Food Service Contractors

Industry Profile Report

Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters

Industry Overview Industry Structure, How Firms Opertate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.

Call Preparation Quarterly Insight, Call Prep Questions, Industry Terms, and Weblinks.

Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.

Industry Profile Excerpts

Industry Overview

The 3,400 food service contractors in the US provide food and beverage services to institutional, governmental, commercial, or industrial locations on a contract basis. Companies typically serve customers under long term contracts, although some provide catering services for one-time events. Key customer segments include colleges, hospitals, long-term care facilities, schools, business and industrial (B&I), correctional facilities, recreational facilities, and military facilities. The industry is highly concentrated; the top 20 firms account for about 82% of industry sales.

Variable Costs

Food service contractors are vulnerable to variations in costs, particularly food and labor expenses.

Sustainability

Food service providers are embracing environmental responsibility through a variety of methods, including local sourcing and waste reduction programs.

Industry size & Structure

The average food service contractor operates out of a single location, employs 106 workers, and generates about $14-15 million annually.

    • The food service contracting industry consists of about 3,400 companies that employ about 363,900 workers and generate about $49 billion annually.
    • The industry is highly concentrated; the top 20 firms account for about 82% of industry sales.
    • Large companies include Compass Group, Sodexo, and Aramark. Some large companies are owned by foreign corporations, have global operations, and generate revenue in the billions of dollars. Medium size companies generate between $100 million and $1 billion annually. Small companies generate less than $100 million annually.
                                      Industry Forecast
                                      Food Service Contractors Industry Growth
                                      Source: Vertical IQ and Inforum

                                      Coronavirus Update

                                      Apr 28, 2022 - Food Prices Skyrocket
                                      • • Food prices have been on the rise since mid-2021, but they are expected to increase further amid the Ukraine war and rising interest rates. On a seasonally adjusted basis, US food manufacturers’ prices rose 1.5% in March 2022 compared to the prior month, but unadjusted food prices grew 14.6% over March 2021, according to the US Bureau of Labor Statistics. While foodservice firms have tended to increase their prices as food costs rise, firms and their customers are not likely to get much relief. Food-away-from-home prices are expected to rise between 5.5% and 6.5% for all of 2022 compared to 2021, according to the food price outlook released in March by the US Department of Agriculture.
                                      • • In February 2022, 6% of accommodation and food services workers quit or left their jobs, the highest percentage of any US industry sector. In speaking about the overall level of quits in February, Daniel Zhao, senior economist at the career site Glassdoor, said, “These quits are still extremely high, and that shows the Great Resignation is still in full swing.”
                                      • • New COVID-19 cases are decreasing nationally, leading to increased demand for food services. In late April 2022, the CDC announced that according to the agency’s research, about 60% of the US population had been infected with COVID-19 by February 2022. Some medical experts suggest the high rate of infection and the resulting increase in immunity among the US population may signal a new phase where infections cause less and less severe illness.
                                      • • To cope with labor shortages, food services providers and restaurants are doing more than just offering better wages to retain their workers, according to Bar & Restaurant. Some have invested in technology, including new point-of-sale (POS) systems with handheld devices and QR code ordering kiosks to ease team member workloads. Others offer bonuses for employment referrals or have created clear upward mobility tracks.
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