Introduction to the Restaurant Industry

Restaurants are such a big part of our lives – we get coffee at the Dunkin drive-thru on the way to school or work, have lunch with friends at Panera or Chipotle, go on dates, celebrate birthdays and anniversaries, or order food for delivery for a cozy night in. We eat at restaurants at home and on vacation – sometimes, we even pick a vacation destination for the food. Many of us got our first jobs in the restaurant industry, and it is a vital part of our lives and the US economy.

The restaurant industry grew out of simple origins: as people traveled from their homes, going about their business, they often had a need or desire to eat or drink. Others were encouraged to meet this demand by supplying food and drink. As the interests of the public became more diverse, so too did the offerings of the food and beverage sector.

It is estimated that there are more than 749,000 restaurants in the US. According to the National Restaurant Association (NRA), the US restaurant industry is the nation’s second-largest private sector employer, with 15.7 million jobs and projected sales of more than $1 trillion in 2024. These numbers are expected to grow: 9 in 10 adults say they enjoy going to restaurants because they allow them to enjoy a favorite meal that has flavor and taste sensations they can’t easily replicate at home.^[1]

Many students are familiar with the sector through their workplace — restaurants are the largest employer of teenagers, providing job opportunities for nearly 2 million 16-19 year olds – or 35% of all working teens.^[2]

Types of Foodservice Providers

The increasing awareness and demand for organic, sustainable, local, or craft options, as well as special dietary needs in food and beverage, continue to challenge this industry. In addition, to better attract and serve a diverse array of diners, the food service industry now consists of a variety of segments.

There are two key distinctions: commercial foodservice, which comprises restaurant operations whose primary business is food and beverage, and non-commercial foodservice establishments where food and beverages are served but are not the primary business. It is made up of quick-service restaurants, full-service restaurants, catering, and drinking establishments. Below, we’ll look at each of these in more detail. But first, let’s classify restaurants by their ownership structure

Classifying Restaurants by Ownership Structure

Restaurant ownership is similar to hotel ownership in that there are independent, franchised, and corporate-owned entities.

Independent Restaurants

Independent restaurants are typically locally owned and operated by individuals or small partnerships, often just one, two, or three locations. These restaurants offer owners the greatest amount of creative freedom and operational control, allowing them to tailor their menu, decor, and overall concept to their unique vision. Independent restaurant owners can quickly adapt to local market trends and customer preferences, but they also bear the full brunt of financial risk and responsibility. Independents are the majority of restaurants in the US – the NRA estimates that 70% are single-unit operations.

Franchise Restaurants

Like hotels, franchise restaurants like Burger King and Applebee’s operate under a business model where independent owners (franchisees) purchase the rights to use the branding, recipes, and operational systems of an established restaurant brand (franchisor). This structure allows franchisees to benefit from the franchisor’s established reputation, marketing support, and standardized procedures. The franchisor typically provides extensive training and ongoing support to ensure consistency across all locations. While franchisees enjoy reduced risk due to the established brand and support network, they must adhere to strict guidelines and operational standards set by the franchisor. This can limit their ability to make independent business decisions and necessitates payment of initial franchise fees and ongoing royalties. Nonetheless, the franchise model has proven successful for many entrepreneurs seeking to enter the restaurant industry with a reliable framework and built-in customer base.

National (Corporate-Owned) Chains

National or corporate-owned restaurant chains – such as Chipotle, Shake Shack, and Starbucks – are managed and operated by a central corporate entity. These establishments often have multiple locations across various regions or countries, all controlled directly by the corporation. This ownership structure allows for a high degree of consistency in brand image, menu offerings, and customer experience, as all decisions are made at the corporate level. Corporate-owned chains benefit from economies of scale in purchasing, marketing, and logistics, leading to cost efficiencies that independent or franchise restaurants may not achieve. However, these chains must navigate the complexities of managing numerous locations, which can lead to challenges in maintaining quality and customer service standards. Additionally, the corporate structure often involves layers of management and bureaucracy, which can slow down decision-making and responsiveness to local market conditions. Despite these challenges, national chains often dominate the market due to their extensive resources and widespread brand recognition.

