Chapter 6 – The Restaurant Business

Learning Objectives:
At the end of the chapter, you are expected to:
1. Describe the different characteristics of chain and independent restaurants.
2. Identify some of the top chain and independent restaurants.
3. List the classifications of restaurants.
4. Differentiate characteristics of chain and independent restaurants.

Restaurants are a vital part of our everyday lifestyles; because we are a

society on the go, we patronize them several times a week to socialize, as well as to
eat and drink. Restaurants offer a place to relax and enjoy the company of family,
friends, colleagues, and business associates and to restore our energy level before
heading off to the next class or engagement. Actually, the word restaurant derives
from the word restore.
As a society we spend an increasing amount, approaching 50%, of our money
away from home. Restaurants are a multibillion-dollar industry that provides
employment and contributes to the nation’s social and economic well-being.
In this new millennium, we are seeing culinary education setting the pace for
dining exploration.7 As you prepare for a career in the hospitality industry, you will
find it imperative that you develop a strong culinary foundation. Within the structure
of this you will need to develop cooking skills, strong employability traits, people
skills, menu development skills, nutrition knowledge, sanitation/safety knowledge,
accounting skills, and computer skills.
CLASSIFICATION OF RESTAURANTS
There is no single definition of the various classifications of restaurants,
perhaps because it is an evolving business. Most experts would agree, however, that
there are two main categories: independent restaurants (indies) and chain
restaurants. Other categories include designations such as fine dining, casual dining
and dinner house restaurants, family, and quick-service restaurants. Some
restaurants may even fall into more than one category—for instance, a restaurant
can be both quick service and ethnic, such as Taco Bell.
INDEPENDENT RESTAURANTS
This are typically owned by one or more owners, who are usually involved in
the day-to-day operation of the business. Even if the owners have more than one
store (restaurant-speak for a “restaurant”), each usually functions independently.
These restaurants are not affiliated with any national brand or name. They offer the
owner independence, creativity, and flexibility, but are generally accompanied by
more risk. For example, the restaurant may not be as popular as the owners hoped it
would be, the owners lacked the knowledge and expertise necessary for success in
the restaurant business, or the owners did not have the cash flow to last several
months before a profit could be made. You only have to look around your
neighborhood to find examples of restaurants that failed for one reason or another.
CHAIN RESTAURANTS
This are a group of restaurants, each identical in market, concept, design,
service, food, and name. Part of the marketing strategy of a chain restaurant is to
remove uncertainty from the dining experience. The same menu, food quality, level
of service, and atmosphere can be found in any one of the restaurants, regardless of
location. Large companies or entrepreneurs are likely chain restaurant owners. For
example, Applebee’s is a restaurant chain; some stores are company-owned, but the
majority are franchised by territory.
FINE DINING
A fine-dining restaurant is one where a good selection of menu items is
offered; generally at least fifteen or more different entrées can be cooked to order,
with nearly all the food being made on the premises from scratch using raw or fresh
ingredients. Full-service restaurants may be formal or casual and may be further
categorized by price, decor/atmosphere, level of formality, and menu. Most fine-
dining restaurants may be cross-referenced into other categories, as mentioned
previously. Many of these restaurants serve haute cuisine (pronounced hote), which
is a French term meaning “elegant dining,” or literally “high food.” Many of the fine
restaurants in the United States are based on French or northern Italian cuisine,
which, together with fine Chinese cuisine, are considered by many Western
connoisseurs to be the finest in the world. Most fine-dining restaurants are
independently owned and operated by an entrepreneur or a partnership. These
restaurants are in almost every city. In recent years, fine dining has become more
fun because creative chefs offer guests fine cuisine as an art. The level of service in
fine-dining restaurants is generally high, with a hostess or host to greet and seat
patrons. Captains and food servers advise guests of special items and assist with
the description and selection of dishes during order taking. If there is no separate
sommelier (wine waiter), the captain or food server may offer a description of the
wine that will complement the meal and can assist with the order taking. Some
upscale or luxury full-service restaurants have table-side cooking and French service
from a gueridon cart (a wheelable cart used to add flair to tableside service; it is
also used for flambé dishes). The decor of a full-service restaurant is generally
compatible with the overall ambiance and theme that the restaurant is seeking to
create. These elements of food, service, and decor create a memorable experience
for the restaurant guest.
Celebrity Restaurant: Celebrity-owned restaurants have been growing in
