Chapter 7
Copyright © 2010 by John Wiley & Sons, Inc. All Rights Reserved

• Definition: Food outlets in business and industry, schools, universities, hospitals, skilled-nursing centers, eldercare centers, correctional facilities, recreational facilities such as stadiums, and child care centers
• This can include locations where people are at work, play, recreation, school, etc.
• This segment has a long history—it was originally known as “institutional” food service because it was associated with “institutions” such as universities and hospitals

• General categories include: (1) Business and
Industry; (2) Education; (3) Health Care; (4)
Corrections; and (5) Recreation.
• These are the five segments that we will discuss but there are many other environments where people purchase food service in these types of environments – can you think of some examples?

• The segment was also known as
“noncommercial food service” because originally it was operated by the institutions themselves on a break-even basis (without attempt to make a profit)
• It was long operated on the assumption that its customers represented a “captive market”—the current perspective reflects the market more as customers who have choices

Some terms that you will need to understand
(that are unique to this segment) include the following:
• Participation rate
(compare with measure used in commercial restaurants)
• Self-op
• Contractor
• Managed services
• Client

The reasons that we choose to include this segment in this course is:
• The areas that it has in common with other hospitality sectors
• The involvement of traditional hospitality companies in management
• Its size and scope
• The professional opportunities available

• Self-ops are food service operations that institutions choose to manage themselves
• Historically, before the advent of professional management companies, this was how most operations were managed

• Managed services companies are those companies that specialize in managing food service operations for a third party
• Such companies believe that they are able to offer operational advantages to the host company (client) including cost savings, economies of scale, variety of offerings, and problem-solving abilities (trouble-shooting)

• Managed service companies have been able to develop a network of expertise from managing
“accounts” all over the country and the world
• They develop managers who are experts in the area
• They have support systems, new product development and financial stability

The “penetration” of managed services companies continues to grow. The penetration rates in the major market segments is:
• B & I: 85% – 90%
• Colleges and universities: 60% – 65%
• Health care: 45% – 50%
• Schools: 20% – 25%

• The major companies include ARAMARK,
Sodexo, and Compass.
• Other companies tend to be smaller, regional operators or operators that specialize in a particular segment
• The contract company’s name rarely appear in
(or on) the facility itself so that the customer sometimes does not know which company operates the food service

• Business and Industry (or Business Dining) provides food service to company employees
• B&I food service is affected by the size of the work force and the health of the economy (or employment rate)
• It has the highest rate of managed service of all four segments.

• Food programs have proven to be very important to companies in recent years but…
• Companies have reduced subsidies in recent years
• Competition is bigger than ever from commercial restaurant segment
• Many companies specialize in business dining such as Guckenheimer and others

• Aggressive marketing
• Organic growth
• More options for diners
• More branded concepts
• Innovative menus
• Grab n’ go

• Foodservice on college and university campuses is necessary even if the campus is nonresidential
• Food services must not only accommodate students but also faculty, staff, and visitors
• Where “board plans” were once the rule, now there are many options

• College and university food service is affected by demographics, students living on campus, and food quality, among others
• The introduction of brands has been the biggest factor in recent years (national and proprietary)
• Most college and university programs are managed by contractors and the penetration rate continues to increase

• Healthy segment
• Universities are trying harder to attract nontraditional students
• New brands (Starbucks)
• More choice
• Comfortable/multi purpose dining areas

• This segment includes hospitals (large and small) and nursing homes
• Food had always been important in this environment but has become more important in recent years
• The presence of Dietitians makes this segment different
• Dieticians are professional qualified individuals who manage the nutritional aspects of food service

• Hospitals are taking food more seriously as a result of: (1) competition; (2) customer feedback and; (3) becoming more “business like”
• Health care has sophisticated facilities and systems as well as unique challenges
• Only about 50 % of health care food service facilities are outsourced but this number is increasing

• More emphasis on retail
• Introduction of brands
• Cost reductions – doing more with less
• Revenue enhancement (catering, cooking events)
• Growth!

• School foodservice serves two functions: (1) proving food to school children and; (2) taking care of underprivileged children through federally assisted meals
• This is accomplished through subsidies and government food programs
• Some systems feed 1 million children a day
• Again, participation rates are important

• Lowest percentage of contractor penetration
• Lower profit margins
• Specialized market
• Large systems (650 schools in Chicago)
• Challenges with restrictions and diet

• Lower enrolments
• Fighting child obesity
• Greater responsibility of food service programs
• Growing importance of education
• Celebrity involvement

• Onsite foodservice is found is many recreation venues including:
– Stadiums
– Arenas
– Museums
– National Parks
• Trend is to offer a wider variety of food in these venues

• The U.S. has some 2.3 million people in prison
• Foodservice is cost driven in this sector
• Privatization is creating more opportunities for contractors
• For foodservice managers, setting and challenges is often offset by competitive compensation

• Vending is in all segments of onsite foodservice
• Over 50% of all vending machines in the US are in B&I settings
• The variety of products and machines is growing and constantly improving
• Technology will dramatically change vending of the future