Classifying Restaurants by Service Type

Quick-Service Restaurants

Formerly known as fast-food restaurants, quick-service restaurants, or QSRs, include familiar names like McDonald’s, Subway, and Dunkin.  They make up approximately 33% of total food sales in the US and 48% of restaurants.^[4] This important segment of the food sector generally caters to both residents and visitors and is represented in areas that are conveniently accessed by both. Brands, chains, and franchises dominate the QSR landscape, but it also includes your favorite local deli and pizza shop. While the sector has made steps to move away from the traditional fast-food image and style of service, it is still dominated by food that is prepared and purchased quickly, and generally consumed quickly.

Convenience and familiarity are key in this sector. Examples of QSRs include:

• Drive-through locations
• Stand-alone locations
• Locations within retail stores
• Kiosk locations in shopping centers
• High-traffic areas, such as major highways or commuter routes

Fast-casual restaurants focus on higher quality ingredients than QSRs and provide made-to-order food in an environment that does not include table service. Customers usually order at a counter. The seating area is more upscale and comfortable. Examples would include Chipotle Mexican Grill, Panera, and Five Guys. 

Full-Service Restaurants

With nearly 33% of the market share,^[5] full-service restaurants — which provide table service, with waitstaff taking guest orders and bringing food and drinks to the table —  are perhaps the most fluid of the F&B operation types, adjusting and changing to the demands of the marketplace. Consumer expectations are higher here than with QSRs.^[6]  The menus offered are varied but, in general, reflect the image of the restaurant or consumer’s desired experience. Major segments include fine dining, family/casual, ethnic, and upscale casual.

Fine dining restaurants are characterized by highly trained chefs preparing complex food items that are exquisitely presented. Meals are brought to the table by experienced servers with sound food and beverage knowledge in an upscale atmosphere. The concept of fine dining has evolved over the years.  It was once mandatory to have table linens, fine china, crystal stemware, and silver-plate cutlery in order to be referred to as a fine dining establishment. Service was often very formal and reserved, with minimal personal interaction between guests and servers. The table was often embellished with fresh flowers and candles as well. Today, the best restaurants focus on the quality of preparation, presentation, and flavor of the food, utilizing the best and, where possible, local ingredients. Servers who are engaged, customer-centric, and well-informed are sought after by the best restaurants. In these businesses, the average check, which is the total sales divided by the number of guests served, is quite high (often reviewed with the cost symbols of three or four dollar signs- $ $ $ or $ $ $ $). Examples include national chains like Ruth’s Chris Steakhouse and Capitol Grille. Shadows on the Hudson and Henry’s on the Farm offer fine dining experiences here in the Hudson Valley.

Casual restaurants serve moderately-priced to upscale food in a more casual atmosphere. Casual dining comprises a market segment between fast-casual establishments and fine dining restaurants. Casual dining restaurants often have a full bar with separate bar staff, a larger beer menu and a limited wine menu. This segment is full of chains such as Chili’s, Outback, and Red Robin, as well as many independent restaurants in regional or local markets, such as Cosimo’s and Mill House Brewing Company in Poughkeepsie.

Family restaurants offer affordable menu items that span a variety of customer tastes. They also have the operational flexibility in menu and restaurant layout to welcome large groups of diners. An analysis of menus in family/casual restaurants reveals a high degree of operational techniques such as menu item cross-utilization, where a few key ingredients are repurposed in several ways. Both chain and independent restaurant operators flourish in this sector. Examples of chains in this category would be Golden Corral, Cici’s Pizza, and local restaurants like the Daily Planet and and the Red Line Diner.

Specialty Restaurants

Ethnic restaurants serve food and offer dining experiences that are representative of a specific ethnicity or nationality, often reflecting that of the owner or chef. The growth and changing nature of this sector reflects the acceptance of various ethnic foods within our communities. Ethnic restaurants generally evolve along two routes: toward remaining authentic to the cuisine of the country of origin or toward larger market acceptance through modifying menu items.^[7]The authenticity of the experience often drives the customer’s decision.  The driving force behind these operations is the Chef’s background, commitment to the quality of the product, innovative preparation mixed with exceptional technique, and knowledgeable service staff to bring it to the consumer. The ethnic category can include fine dining, casual, and quick-service restaurants. Some local examples include Tamarind, a fine-dining Indian restaurant in Poughkeepsie, Café con Leche, a casual restaurant serving Puerto Rican cuisine in Wappingers, and Chan’s Peking, a Chinese restaurant in Poughkeepsie.

