Foodservice
Seat turnover
# of guests in period / (# of seats x operating days)
FSR: Traditional casual
$12-20 - Often theme-based concept and décor → have a particular vibe - Relative broad menu choices, greater flexibility (substitutions, etc.) - Higher prices than family restaurants - Higher quality and more refined service → better serviced - Start to see a significant portion of revenue from alcohol - Brings in the most revenue out of the 4 categories Example: TGI Fridays , Souvlaki house
FSR: Polished casual
$20-50 - In between casual and fine dining - Elevated culinary experience in refined atmosphere - Better ingredients, more flexibility, polished service Ex. Bravo Brio, Cheesecake factory
LSR: Snack
$3-5 - Not a full meal - Coffee, doughnuts, juice bars, etc.
LSR: Quick service (QSR)
$5-9 - "Fast food" - Limited menu, standardized products, high uniformity - Many ingredients are prefabricated to facilitate handling by less skilled workers - Efficient delivery system, convenience - Low price Ex. McDonalds
FSR: upscale/fine dining
$50+ - About 10.5% of FSR Segment restaurants, and $29B in sales - Pretty small 5% of all total restaurants in the country - "White tablecloth restaurants" - Luxury ingredients and extensive wine lists - Majority (88%) of establishments are independent operators - Small restaurant groups that are either regionally focused or focused in a small city - Food quality and menu complexity extremely high - High emphasis on experience
FSR: Family/ midscale
$8-14 - Table service at a relatively low price point - Extensive menu choices to capture broad audience - Typically marketed to families (children's menu, etc.) - Emphasis on value (e.g., large portions) Ex. 24 hour restaurants → IHop, waffle house
LSR: Fast casual
$9-14 - About 20% of LSR sales - Higher quality and better ambiance than QSR - Convenience of QSR, fresh ingredients of a sit-down restaurant - Longer preparation time, more operations Ex. Panera bread and chipotle are the "starters" of this
Prime cost Equation
(food and beverage costs + payroll costs + benefits) / food and beverage sales OR (if in %) Prime costs= COGS%+ Payroll % +Employee benefit %
Who controls what on the income statement
(most money is coming from guests)
Aboyeur
- "Runner" - Expediting (organizing tickets (what should go to each table))
China's LSR Industry
- $162.2 billion in 2021 (3.1 growth) - Top 5 companies= 11.1% - 2.5 million outlets
China's FSR Industry
- $459.3 billion in 20221 (5.9% pandemic decline) - Top 5 companies= 1.1% - 2.6 million outlets
China's cafes, bars, etc
- $7 billion in 2021 (24.4% growth) - Top 5 companies = 46.1% - 61K outlets
Noncommercial Restaurant Services
- (EXAMPLE, CORNELL DINING) - In house → people who work at places run the restaurant services - Employee restaurants services, school, universities, transportation, hospitals nursing homes, clubs, community centers
Commercial: Bars and taverns
- 2.5% - Don't serve food, only alcohol
Decline Phase
- Concepts either reinvent themselves or die - Management may become complacent - Uncertain how to adapt to changing marketplace - Customers looking for something new patronize brands in early stages - Employees want to be part of new concepts and fresh management - Lack of growth & reduced revenue can cause financial problems - Management must renew knowledge of market and customers preferences - Consider establishing new brands, entering new markets, etc. EX: Subway or Applebees
The UIR: All other costs
- DOE not a good differentiator --> Upscale restaurants will have higher DOE in general - Music and entertainment -->Live entertainment costs more - Marketing -->chain/franchised restaurants pay into ad programs (esp. QSR) - Repairs --> Expect to be higher for high volume restaurants - Rent -->higher for urban or downtown locations - Franchise Fee/corporate overhead --> Chain restaurants will incur this fee
Customer Satisfaction
- Determined by value of services provided - Service designed and delivered to meet target customers' needs
Communard
- Does not exist today but their job was to make staff meal
Demand factors that influence industry growth
- Employment - Wages - Prices/inflation - Interest rates - Consumer confidence
Introduction phase
- Entrepreneur considers entering industry, looks for opportunities - Inexperience can lead to losses, business failure - Focus on resource management (food and labor) - determine an establishment's price- value position - Marketing/advertising most important → trying to build awareness
Evolution of restaurants
- Everything we know about restaurants basically comes from Europe - Centered around the French Revolution and fall of Old Regime - Restaurant is an icon of French Gastronomic genius - People ate in public inns, private homes with personal cooks, and retail food and drink merchants
Growth Phase
- Expand number of units, streamline operations - Standardization become critical → making sure everything is the same, consistent - Competitors more likely to try to copy popular menu item concepts - Balance between consistency in delivery of food/service and consistency in expansion - menu refinements, but emphasis on high profit items
China's restaurant industry structure
- Full service segment in china is larger than limited service - Cafes are the largest segment - Catering industry is 54% of consumer food dollar
Executive chef
- Head person, in charge of whole operation
- Chef de Cuisine
- In charge of staffing, menu planning, and overall management
What is the 2016 National restaurant Association operations report and whats the purpose?
