MARKETCertain elements of the dining market distinguish these restaurants from the eating market: the importance (and sophistication) of service, the customer, and the occasion as well as othersThe most obvious example of a restaurant type that makes up this market is fine diningFine dining restaurants tend to be characterized as: full-service, small, independent, high-quality food and service, nice ambience, and expensiveSlide10

THE DINING MARKETLargely due to the economy, the demand for fine dining has decreased, resulting in the increasing popularity of “casual upscale” diningIn addition, some well-known fine dining restaurants have even closedCasual upscale restaurants are characterized by sophisticated menus, excellence in food, strong management (typically run by chains), and good wine lists but are slightly less expensive and more casual than traditional fine dining restaurantsSlide11

THE DINING MARKETExamples of casual upscale chains would include Houston’s, Mimi’s, Cheesecake Factory, and McCormick & Schmick’sBecause of their ambience and the overall experience that they provide, many of these concepts appear as if they are independent restaurantsInterestingly, because of the success of these chains, they have been the targets for acquisitions by other companiesSlide12

THE EATING MARKETThe eating market is differentiated from the dining market in that it caters more to meeting biological needsThe best (and most obvious) example would be quick-service restaurants or QSRThe other primary segment is the family dining segment which offers table seating and full service (examples, Denny’s, IHOP, and Cracker Barrel)Slide13

THE EATING MARKETThe eating market can be sub-divided into (1) on-premise and (2) off-premise diningOff-premise can be further classified into:Takeout (or take-away)Drive throughDeliveryTogether, these three areas have grown tremendously as a result for customers’ demand for speed and convenienceSlide14

CONTEMPORARY POPULAR-PRICED RESTAURANTSWhen we use the term contemporary popular-priced restaurants, we are referring to the restaurants that cater to the eating marketAs you will recall, the two primary segments in this market are QSR and Family Dining restaurantsWe will also include casual restaurants which provide a bridge between the eating and dining marketsSlide15

The Eating and Dining Markets

Fine Dining

Casual

Dining

Fast

Casual

QSR

Upscale

Casual

Family Dining

VendingSlide16

QSRsThe Quick Service segment is a very unique segment for a variety of reasonsQSRs have a very long history, are among the most productive types of restaurant operations in the entire industry and have a history of leading the industry in terms of innovationSlide17

QSRsEven though many believe that QSR begins and ends with McDonald’s, it is generally believed to have begun in the 1920s with White Castle and then began to develop in the 1940s with Carl’s Jr. and In-N-OutThe industry has undergone many changes in the past 60 years including the domination by chains and the emergence of McDonald’s as the leaderSlide18

QSRsThe QSR industry is characterized by a variety of things including:

Location

Limited menus

Sales volume

Fast service

Types of employees (many part-timers)

Use of unskilled labor

Key roles for unit managers

Highly competitive menu prices

Chain domination

Simple unit, complex systemSlide19

QSRsSome changes have occurred over the last few years including:Going more “upscale”Companies diversifying (changing again?)Introduction of healthy itemsExpansion of menusNontraditional locationsSlide20

Fast CasualFull-service quality in a quick-service formatHybrid that combines convenience with higher-quality ingredientsExamples include Panera Bread, Baja Fresh, and Qdoba Mexican GrillSlide21

MIDSCALE RESTAURANTSMidscale restaurants include those restaurants that have simplified production systems (requiring lesser skilled employees), specialized menus and moderately priced food This category of restaurants include:Family restaurantsCafeterias and buffetsPizza (sit-down)Slide22

CASUAL RESTAURANTSCasual restaurants are a “step-up” from Midscale Restaurants These restaurants have become more popular in recent years driven by their popularity with a number of demographic groupsThese restaurants are characterized by a relaxed atmosphere, more varied menus and reasonable pricesSlide23

CASUAL RESTAURANTSCasual restaurants include:“Mainstream” casual restaurants such as Applebee’s, Chili’s, Ruby Tuesday, and Friday’sSpecialty restaurants such as those focusing on steak (Outback), seafood (Red Lobster) or pasta (Semolina’s)Ethnic restaurants include, among others, Chinese, Italian and MexicanTheme restaurants including Hard Rock CafeSlide24

HIGH CHECK AVERAGE RESTAURANTSHigh check average restaurants also known as fine dining restaurants, have a special place in American societyFine dining restaurants are solidly established as serving the dining marketThe “average check” begins at about $30.00 and goes up from there – a notable $200 meal in New Orleans comes to mindSlide25

HIGH CHECK AVERAGE RESTAURANTSThese restaurants are typically found in high income and densely populated areas (although there are exceptions)Several large US cities are known for fine dining including New York, Chicago, and LAThey are also typically found in large tourist areas such as New Orleans, Vail, and Las VegasSlide26

HIGH CHECK AVERAGE RESTAURANTSAlthough this type of restaurant is in decline, some are as popular as ever: Excelsior, Restaurant L, Seasons, Aujourd’hui, Julien, and L’EspalierThey cater to people going out for special occasions (birthdays and anniversaries), celebrations (end of the school year) and business mealsEven some of these have become more casual (although not necessarily less expensive)Slide27

RESTAURANTS AS PART OF A LARGER BUSINESSThe restaurants in this category do not really fit neatly into another categoryThese restaurants exist to serve another business or businessesExamples include: restaurants in retail stores such as Nordstrom and Lord and Taylor, and restaurants in shopping malls We differentiate these because they are not “free standing”