Restaurants

 Introduction to Restaurant/Food Service

Industry
 Identify the types of restaurants
 Discuss the Restaurant operations
 Identify the types of Restaurant Industry

Organizations
 Discuss the competitive forces in Restaurant
 Food and Drink Sales 2005

2005
Projected dollars
in US$bn
Eating places – full-service quick- 326.4
service, cafeterias, snack bars
Bars and taverns 15.2
MANAGED SERVICES–hospitals, 31.6
schools, universities, sports centres

Source: National Restaurant Association 2005 Industry Forecast

 Restaurant originated from French word meaning
‘restorer of energy’. Used in mid-1700s to describe
public places that offered soup and bread

 Food service or restaurant encompasses all public and

private locations that provide food for sale

Mill (2007)
 National Restaurants Association identified the following
industry trends
- growth in sales due to affluent customers
- 40% think that eating out is cost effective than cooking
and cleaning up
- restaurants use the Internet for marketing
- menu items such as side salads are popular
- casual dining grew from 2% (2001) to 15% (2002)
- off-premise or eating market sales (takeout, drive-
through and delivery) continues to grow

Mill (2007)
 Schmelzer & Lang (1990)
found the three most
frequently used sources by
US restaurateurs were
i) family and friends
ii) food and equipment
vendors
iii) printed materials

Mill (2007)
 Restaurants are built for utility or pleasure. Utility
restaurants are filling stations (high utility/low
pleasure) e.g. vending machines and fast-food outlets.
Dining and family restaurants have low utility/high
pleasure

Mill (2007)
 In full-service restaurant, servers take menu orders
and deliver items to customers. It offers high
service/high prices.

 In self-service operation, customers serve themselves

e.g. buffet breakfast or brunch at restaurant. It offers
low service/low prices

Mill (2007)
 Understanding of productivity is important from a
management perspective and QSR operations (fast food)
lead in productivity as they simplify production
processes and use self-service

Food service type Direct labor hours

per 100 guests
Fast food 10.5
Cafeterias 18.3
Family restaurants 20.7
Luxury restaurants 72.3

Barrows, Powers & Reynolds (2012)

 Unique characteristics
a) Location strategy (they are everywhere)
b) Relatively limited menus
c) High sales volume
d) High degree of self-service
e) Numerous part-time employees
f) Highly competitive prices
g) Highly standardized product
h) Managers should be capable

Barrows, Powers & Reynolds (2012)

 Family restaurants offer table
service, salad bars and desert
bars. They serve three meals a
day.

 Pizza restaurants are popular

and emerged as top 25 food
service

Barrows, Powers & Reynolds (2012)

 Specialty–Outback
steakhouse

 Ethnic – Italian, Chinese,

Mexican

 Entertainment – Hard Rock

Cafe

Barrows, Powers & Reynolds (2012)

 Three areas:

a) Front of the house

b) Back of the house

c) Office

Barrows, Powers & Reynolds (2012)

A) Front of the house-operating system,
business place, and social stage setting

Responsibilities Tasks Roles Supervision

Guest satisfaction Greeting Greeter Ensure guests
with personal guests Order Order-taker are served well
service taking,

Barrows, Powers & Reynolds (2012)

Responsibilities Tasks Roles Supervision
Empowered staff Serving food, Food server Supervise
to satisfy guests’ Clearing cleaning staff
needs tables and cashiers
Control measures Receive Personal Interact with
on quality service, payment, appearance guests
payment, cash Thanking and manners
guests are important

Barrows, Powers & Reynolds (2012)

B) Back of the house-assembly plant operations
Responsibilities Tasks Roles
Food taste Standardized recipes Chefs
Food safety Cooks
Dishwashers

Food cost Quality and cost control Close kitchen

Food hygiene Cleanup

Barrows, Powers & Reynolds (2012)

C) Office
Responsibilities Tasks Roles Supervision
Administrative – Handle phone Office General
office procedures calls, Manager Manager
suppliers
Keeping the books Account Accountant CFO
– cost control receivables
reports Account
payable
Statement of Payroll
income and
expenses

Barrows, Powers & Reynolds (2012)

General Management
- Daily routine responsibilities and tasks
Roles Issues
Opening Asst Manager Security
Supervisor Standby personnel
Before and Chef Food preparation, Sidework
after the rush Supervisor (cleaning, staff schedule)