- Includes operating data and financial performance info by segment Allows restaurants to compare business to those of similar profile
How did restaurants differ from inns, cook shops, and other eating establishments?
- Individual tables (picking where you ate not fixed) - Broth was served - Unfixed mean times - Concern for health and well being of customers
Commercial: Other
- Managed services (contracted), operated by another company - Industrial plants, office buildings, hospitals, nursing homes, schools, universities, airlines, sports centers - Lodgings places - Hotel restaurants, other accommodation restaurants (resorts) - Retail, vending, recreation, mobile - Retail-host restaurants (big convenient stores that have a big restaurant inside → have a retail operation (gas station, mall) and fun a restaurant through it) (7 eleven in Japan) - Movie theatres, bowling lanes, mobile caterers, vending and non-store retailers
Case of UIR: Beverage sales
- No beverage sales → do not sell alcohol: coffee shop or QSR - Very high % of beverage sales: bar (greater than 50%) - Moderate to high beverage sales - Upscale restaurants sell more wine with higher selling prices - CDRs tend to have beverage sales → 20% - Grill/buffet won't sell as much alcohol as CDR, particularly to lunch service - Light beverage sales (<10%) - Fast casual restaurants sell alcohol in relatively small quantity - Three-meal restaurant won't sell much alcohol during breakfast, lunch, or overnight making beverage sales higher than fast casual but lower than CDR
Military Restaurant Services
- Officers' and NCO clubs, military exchanges
The UIR: Food costs/ COGS
- Paper supplies counted in food costs for QSR, and food costs tend to be higher → prices are low, food is processed - Processed food has higher costs than raw food → the company has already put in the labor of processing it - Low costs to get the raw product but a lot of cost in labor - Buffets have higher food costs due to "all you can eat" format and waste - Upscale restaurants have low food costs due to high prices and raw products - If you have really high menu prices that will deflate the food costs - Wine sales make beverage costs higher for upscale restaurants - Different alcohols are marked up differently depending on the restaurant - Restaurant pays less than 20% of what you pay when you buy it at the restaurant - Bottle beer have higher beverage costs than draught beer cocktails
Back of the house
- Plongeurs or esculeries (clean dishes) - Apprentis or Stagiaires (intern to sous chef) - Commis (assists a section chef. Assisting in the food preparation process
Maturity Phase
- Sales stabilize, brand becomes fully leveraged (market leader) - Begin branching out, launching new brands to harness experience - Continue to gain market share, but more slowly - Competitors try innovations and new concepts to steal market share
Chefs de Partie
- Saucier (creates sauces) - Rotisseur (meat cook) - Poissonier (in charge of fish) - Entremetier (vegetables) - Garde Manger ( cold dishes) - Patissier (pastry)
Sous Chef
- Second-in-command to the head chef, the sous chef assumes responsibility in their absence. - Modern-day sous chefs are typically also in charge of ordering and help oversee menu planning
Prime Cost
- The main costs that restaurants experience - Displayed as a % - Combination of 3 different cost: 1. Costs of good sold 2. Payroll costs 3. Employee benefits
Food and drink merchants were organized by monarchical decrees (Guilds):
- Traiteurs (cook caterers) - offered a table d'hote (fixed prices and meals) - Charcutiers - made sausage, hams, and other pork products - Butchers, rotisseurs, bread makers, vinegar makers, pastry cooks, etc. - Master cook caterers held the right to serve full meals to large parties - Restaurateurs never formed a legal guild (monarchical degrees)
The UIR: Labor Costs
- Upscale restaurants require highly skilled labor (typically offset by lower food costs) - Lower labor costs for a bar (most sales come from alcohol) - Under 30% -- element of self-service - EX: buffet, coffee shop), assmelply only (QSR) - 31% to 34% -- more skilled labor, food preparation done from scratch (fast casual, casual), open all day (3-meal family style) - Does not need to be highly skilled workers but the labor cost is high because the restaurant is open 24 hours
Fixed vs. variable costs
- Variable costs → Varies with sales. The more you sell the more that cost goes up - Fixed costs → Doesn't change based on what you are selling - Occupancy costs - Certain utilities - Regular equipment maintenance - Management salaries and some payroll - Portion of other controllable expenses
Customer value proposition
- What makes up customer value proposition - Not just product and price, has customer expectations, service, atmosphere, ambiance - Every customer has a different preconceived notion of value - Old, limited understanding: value= product/price - More robust definition includes other aspects of restaurant experience: Value= customer experience + service + atmosphere + product/ price
