History and Types of Restaurants

PAMANTASAN NG LUNGSOD NG MAYNILA PLM Business School Department of Hospitality Management

ITM 1204 MICRO PERSPECTIVE OF TOURISM AND HOSPITALITY

Module 6: FOOD AND BEVERAGES SECTOR MODULE OBJECTIVES

By the end of the module students will: 1. 2. 3. 4. 5. 6. 7. 8.

I. History of the Food and Beverage Service

trace the history of the food and beverage industry; describe the different types of restaurants; explain the importance of franchising to the restaurant industry; discuss restaurant profitability and calculate food cost percentage, gross profit, and average guest check; calculate the restaurant’s breakeven point; explain the role of the menu in a restaurant’s success; differentiate airline catering from restaurant catering; and discuss restaurant promotion.

In early history, there was much evidence that certain groups of people cooked together in big groups and that the early inns provided a crude menu. In the Roman era, there were some establishments that offered sausage or roast meat, bread, and a cup of wine. The forerunner of the modern restaurant that provides hot food and drink developed in Rome. Many of the early restaurants were in the cities, near temples and government buildings. After the fall of the Roman Empire, the manors and castles provided food to large numbers of people. The early inns provided bread and wine to travelers. In 1200, public cook shops were opened in London which offered precooked takeout food. The royal families of Europe introduced cutlery, table linen, crystal glasses, new foods such as turkey and potato, and the roadside tavern. In the sixteenth century, British inns and taverns began to serve one meal a day at a fixed time and price and at a common table. The meal was known as ordinary, and the dining rooms were called ordinaries. The most famous ordinary in London was the Castle and Lloyd's which was the meeting place for merchants and ship owners. in the seventeenth century, the ordinaries became fashionable clubs and gambling places as well as centers for political activities. The word "restaurant" was used in the late eighteenth century for a Paris dining room serving light dishes. 1

In the United States, taverns and inns were very similar to those in England. A famous tavern in New York was Fraunces Tavern. In 1834, the famous Delmonico's was opened in New York. In the early 1900s, several events that were significant to the food industry occurred. The hamburger was first served in 1904 at the St. Louis World's Fair. The first root beer stand was founded by Roy Allen and Frank Wright. The Second World War brought many changes to the American public, People became richer, the automobile made them more mobile, and they shifted to the suburban areas of cities, In the 1960s, fast-food establishments emerged. At present, modern popular cuisine including French, Chinese, Mexican, and Japanese have become common in most cities. The role food plays in tourism may not be a direct but an indirect attraction. II. Types of Restaurants

The following are the different types of restaurants: 1. Family or Commercial Restaurants Family-style restaurants offer a wide menu of "meat and potato" selections with a price range that appeals to an average family income. They serve beer and wine if they have a liquor license. The decor is bright. A combination of counters, tables, and booths is common. Parking is necessary since customers usually arrive by car. Family restaurants are normally located near a residential area and a highway. The operating hours are usually from early evening to midnight. The staff are friendly and efficient. The initial investment is medium to high. 2. Coffee Shops Coffee shops are characterized by a fast-food service. The decor is simple, and prices are relatively low. it is usually located in an office building or shopping mall. The rent is high. The staff are often minimally trained. The peak periods of a coffee shop are lunch and coffee breaks. Operating hours are from early morning to early evening, A takeout service may be offered. 3. Cafeterias Cafeterias are usually located in shopping centers and office buildings. Self-service is typical with limited 2