The meal Manager Staffing

periods Supervisor Food quality and services
Closing Supervisor Housekeeping
Sanitation

Barrows, Powers & Reynolds (2012)

Making a Profit in Food Service Operations

3 stakeholders
a) Customers – quality products and services
b) Employees – good place to work
c) Owners - profit

Barrows, Powers & Reynolds (2012)

Making a Profit in Food Service Operations
Two approaches:

1) Increase sales
Menu redesign – change menu items
Bundling food items – ‘value set meals’
Suggestive selling – promote wine, desserts

2) Reducing costs
Improved efficiency – staffing costs, supplies

Barrows, Powers & Reynolds (2012)

3 types of organizations to operate:

1) Chain Restaurant Systems

2) Independent Restaurant

3) Franchise

Barrows, Powers & Reynolds (2012)

1) Chain Restaurant Systems – large organization

7 key strengths:
a) Marketing and Brand recognition (McDonald’s, KFC)
b) Site selection expertise (analyze location potential)
c) Access to capital (banks willing to finance)
d) Purchasing economies (buying power)
e) Centrally administered control and information
systems (collecting information)
f) New Product development (strong R&D)
g) Human-resource development (established T&D)
Barrows, Powers & Reynolds (2012)
B) Independent Restaurant – small but flexible

7 key issues:
a) WOM to build name for the restaurant
b) Seek site selection expertise
c) Venture capitalist to raise capital
d) Need to seek quality suppliers
e) Need to computerize information systems
f) Need to build ties with employees

Barrows, Powers & Reynolds (2012)

C) Franchise

2 types of franchising
i) Business format-access to product or service,
systems and standards, e.g. McDonald’s
ii) Product or trade name-car dealership
4 issues to new franchisee
i) Passed screening test
ii) Site selection and planning
iii) Preopening training e.g. Hamburger University
iv) Operation manuals
Barrows, Powers & Reynolds (2012)
 Intense competition with many sellers and many
buyers

 Established restaurant giants struggle with each

other over a slowly growing market

 Many independent operators either become very

large operators or withdrawn from the market

 Successful operators are able to distinguish from its

competitors

Barrows, Powers & Reynolds (2012)

Product
– product expectations and guest experience
- e.g. McDonald’s ‘Go Active! Happy Meal’ for those
healthy conscious adults.
- extend product life cycle by adding new products
to the menu item
- strong branding can heighten awareness of
product in consumers’ mind

Barrows, Powers & Reynolds (2012)

Price
– pricing strategy options
a) ‘Value pricing’ sets prices based on perceived
value by customers rather than product cost
b) ‘Couponing’ is a discount or rebate on a
product
- lowering prices can affect customers’ perception
of product quality and may affect bottom line

Barrows, Powers & Reynolds (2012)

Place
– place refers to location
- issue of wide distribution and space constraint
due to rental costs
- ‘point of distribution’ (POD) e.g. Subway Express
in kiosks and carts

Barrows, Powers & Reynolds (2012)

Promotion
– McDonald’s spent US$647m in advertisements in
2002
- Conventional media, print media and social media
are good promotional tools
- Sales promotions through games, coupons are
common campaigns

Barrows, Powers & Reynolds (2012)

Restaurants also faced competition from:

a) Convenience stores e.g. 7-11 provide prepared

food

b) Supermarkets have food courts and fast-food

outlets

Barrows, Powers & Reynolds (2012)

Right concept – requires well-managed operations
and good team to deliver high quality consistently
Careful expansion – ensure operational and marketing
efficiency and the need to hire, train and motivate
employees
Skillful execution – well-trained staff, standard
operating procedures, performance evaluation
Service – provide timely service, answer customers
queries, handle customer complaints, deliver
accurately and recommend suitable menu items

Barrows, Powers & Reynolds (2012)

 Mill, R.C. (2007). Restaurant Management-Customers,
Operations and Employees. Third edition. Pearson Prentice
Hall
 Powers, T. & Barrows, C. W. (2006) Introduction to
Management in the Hospitality Industry. Eighth edition. John
Wiley & SonsWright, O. & McAuley, A. (2012)
 Australian franchising research: Review, synthesis and
future research directions. Australasian Marketing Journal.
May. 2012
 Burusnukul, P., Binkley, M. and Sukalakamala, P. (2011)
Understanding tourists’ patronage of Thailand foodservice
establishments-an exploratory decisional attribute
approach. British Food Journal. Vol.113, No.8, pp965-981