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 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

                                      Recent Developments

                                      Nov 7, 2022 - Compass Group to Eliminate Gestation Crates
                                      • Responding to pressure from animal welfare activists, Compass Group recently announced it will adopt a more humane animal welfare policy. Specifically, the food service contractor has said it will transition to end gestation crates for pigs in its US supply chain by the summer of 2023. Gestation crates enclose mother pigs in tight spaces about seven feet by two feet — an area barely larger than the pig's body. The company’s new policy also includes protections for chickens raised for meat and a commitment to exclusively use eggs from hens that are not confined to cages. Gestation crates for mother pigs have been banned in 10 US states including California, Florida, and Michigan. Nearly 100 companies in the US have also committed to banning these crates, including Aramark, Nestlé, Campbell’s, and Kraft Heinz.
                                      • Colleges and universities struggling with staffing shortages are finding creative ways to recruit student workers including instituting “microshifts” that better suit students’ class schedules, Food Service Director (FSD) reports. By cutting food service shifts from four hours to two hours, the University of Illinois Urbana-Champaign was able to fully staff its dining hall operation. Students are paid $13.50 an hour, and if they are promoted to the student coordinator position, the pay is $15.50. The university uses scheduling software called WhenToWork that students can access through a mobile app or laptop and choose their preferred shifts every week, FDS reports.
                                      • Funding for pandemic-era free school meals expired in August 2022 just as school meal prices began to rise. In response, the Biden Administration and other food leaders called for the expansion of free school meals for all students during a White House Conference on Hunger, Nutrition and Health in September. Biden advocated for expanding free school meals over the next several years and said that offering free meals to an additional 9 million students by 2023 is part of his national strategy on hunger, nutrition and health. Advocates for universal free school meals say it would eliminate the stigma many students dealing with food insecurity face in the school lunch line. Previous attempts by the federal government to provide universal free meals failed. At the state level, California and Maine have both included funding in their state budgets to offer free school meals for all students, and several other states have earmarked funding to continue offering free meals for at least another school year.
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