Read Chapter 4 - Food and Beverage Services

Chapter 4 - Food and Beverage Services

Learning Outcomes

• Describe the origins and significance of the food and beverage sector
• Relate the importance of the sector to the Canadian economy
• Explain the various types of food and beverage providers
• Discuss differing needs and desires of residents and visitors in selecting a food and beverage provider
• Examine factors that contribute to the profitability of food and beverage operations
• Discuss key issues and trends in the sector including government influence, health and safety, human resources, and technology

Overview

According to Statistics Canada, the food and beverage sector comprises “establishments primarily engaged in preparing meals, snacks and beverages, to customer order, for immediate consumption on and off the premises” (Government of Canada, 2012). This sector is commonly known to tourism professionals by its initials as F&B.

The food and beverage sector grew out of simple origins: as people travelled 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.

In 2014, Canadian food and beverage businesses accounted for 1.1 million employees and more than 88,000 locations across the country with an estimated $71 billion in sales, representing around 4% of the country’s overall economic activity. Many students are familiar with the sector through their workplace, because Canada’s restaurants provide one in every five youth jobs in the country — with 22% of Canadians starting their career in a restaurant or foodservice business. Furthermore, going out to a restaurant is the number one preferred activity for spending time with family and friends (Restaurants Canada, 2014a).

While there are many ways to analyze the sector, in this chapter, we take a market-based, business-operation approach based on the overall Canadian market share from the Restaurants Canada Market Review and Forecast (Restaurants Canada, 2014b). The following sections explore the types of foodservice operations in Canada.

There are two key distinctions: commercial foodservice, which comprises 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.

Let’s start with the largest segment of F&B operations, the commercial sector.

Commercial Operators

Commercial operators make up the largest segment of F&B in Canada with just over 80% market share (Restaurants Canada, 2014b). It is made up of quick-service restaurants, full-service restaurants, catering, and drinking establishments. Let’s look at each of these in more detail.

Quick-Service Restaurants

Formerly known as fast-food restaurants, quick-service restaurants, or QSRs, make up 35.4% of total food sales in Canada (Restaurants Canada, 2014b). This prominent portion 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. While the sector has made steps to move away from the traditional fast-food image and style of service, it is still dominated by both fast food and food fast; in other words, food that is prepared and purchased quickly, and generally consumed quickly.

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

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

Full-Service Restaurants

With 35% of the market share (Restaurants Canada, 2014b), full-service restaurants 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 (Parsa, Lord, Putrevu, & Kreeger, 2015). 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.

A rhubarb pavlova with local Pemberton strawberries is served at Araxi Restaurant + Bar, a fine dining establishment in Whistler.

Fine dining restaurants are characterized by highly trained chefs preparing complex food items, exquisitely presented. Meals are brought to the table by experienced servers with sound food and beverage knowledge in an upscale atmosphere with table linens, fine china, crystal stemware, and silver-plate cutlery. The table is often embellished with fresh flowers and candles. In these businesses, the average cheque, which is the total sales divided by number of guests served, is quite high (often reviewed with the cost symbols of three or four dollar signs- $ $ $ or $ $ $ $).

Bishop’s in Vancouver is one of BC’s best known and longest operating fine dining restaurants. Since opening in 1985, this 45-seat restaurant has served heads of state including Bill Clinton and Boris Yeltsin, and has won awards including the Best of Vancouver. John Bishop was awarded the Governor General’s Award in 2010 (Georgia Straight, 2015).

Family/casual restaurants are characterized by being open for all three meal periods. These operations 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. Popular chain examples in BC include White Spot, Ricky’s All Day Grill, Boston Pizza, and The Old Spaghetti Factory. Independents include the Red Wagon Café in Vancouver, the Bon Voyage Restaurant near Prince George, and John’s Place in Victoria.

Ethnic restaurants typically reflect the owner’s cultural identity. While these restaurants are popular with many markets, they are often particularly of interest to visitors and new immigrants looking for a specific environment and other people with whom they have a shared culture. Food is often the medium for this sense of belonging (Koc & Welsh, 2001; Laroche, Kim, Tomiuk, & Belisle, 2005).

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 (Mak, Lumbers, Eves, & Chang, 2012).

Upscale casual restaurants emerged in the 1970s, evolving out of a change in social norms. Consumers began to want the experience of a fun social evening at a restaurant with good value (but not cheap), in contrast to the perceived stuffiness of fine dining at that time. These restaurants are typically dinner houses, but they may open for lunch or brunch depending on location. Examples in BC include the Keg, Earls, Cactus Club, Brown’s Social House, and Joey Restaurants.

Catering and Banqueting

Catering makes up only 6.8% of the total share of F&B in Canada (Restaurants Canada, 2014b) and comprises food served by catering companies at banquets and special events at a diverse set of venues. Note that banqueting pertains to catered food served on premise, while catering typically refers to off-premise service. At a catered event, customers typically eat at the same time, as opposed to restaurant customers who are served individually or in small groups.

Catering businesses (whether on-site or at special locations) are challenged by the episodic nature of events, and the issues of food handling and food safety with large groups. Catering businesses include:

• Catering companies
• Conference centres
• Conference hotels
• Wedding venues
• Festival food coordinators

Trends and Issues

In addition to having to focus on the changing needs of guests and the specific challenges of their own businesses, food and beverage operators must deal with trends and issues that affect the entire industry. Let’s take a closer look at these.

