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
                                      Source: Vertical IQ and Inforum

                                      Recent Developments

                                      May 20, 2024 - Employment & Wages Continue to Climb
                                      • Employment by food service contractors rose 5.4% in March compared to a year ago, according to the latest US Bureau of Labor Statistics data. The industry has been on a hiring spree fueled by rising wages to attract workers. Average industry wages jumped 12.4% in March year over year to $21.54 per hour, a new high for the industry, BLS wage data show. Companies’ hiring efforts have paid off, with employment in the industry rebounding last year to surpass pre-pandemic levels. Despite the rise in employment and pay, many food service contractors say they’re struggling with a persistent labor shortage.
                                      • 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 will take effect July 1, schools will need to limit the amount of added sugars in cereals and yogurts they serve beginning in the 2025-26 academic year, according to NYT. Also, schools will need to 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.
                                      • A Long Island Hospital has launched a DoorDash-stye mobile app that lets patients order safe and nutritious meals using their smartphones or tablets, Food Service Director (FSD) reported in April. With more people accustomed to ordering food online, Stony Brook University Hospital’s food service provider, Stony Brook Medicine Distinguished Dining Services, adopted an app created by tech solutions provider CBORD that allows patients to order from the hospital dining menu. While there are 30 different diets (with expertly photographed food selections) that the app can filter through, it only displays items compliant with each patient’s diet and allergies, according to FSD. Nutrition information, including carb counts, is calculated, allowing patients to swap items when they reach their limit. Patients' families can also order meals for them from home.
                                      • 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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