Internal service quality
- Workplace design - Job design - Employee selection and development - Employee rewards and recognition - Tools for serving customers - Drives employee satisfaction
Revenue growth and profitability
- both stimulated by customer loyalty a 5% increase in loyalty is 25-85% increase in profits - More profitable to have loyal customers than to have new ones
Commercial: Eating places
- generates most sales, 68.7% - Full Services restaurants - Limited-service restaurants - Cafeterias, buffets - Snack bars - Social caterers - 90% of eating places are restaurants
Global environmental impacts (food waste and energy)
- restaurants use about 2.5 times more energy per square foot than other commercial buildings - food prep is largest energy consumption, refrigeration is smallest Food waste: - accounts for 30-40% of the food supply - 133 billion pounds, $161 billion - single largest component in landfills
Employee Sasisfaction
- results from high quality support services, enabling emplyees to provide results to customers - Happy employees tend to stay and will tend to be more productive - Transitions into employee retention and employee productivity
3 broad markets within foodservice industry
1. Commercial restaurant services (make up majority of sales) 2. Noncommercial resturant services 3. Military Resturant services (smallest amount of sales)
What is included in full service restaurants?
1. Family/midscale 2. Traditional casual 3. Polished causal 4. Upscale/ fine dining
What is included in limited service restaurants?
1. Snack 2. Quick service 3. Fast casual
The size and scope of foodservice industry has increased
1970 (43 billion) - 2021 (863 billion)
FSR Segment accounts for $____ billion in sales
285
- Accommodation and food services is ___ of GDP
3.1%
LSR segment accounts for $____ billion ins sales
303
What % of our money is spent on food consumed NOT at home
51%
Why prepare a P&L statement?
A - P&L Statement is a snapshot of how good we are at transforming input into output over a period of time - The P&L statement answers the question, "Am I Making Any Money?" - No investor will give you money if they don't know how well you will do in the future - The P&L statement also allows outsiders to evaluate your ability to manage and use your company's resources (lenders, investors) - It is required by the IRS—it is the record of a business' operation that is used to assess taxes on profits earned
Demand: Wages
Customers will have more money and will want to spend more money at restaurants. Shift across segments (from fast food to fine dining)
Demand: Prices/inflation
Degrees demand because things are getting more expensive so will want to do the cheaper option and stay home
Service a la Russe
Dishes brought to the table sequentially and served individually, portioned by servants
Average check
Food and beverage sales (on premise - not takeout)/ guests in period
RevPASH
Food and beverage sales (on premise)/ available seat hours
GDP
Gross Domestic Product- the total market output
Demand: Interest rates
High interest rates people will want to save their money so demand will decrease (save more and spend less)
The Service Profit Chain
How restaurants create value for customers
Demand: Consumer confidence
If consumer confidence is down spending will decrease. People are not confident in the market so aren't going to risk spending, will rather save their money
Demand: Employment
If employment is up it will increase demand. More people have jobs, so more people will want to go out and dine at restaurants
In what stage of the business life cycle is advertising most important?
Introduction phase
Customer loyalty
Is a direct result of customer satisfaction - Retention - Repeat business - Referral - Free advertising
External Service Value
Service concept: result for customers benefits/price
Overhead rate
Total fixed costs / total amount of time open - "overhead" is a business term used to describe operational costs not related to direct materials and labor
Break-even point
Total fixed costs/gross profit margin - the point at which total revenue equals total costs or expenses
Employee retention and Employee productivity
Value created by satisfied, loyal and productive employees
Food consumed at home is _____ while food away from home is ______
decreasing,increasing
Controllable expenses
direct operating expenses involved in the service of customers, and usually are expenses that are ot 100% variable with sales
Commercial consists of:
eating places, bars & taverns, other
Restaurant industry employment is (increasing/decreasing/staying the same) every year
increasing
4 top question
number of new seats* seat turnover* days open* average check
Available seat hours (ASH)
number of seats x operating hours x operating days
Non controllable expenses
rent, property tax, insurance → fixed
What was a restaurant before it was a place
restorative broth - produced by restaurateur (18th century) - Broth was designed to restore health to those ill
Service a la Francaise
various dishes at the same time, people helping themselves