Theme restaurants are dining establishments that create a unique and immersive experience by centering their decor, menu, and overall ambiance around a specific concept or theme. These restaurants often incorporate elaborate decorations, costumes, music, and even interactive elements to enhance the thematic experience for guests. The goal is to transport diners into a different world, providing not just a meal but a memorable and entertaining outing. An example of a theme restaurant is Rainforest Cafe, which simulates a tropical rainforest environment complete with lush vegetation, animatronic animals, and the sounds of rain and thunder, creating a captivating and family-friendly dining experience.

Celebrity-owned restaurants are dining establishments owned, co-owned, or heavily endorsed by famous individuals from various fields such as entertainment, sports, or fashion. These restaurants leverage the star power of their owners to attract diners, often incorporating elements of the celebrity’s persona or interests into the restaurant’s theme, menu, and decor. An example of a celebrity-owned restaurant is Nobu, co-owned by renowned chef Nobu Matsuhisa and actor Robert De Niro.

Though technically a part of the QSR category, cafes and coffee shops are a significant sector of the restaurant industry. Specializing in coffee, tea, light meals, and pastries, these establishments serve as social hubs where people can relax, work, or meet friends in a casual and comfortable atmosphere. Known for their cozy interiors and inviting ambiance, cafes and coffee shops often feature free Wi-Fi, comfortable seating, and a welcoming environment. They range from small, independently owned local spots like Bank Square Coffeehouse in Beacon or Poughkeepsie’s Crafted Kup, to large international chains like Starbucks. This sector has seen significant growth, driven by the increasing global demand for specialty coffee and tea, as well as a rising trend toward casual dining and community-centric spaces. With a focus on quality beverages and light fare, cafes and coffee shops have become essential fixtures in urban and suburban landscapes, appealing to a wide range of customers seeking both convenience and a place to unwind.

Restaurant Customers

Key Components of the Restaurant Industry

Several key components contribute to a dining establishment’s success and appeal. Understanding and excelling in areas such as menu development, beverage service, customer experience, and marketing are crucial for creating a thriving and competitive restaurant.

Menu Development

According to the Auguste Escoffier School of Culinary Arts, “A menu not only helps answer these questions but also gives diners a deeper understanding of what they can expect out of their dining experience. By spending the time to carefully create a restaurant menu, this seemingly simple piece of paper can effectively convey the restaurant’s quality standards, dining experience, and ambiance.” ^[8] Menu development is a critical component of the restaurant industry, involving the creation and planning of dishes that define a restaurant’s identity and appeal to its target market. A well-designed menu balances creativity and profitability, offering a mix of signature items and customer favorites while considering food costs and kitchen capabilities. It also reflects current culinary trends and seasonal availability, ensuring freshness and variety. Effective menu development requires a deep understanding of customer preferences, dietary trends, and competitor offerings. By continuously refining and updating the menu, restaurants can keep their offerings fresh and exciting, attracting new patrons and retaining regular customers.

Beverage Service

Beverage service is another vital aspect, encompassing everything from coffee and tea to alcoholic drinks like wine, beer, and cocktails. An appealing beverage menu can significantly enhance the dining experience, complementing the food offerings and increasing overall revenue. Craft cocktails, artisanal sodas, and specialty coffees are popular trends that draw in customers looking for unique and high-quality drink options. Proper staff training in beverage preparation and service is essential to ensure consistency and quality. Additionally, understanding the principles of pairing beverages with food can elevate the dining experience, encouraging higher spending and customer satisfaction.

Customer Service and Experience

Exceptional customer service is the cornerstone of a successful restaurant. It encompasses all interactions between staff and guests, from the moment they make a reservation to when they leave the establishment. High-quality service creates a welcoming atmosphere, encourages repeat business, and generates positive word-of-mouth. Staff training in areas such as hospitality, conflict resolution, and cultural sensitivity is crucial for maintaining high service standards. Moreover, personalizing the dining experience, such as remembering regular customers’ preferences or celebrating special occasions, can significantly enhance customer satisfaction and loyalty.