menus of soups, entrees, desserts, and beverages. Cafeterias often require a large preparation area. Their staff are minimally trained. Beer and wine may be offered. Fast service is necessary to handle the traffic volume. The operating hours will depend on the location as school, office building, airport, or highway. 4. Gourmet Restaurants Gourmet restaurants generally require a higher initial investment than other types of restaurants because they require an expensive ambience and decor. They cater to those who want a higher standard and are willing to pay the price. Cafeterias often require a large preparation area. Their staff are minimally trained. Beer and wine may be offered. Fast service is necessary to handle the traffic volume. The operating hours will depend on the location as school, office building, airport, or highway. The prices are higher at gourmet restaurants because of the high investment required. The menu and wines are carefully planned, and the staff are highly trained. The evening period is the main emphasis. The location is important but may not be critical since discriminating diners look for quality gourmet restaurants. Word-of-mouth advertising and repeat business are keys to success. 5. Ethnic Restaurants Ethnic restaurants feature the food of a specific region or country. They can be Chinese or classical French cuisine. The decor usually has an ethnic motif. In order to be successful, ethnic restaurants must serve authentic cuisine of the region or country they are featuring and those who prepare the food must be well-trained and knowledgeable. Prices range from budget to high. Beer, wine, and liquor may or may not be served. The initial investment is high because of the decor and staff training. The location is variable. Operating hours are in the evening. 6. Fast-food Restaurants Fast-food restaurants have increased in the past 20 years as people have become more mobile. Franchising is common in this type of restaurant. The menu is limited with low prices. Because of low 3

prices, many customers patronize fast-food restaurants. Fast-food restaurants operate for long hours and generally for seven days a week. Alcoholic beverages are not offered. A well-trained staff is required for franchise fast-food operation in which the franchisor sets standards of service and food quality that must be maintained at all times. Fast-food chains have been successful in the past two decades because they have offered a limited menu. This has given them greater purchasing power, less waste, and lower labor costs by using disposable paper, plastic, and styrofoam containers which save dishwashing costs. These restaurants are pioneers in establishing more efficient food-operating systems. 7. Deli Shops Deli shops provide delicatessen food service, combining traditional delicatessen cold meats and cheese with takeout sandwiches, salads, and similar items. Some deli shops have limited seating capacity. They are usually located in shopping areas or office buildings and are open from 9:00 AM to 5:00 PM or 9:00 PM. Capital investment is low. Deli shops have low labor costs because only one or two owners and employees are involved. 8. Buffet Restaurants Buffet restaurants are established on a completely self-serve basis. However, if liquor, beer, and wine are offered, table and service for these beverages are provided. The food buffet is usually an "all you can eat" hot and cold food for one price. Food preparation and service staff are kept to a minimum, Buffet restaurants cater to the family and therefore offer reasonable prices. They are open from 5:00 PM to 11:00 PM. 9. Transportation Restaurants There is a natural link between transportation and food service. Several restaurants are generally found along auto and bus transportation routes. They are also found at bus, rail, and air transportation buildings, as well as on transportation vehicles as trains and ships. Some transportation restaurants cater to tour groups, particularly bus tour groups. These restaurants can be quite profitable if the market can be maintained. They require special cafeteria or buffet-type facilities so that arriving groups can be served quickly and continue their journey. 4

III. Franchising

Franchised restaurants are a major component of the food service industry, particularly in the fast-food sector. The reasons for the popularity of franchising in the restaurant industry are very similar to those in the hotel industry. Franchises are beneficial to the franchisees because they provide operational, training, layout and design assistance, location assistance, managerial expertise, group purchasing power, and most importantly, the identification of a well-known brand supported by regional, national, and international advertising and promotion. Franchised restaurants can easily get financing from lending institutions than independents. In the early days of franchising, the common practice was to sell individual franchise rights for a single restaurant. At present, a regional franchise has become popular with franchisees and franchisors. A regional franchise allows a franchisee to develop multiple outlets within a specific geographical area. The area could be a city, a state, a province, a major part of the country, or the whole country. For example, Wendy's in the United States gave private Canadian Country the territorial rights to all of Canada for Wendy's restaurant operations. Franchised restaurants include fast-food chains such as McDonald's, Kentucky Fried Chicken, Pizza Hut, A&W Root Beer, and Burger King. They also include dine-in types of restaurants such as Wendy's and Pizza Inn and carry-out establishments like Orange Julius. The fast-food franchise is the most common. Table-service restaurants such as Denny's Steak and Ale and Victoria Station, and buffet-style restaurants such as Bonanza are also franchised. These table-service and fast-food restaurants have spread from the United States to other countries throughout the world.

