ABSTRACT
A significant segment of the food industry is the food service sector: bars, restaurants, cafeterias, delivery pizzas, college dining halls, and caterers, all the places that prepare and serve ready-to-eat food for us to consume. While the basic economics of the food service industry is no different than that of any other food processor, there are some special features of food service that warrant a separate chapter. Labor issues are especially important. Customer service gets more attention because a small restaurant probably has many more different customers in a year than does Campbell's Soup. Pricing rules are not as precise, partly owing to less managerial ability at many food service establishments, but also owing to the impracticability of continually adjusting prices to keep up with ingredient costs (and sometimes even recipes) that are often changing on a daily basis and to the fact that customers complain fiercely when menu prices are increased. Finally, food service marketing plans must be designed to appeal to people directly, while large food processors market to people, wholesalers, and retailers. A restaurant does not need to deal with a supermarket chain over its shelf space, but it is producing a final good, so its products cannot hide from consumers. Consumer loyalty must be earned continually and with as few missteps as possible.
