Food Service Contractors
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Industry Overview
The food service contracting industry includes about 21,000 companies with combined annual revenue of $23 billion. Major companies include ARAMARK, Compass Group USA, Delaware North, and Sodexo, Inc. The industry is highly concentrated: the 50 largest companies account for about 90 percent of revenue.
Food service contractors provide cafeteria and restaurant services to businesses, government agencies, and institutions. Food distributors, which supply food to food service contractors as well as to grocery stores and restaurants, are covered in a separate industry profile.
Competitive Landscape
Demand is driven by employment trends and consumer tastes. The profitability of individual companies depends on efficient operations and food quality. Large companies have advantages in economies of scale in food and equipment purchasing, off-site food preparation, and distribution. Small companies can compete effectively by specializing in unique food products or local markets. The industry is labor-intensive: average annual revenue per worker is only $50,000.
Products, Operations & Technology
Major products are meals consumed on-premises (65 percent of revenue) and take-out food (30 percent). Other products include alcoholic drinks and grocery food items. Meals can vary depending on the setting and client, but typically focus on breakfast, lunch, and dinner standards. Food includes pizza, Mexican and Asian cuisine, sandwiches, salad bars, chicken, and hamburgers. Beverages include soft drinks, tea, coffee, bottled water, and juice.
Food service contractors prepare and serve meals cafeteria-style; in bulk quantity to students, hospital patients, and prisoners; and in fast-casual or quickservice restaurants (QSR). Fast-casual and QSRs can be either private-branded (Au Bon Pain, Bleeker Street Café) or a franchise (Burger King, Wolfgang Puck, Starbucks). Stand-alone QSRs tend to be less than 3,000 square feet. Cafeteria and public dining settings can be up to 40,000 square feet, with the dining area representing about 60 percent of total space, kitchen around 30 percent, and common areas 10 percent.
A large food service contractor operates thousands of facilities and serves millions of customers each day. A typical site serves around 500 to 1,500 people daily with an average transaction of $2.
Operations include food preparation, food service, and clean up. Food preparation involves cleaning, cutting, and cooking entrées, salads, soups, side items, and desserts. Major utility inputs include natural gas for cooking and electricity for refrigeration and cooling. Food ingredients are supplied by a food distributor. Increasingly, distributors are providing food service contractors with portion-controlled, pre-washed, and pre-assembled food items, reducing spoilage and limiting the time needed to prepare food onsite.
Large food service contractors employ a professionally trained chef onsite, whose primary responsibility is to oversee food preparation, limit spoilage, and reuse ingredients whenever possible. Cooks, food servers, and cleanup crew are typically paid hourly and require minimal skills.
Food service contractors rely heavily on point-of-sale (POS) technology to track sales and inventory. Software systems help food contractors reduce food costs and improve profitability by tracking individual products, sales trends, and revenue share figures. Contractors in the university sector are adopting fingerprint-based biometric identification, replacing traditional card-reading systems, allowing for a more rapid flow of customer traffic and eliminating the problem of lost or stolen cards.
