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 Current Conditions, Industry Structure, How Firms Operate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.
Call Preparation 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 input 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 multiple locations, employs 156 workers, and generates about $13.8 million annually.
- The food service contracting industry comprises about 3,400 companies, employs about 531,000 workers, and generates about $47 billion annually.
- The industry is highly concentrated; the top 20 firms account for 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, while small companies generate less than $100 million annually.
Industry Forecast
Food Service Contractors Industry Growth
Recent Developments
Jul 20, 2024 - Payrolls Grow in May
- Employment by food service contractors grew 3.8% in May compared to a year ago, while average wages jumped 7.6% over the same period to $21.33 per hour, according to the latest US Bureau of Labor Statistics data. Employment and wages have risen steadily since early 2021 as the US emerged from the pandemic and schools, restaurants, and businesses began reopening. Immigrant workers are an important source of labor for service industries and are more likely than US-born workers to work in service industry jobs. Immigrant workers made up 18.6% of the workforce in 2023, a new record, according to Bureau of Labor Statistics data.
- Food service contractors challenged by high food price inflation in recent years are finally getting some relief from rising food costs. The Consumer Price Index (CPI) declined 0.1% in June, the US Bureau of Labor Statistics reports. This comes after the CPI was unchanged in May and represents the first time since the start of the pandemic that there was a month-on-month decline, according to CNN. Over the last 12 months, the all-items index increased 3%. Food prices rose 0.2% in June versus May, while food-away-fron-home prices (restaurants) increased 0.4% for the month compared to a 0.1% increase for food-at-home (groceries) prices. For the 12 months ending in June, food-away-from-home prices increased by 4.1%, three points more than food-at-home prices.
- New nutrition guidelines for school meals finalized by the Biden administration in April, have many school lunch programs worried about rising costs and food waste, The New York Times reports. Under the rule, which took effect July 1, schools must limit the amount of added sugars in cereals and yogurts they serve beginning in the 2025-26 academic year, according to NYT. Also, schools must reduce sodium in lunches by 15% from current levels and in breakfasts by 10% by the 2027-28 school year. Students will still have access to chocolate and other flavored milk under the final rule, provided the beverages meet limits on added sugars. The strict guidelines will require menu changes, which school administrators worry could make the meals less appetizing – although healthier – for students. The new guidelines are designed to better align school meals with federal dietary standards.
- Labor will be a pressing challenge for college dining services in the years ahead, according to the National Association of College and Universities Food Services. The new NACUFS “Campus Dining: 2030 and Beyond” report warns that attracting and retaining student workers will continue to be an industry pain point and recommends food service providers explore the role of technology in mitigating labor shortages. A key finding, gathered from focus groups, is the use of technology, and robotics in particular. Examples include automated smoothie kiosks, robotic chefs, and smart vending options. Also, autonomous marketplaces using Amazon’s Just Walk Out technology eliminate the need for labor at the point of service and are popping up on more campuses. The report also cites the importance of culture and environment in attracting and retaining workers and the need to appeal to student labor with flexible work schedules and shorter shifts.
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