IV. Restaurant Profitability

Food Cost Percentage Food cost percentage is often used to measure a restaurant's marketing success. It is determined by dividing the food cost for a period (a day, a week, a month) by the sales for that same period and then multiplying it by 100. For example, if the cost of food for one month is $40,000 and sales is $100,000, the food cost would be: $40,000 x 100 = 40% $100,000 Many restaurant operators strive for a 40% food cost to make the restaurant more profitable. Gross Profit

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Gross profit is the selling price of an item less its food cost. Table 3 shows the importance of gross profit in comparing two menu items. Table 3. Gross Profit of Two Menus Item 1 2

Cost Price $4 $1

Selling Price $8 $4

Cost Percentage 50% 25%

Gross Profit $4 $3

In this table, it would be better to sell item 1 rather than item 2 since item 1 has a higher cost percentage and a higher gross profit; hence, a contribution to net profit than item 2. For each of item 1 sold 50% food cost, there is a $4 gross profit compared with $3 with item 2. Labor Costs Labor costs are controlled by expressing them as a percentage of sales on a daily, weekly, or monthly basis and comparing the actual cost with the standard desired. Instead of treating labor costs as separate from food costs, many successful restaurants look at these two as a combined cost. For instance, they set a standard of 75% above in which food costs plus labor costs must not increase. As long as the operation maintains the combined cost below this level, the restaurant will be profitable. In a large restaurant, the organization of the labor force is important to labor cost control. The food service structure is illustrated in Figure 4.

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Figure 4. Food Services Structure Source: International Hotel Development Average Guest Check Another profitability measure used in restaurants is the average guest spending or average check. Average guest spending is calculated by dividing the total revenue received for a particular period (a day, a week, a month or a year) by the total number of guests served during that period. For example, if 350 guests are served dinner and the total revenue received is $3,610, the average spending will be: Breakeven Point Breakeven is that point at which business will make neither a profit nor a loss. The operation for determining the breakeven point is: __Fixed costs__ Contribution margin Fixed costs are those costs that remain the same regardless of the volume of business. Examples are salaries, interest, depreciation, insurance rent, and the like. The contribution margin is average check less variable costs. For example, if a restaurant has an annual fixed cost of $125,000 and an average guest spending of $10.00 and its variable cost such as food, labor, and others is 75% of revenue or $7.50% guest served, its breakeven point is: $125,000 = $50,000 $2.50 The contribution margin is average check less variable costs or $2.50 less $7 .50. The breakeven number of customers is $50,000. The proof of this is: Total revenue: $50,000 x $10 = $500,000 Variable costs: $50,000 x $7.50 = $375,000 Fixed costs: $125,000 Profit or loss: 0 7

V. Menus

The menu is the basic planning document for a successful restaurant. Several aspects of the restaurant's operation depend on the menu. The menu contains what the restaurant offers, the range of offerings, as well as the selling prices. The menu must portray the style and theme of the restaurant. Thus, the menu's design, printing, size, and colors are important. The menu also determines the equipment needed and the investment required. In general, the more extensive the menu is, the more varied the needed equipment will be. If a restaurant sells only hamburgers, hotdogs, fries, and softdrinks, its required equipment will be less compared to those of a restaurant with 20 or 30 menu items which require different cooking methods and more specialized equipment. In addition, the menu identifies the labor costs of a restaurant. It can determine the number of staff required and the cost of staff training for food preparation and service. The more items are contained in the menu, the more complex the service will be. Lastly, the menu estimates the cost for uniforms, purchases, storage and space, and actual food costs. The menu also helps emphasize, by means of bolder prints, which menu items the restaurant would prefer customers to order.