Restaurant Marketing and Branding

Effective marketing and branding are essential for attracting and retaining customers in the competitive restaurant industry. A strong brand identity, which includes the restaurant’s name, logo, design, and overall concept, helps to distinguish it from competitors and creates a memorable impression on customers. Leveraging online review platforms and maintaining a strong online presence through a user-friendly website and active social media profiles can drive traffic and build a positive reputation. Engaging with customers through various marketing channels and providing consistent, high-quality experiences are key to building a loyal customer base.

Trends and Emerging Issues in the Restaurant Industry

One of the newest trends is the “experience”. Customers now expect an authentic, interactive experience while patronizing our restaurants. It is no longer enough to merely provide a great product and service. The experience must also be present in everything we do.

Evolving Consumer Food Preferences

Menus and food preferences are always evolving. Today, guests are more knowledgeable about food and more adventurous than ever before. This trend is partly due to the proliferation of television programming specifically tailored to food and celebrity chefs (see the Food Network for example). In line with this trend, we now see more adventurous items on today’s menus, such as bone marrow gratin and pig’s blood pappardelle, just to name a few. The National Restaurant Association highlights that we now see a focus on the sustainability, quality, wholesomeness, and calorie content of menu offerings.  “Consumers like spending their money locally,” says Larry Reinstein, president and CEO of LJR Hospitality Ventures. “It gives them a good psychological feeling. Not only do they feel like they’re helping their communities, they also learn more about where the food and drink they order comes from.”^[9]

Tipping Culture

A hot topic in restaurants is whether or not front-of-house employees should be tipped or be paid a higher hourly wage. In 2015, Danny Meyer, founder and former CEO of Union Square Hospitality Group (which includes Union Square Café, Gramercy Tavern, and others) introduced a “hospitality included” policy in select restaurants. Mr. Meyer sought a way to achieve greater pay equity between front-of-house and back-of-house employees. However, this policy was reversed in part due to the global pandemic and its impact on restaurants. Other restaurants have experimented with no-tipping policies with mixed results.

Sustainable Practices

In hand with plant-based diets is the continued drive to reduce our impact on the environment through recycling, composting, donating leftover food, or water and energy conservation. A 2021 survey by the National Restaurant Association and the American Culinary Federation identified the ten sustainability trends chefs believe are important to consumers:^[10]

1. Sustainable, reusable, and recyclable packaging
2. Packaging that maintains food quality and ensures the food travels well during delivery
3. Packaging that retains temperature—hot food hot, cold food cold
4. Zero waste/sustainability
5. Immunity-boosting snacks
6. Menu streamlining, featuring fewer items and SKUs
7. Immunity-boosting/functional ingredients
8. Plant-based sandwiches
9. Food security/tamper-proof packaging
10. Alternative sweeteners, like maple and coconut sugars

Restaurant Technology

Technology continues to play an ever-increasing role in the sector. It is most noticeable in QSRs, where many functions are automated in both the front and back of the house. In the kitchen, temperature sensors and alarms determine when fries are ready and notify kitchen staff. Out front, remote printers or special screens ensure the kitchen is immediately notified when a server rings in a purchase. WiFi enables credit/debit card hand-held devices to be brought directly to the table to process transactions, saving steps back to the serving station.

Consumers are interacting with restaurants using their smartphones and tablets in various ways. We are seeing more consumers use rewards, claim special deals, and make reservations through an app or website.

Other trends include automated services such as that offered by Open Table, which provides restaurants with an online real-time restaurant reservation system so customers can make reservations without speaking to anyone at the restaurant. And now smartphone apps will tell customers what restaurants are nearby or where their favorite chain restaurant is located.

Taking It to the Street

Street food has always been a component of the food service industry in most big cities. These operations are often run by a single owner/operator or with minimal staff and serve hot food that can be eaten while standing. Food trucks allow owners the opportunity to share their original food concepts with a broader audience, along with a high degree of flexibility in how they operate and connect with their community. In 2022, food trucks represented $1.2 billion share of the restaurant market in the US.^[11]

Conclusion

Food and beverage, without question, is a key component of the hospitality experience. Moreover, food service establishments are a dominant player in the U.S. economy. As this chapter highlights, there is a great variety in establishments and segments within commercial food service. These different segments provide unique experiences for customers and guests, and they offer a wealth of career options for those seeking a career in food and beverage. Foodservice is a challenging and exciting business, and we hope this chapter has provided a useful overview of the breadth of diversity in food service establishments.