Government Influence

Each level of government affects the sector in different ways. The federal government and its agencies have influence through income tax rates, costs of employee benefits (e.g., employer share of Canada Pension Plan and Employment Insurance deductions), and support for specific agricultural producers such as Canadian dairy and poultry farmers, which can lead to an increase in the price of ingredients such as milk, cheese, butter, eggs, and chicken compared to US prices (Findlay, 2014; Chapman, 1994).

Provincial governments also impact the food and beverage sector, in particular with respect to employment standards; minimum wage; sales taxes (except Alberta); liquor, wine, and beer wholesale pricing (Smith, 2015); and corporate income tax rates.

Municipal governments have an ever-increasing impact through property and business taxes, non-smoking bylaws, zoning and bylaw restrictions, user fees, and operating hours restrictions.

Technology Trends

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 of house and back of 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.

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 (Open Table, 2015). And now smartphone apps will tell customers what restaurants are nearby or where their favorite chain restaurant is located.

Conclusion

The food and beverage sector is a vibrant and multifaceted part of our society. Michael Hurst, famous restaurateur and former chair of the US National Restaurant Association, championed the idea that all guests should be received with the statement “Glad you are here” (Tripp, 1992; Marshall 2001). That statement is the perfect embodiment of what F&B is to the hospitality industry — a mix of service providers who welcome guests with open arms and take care of their most basic needs, as well as their emotional well-being.

The social fabric of our country, its residents, and visitors will change over time, and so too will F&B. What will not change in spite of how we divide the segments — into tourists or locals — is that the sector is at its best when food and beverages are accompanied by a social element, extending from your dining companions to the front and back of the house.

So far, we have covered the transportation, accommodation, and food and beverage sectors. In the next two chapters, we’ll explore the recreation and entertainment sector, starting with recreation in Chapter 5.

Key Terms

• Assets: items of value owned by the business and used in the production and service of the dining experience
• Average cheque: total sales divided by number of guests served
• Back of house: food production areas not accessible to guests and not generally visible; also known as heart of house
• BC Restaurant & Foodservices Association (BCRFA): representing the interests of more than 3,000 of the province’s foodservice operators in matters including wages, benefits, liquor licenses, and other relevant matters
• Beverage costs: beverages sold in liquor-licensed operations; this usually only includes alcohol, but in unlicensed operations, it includes coffee, tea milk, juices, and soft drinks
• Captured patrons: consumers with limited selection or choice of food or beverage provider given their occupation or location
• Commercial foodservice: operations whose primary business is food and beverage
• Cross-utilization: when a menu is created to make multiple uses of a small number of staple pantry ingredients, helping to keep food costs down
• Dine-and-dash: the term commonly used in the industry for when a patron eats but does not pay for his or her meal
• Ethnic restaurant: a restaurant based on the cuisine of a particular region or country, often reflecting the heritage of the head chef or owner
• Family/casual restaurant: restaurant type that is typically open for all three meal periods, offering affordable prices and able to serve diverse tastes and accommodate large groups
• Fine dining restaurant: licensed food and beverage establishment characterized by high-end ingredients and preparations and highly trained service staff
• Food and beverage (F&B): type of operation primarily engaged in preparing meals, snacks, and beverages, to customer order, for immediate consumption on and off the premises
• Food cost: price including freight charges of all food served to the guest for a price (does not include food and beverages given away, which are quality or promotion costs)
• Food primary: a license required to operate a restaurant whose primary business is serving food (rather than alcohol)
• Foodie: a term (often used by the person themselves) to describe a food and beverage enthusiast
• Front of house: public areas of the establishment; in quick-service restaurants, it includes the ordering and product serving area
• Full-service restaurants: casual and fine dining restaurants where guests order food seated and pay after they have finished their meal
• Liquor primary license: the type of license needed in BC to operate a business that is in the primary business of selling alcohol (most pubs, nightclubs, and cabarets fall into this category)
• Non-commercial foodservice: establishments where food is served, but where the primary business is not food and beverage service
• Operating supplies: generally includes reusable items including cutlery, glassware, china, and linen in full-service restaurants
• Pop-up restaurants: temporary restaurants with a known expiry date hosted in an unusual location, which tend to be helmed by a well-known or up-and-coming chef and use word-of-mouth in their promotions
• Primary costs: food, beverage, and labor costs for an F&B operation
• Profit: the amount left when expenses (including corporate income tax) are subtracted from sales revenue
• Quick-service restaurant (QSR): an establishment where guests pay before they eat; includes counter service, take-out, and delivery
• Restaurants Canada: representing over 30,000 food and beverage operations including restaurants, bars, caterers, institutions, and suppliers
• Revenue: sales dollars collected from guests
• Third space: a term used to describe F&B outlets enjoyed as “hang out” spaces for customers where guests and service staff co-create the experience
• Tip-out: the practice of having front-of-house staff pool their gratuities, or pay individually, to ensure back-of-house staff receive a percentage of the tips
• Upscale casual restaurant: emerging in the 1970s, a style of restaurant that typically only serves dinner, intended to bridge the gap between fine dining and family/casual restaurants