Figure 5. Sample International Airline Menu 8

Figure 6. Sample International Airline Menu Airline Catering Airline companies spend billions of dollars every year for food purchases. The average cost per airline passenger is between $1 and $7 depending on the length of the journey. The amount is less for shorter trips, since passengers may be offered only a non-alcoholic beverage and a light snack. For longer trips in which two or three meals may be offered including free alcoholic beverages, the amount is higher. Around 3 to 4% of an airline's total costs is spent on food. Food Quality The main problem of airline companies is to cook the meal on the ground and serve it several hours later in an extraordinary dry cabin atmosphere, seven miles high, to different groups of people with their own food preferences, and whose main motivation is to travel rather than to eat. In 1992, airline passengers were served a sandwich and coffee from a vacuum flask on a flight from London to Paris. At present, particularly on long flights, passengers expect hot meals. 9

Logistics To produce hot meals, the airline companies have to prepare specifications for recipes, ingredients, cooking methods and temperatures, and labor for each flight These require a forecast using the actual passenger reservations for each flight including an allowance for standbys and last-minute reservations in order to have the correct raw materials, equipment, and food production staff for each shift. Preliminary meal counts are usually prepared from 24 to 72 hours ahead so that food supplies can be bought. Menus must be carefully selected for each flight to avoid serving the same meal to a passenger on two succeeding segments of a trip or on a round trip. In addition, trays and serving utensils and supplies must be .in the kitchen when the meal is prepared. Airplane Galleys The first airplane galley was designed in 1936 by Douglas for its DC-3. Meals prepared on the ground were kept hot or cold in insulated containers on the aircraft After World War Il, the introduction of larger airplanes enabled them to have ovens and refrigerators onboard in their galleys. The removable ovens are filled with hot food in the ground flight kitchen, moved to the aircraft, and then plugged into electrical outlets. Flight Kitchens The first airline flight kitchen was opened in the late 1930s near Washington D.C. Hoover Field airport by a gentleman named Marriott. He had a restaurant near the airport. He noticed that passengers would go to his restaurant to eat before boarding their flights because no meals were served in the airplane. He approached Eastern Air Transport, now known as Eastern Airlines, and offered to prepare lunch boxes in his restaurant for Eastern's passengers. Eastern agreed, so the first flight kitchen was established. At present, Marriott In-Flite Services has approximately 100 flight kitchens around the world which cater to 150 different airlines and serve 100 million meals a year. There is an ongoing trend at present in which Flight Kitchen operators lease their dining equipment from other firms. Some airline companies have their own flight kitchens while others contract with other airline 10

companies that are equipped with their own kitchens. Most of the airline companies turn over their catering services to outside caterers because airline kitchens are not large and efficient. VI. Difference Between Restaurant Catering

Airline

Catering

and

Airline catering is different from restaurant catering because in the latter, the cooks can make lastminute adjustments. For example, a steak might be prepared in the flight kitchen to be accompanied by a sauce and vegetables to be served two hours later. During this time, it must be kept hot. if there is flight delay of one hour, the steak will be stringy, the sauce will be congealed, and the vegetables will be mushy. In an ordinary restaurant, a meal like this will not be served but on an airline, the serving crew usually has no other choice but to serve it. In airline catering, the logistics are very complex, but airlines exert great efforts to serve good meals to the passengers. They even respond to the needs of passengers on special diets if given enough notice.

VII. Restaurant Promotion

Chapter Activities

REFERENCES

Many restaurants advertise their menu on newspapers. Local newspaper advertisements are used by most restaurants as a major form of external promotion. Several restaurants advertise in the yellow pages of the local telephone directory; some use local radio or television stations. Most popular restaurants and national restaurant chains advertise in airline in-flight magazines, consumer travel magazines, and travel trade publications. Many restaurants try to foster good relations with nearby hotel employees such as front office staff, bell desk personnel, and doormen because they are often asked by hotel guests to recommend good nearby restaurants. Good public relations and word-ofmouth advertising generate a lot of business. 1. Evaluate a particular restaurant. List down its weaknesses. Decide on what actions you would take to overcome its weaknesses. 2. Create a restaurant concept. Discuss its main elements. 3. Research on the tactics used by restaurant owners to increase profitability. Romeo D. Lim, Micro Perspective of Tourism and Hospitality, Mindshapers Company, Inc., 2019 Micro Perspective of Tourism and Hospitality, 3G E-Learning LLC, 2019 Zenaida Lansangan-Cruz, Micro Perspective of Tourism and Hospitality, REX Bookstore, 2019

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