popularity. Some celebrities, such as Wolfgang Puck, come from a culinary
background. A number of sports celebrities also have restaurants. Among them are
Michael Jordan, Dan Marino, Junior Seau, and Wayne Gretzky. Television and
movie stars have also gotten into the act. Oprah Winfrey was part owner of the
Eccentric in Chicago for a number of years. Some of the famous Filipino celebrities
who also owns restaurant business are Sharon Cuneta, Marvin Agustin, Alden
Richards and Erich Gonzales among others. Celebrity restaurants generally have an
extra zing to them—a winning combination of design, atmosphere, food, and
perhaps the thrill of an occasional visit by the owner(s).
Steak Houses: The steak restaurant segment is quite buoyant despite
nutritional concerns about red meat. Some restaurants are adding additional value-
priced items such as chicken and fish to their menus to attract more guests. Steak
restaurant operators admit that they are not expecting to see the same customer
every week but hopefully every two or three weeks. The Chart House chain is careful
to market its menu as including seafood and chicken, but steak is at the heart of the
business, with most of its sales from red meat.
CASUAL DINING AND DINNER HOUSE RESTAURANTS
As implied, casual dining is relaxed and could include restaurants from
several classifications: chain or independent, ethnic, or theme. Hard Rock Cafe,
T.G.I.Friday’s, the Olive Garden, Houston’s, Romano’s Macaroni Grill, and Red
Lobster are good examples of casual dining restaurants. Over the past few years,
the trend in dinner house restaurants has been toward more casual dining. This
trend merely reflects the mode of society. Dinner house restaurants have become
fun places to let off steam. A variety of restaurant chains call themselves dinner
house restaurants. Some of them could even fit into the theme category. Many
dinner house restaurants have a casual, eclectic decor that may promote a theme.
Chart House, for example, is a steak and seafood chain that has a nautical theme.
T.G.I. Friday’s is an American bistro dinner house with a full menu and a decor of
bric-a-brac that contributes to the fun atmosphere. T.G.I.Friday’s is a chain that has
been in operation for nearly forty years, so the concept has stood the test of time.
The types of restaurants that can be included in the casual dining restaurants
category are as follows:
1. Miscale casual restaurants
2. Family restaurants
3. Ethnic restaurants
4. Theme restaurants
5. Quick service/fast food restaurants
Midscale casual restaurants: They offer full meals at a medium price that
customers perceive as “good value.” They can be full service, buffets or
limited service with customers ordering at the counter and having their food
brought to them.
Family restaurants: Family restaurants evolved from the coffee shop style of
restaurant. In this segment, most restaurants are individually or family
operated. Family restaurants are generally located in or with easy access to
the suburbs. Most offer an informal setting with a simple menu and service
designed to please all the family. Some of these restaurants offer alcoholic
beverages, which mostly consist of beer, wine, and perhaps a cocktail special.
Usually, there is a hostess/cashier standing near the entrance to greet and
seat guests while food servers take the orders and bring the plated food from
the kitchen. Some family restaurants have incorporated salad and dessert
bars to offer more variety and increase the average check. It offers relatively
simple food at reasonable prices, and welcomes children as well as adults.
Ethnic Restaurants: The majority of ethnic restaurants are independently
owned and operated. The owners and their families provide something
different for the adventurous diner or a taste of home for those of the same
ethnic background as the restaurant. The traditional ethnic restaurants sprang
up to cater to the taste of the various immigrant groups—Italian, Chinese, and
so on. They are specialty restaurants (not necessarily fine dining) which
serve ethnic delicacies of a region, primarily in a natural setting inspired by
the local culture. An example of this are Ka Lui located at Puerto Princesa
City, Palawan and Isla Naburot Resort Guimaras Island.
Theme Restaurants: Many theme restaurants are a combination of a
sophisticated specialty and several other types of restaurants. They generally
serve a limited menu but aim to wow the guest by the total experience.
People are attracted to theme restaurants because they offer a total
experience and a social meeting place. This is achieved through decoration
and atmosphere and allows the restaurant to offer a limited menu that blends
with the theme. Theme restaurants have a unifying or dominant subject or
concept, and utilize architecture, decor, special effects, and other techniques,
often to create exotic environments that are not normally associated with
dining because they are inaccessible, no longer exist, are fictional or
supernatural, or taboo. An example of theme restaurants in the Metro are
Snacks and Ladders, Zoo Coffee, Hello Kitty Café and Seoul Train Korean
BBQ among others.
Quick service/fast food restaurants: Quick-service restaurants (QSRs)
consist of diverse operating facilities whose slogan is “quick food.” The
following types of operations are included under this category: hamburger,
pizza, chicken, pancakes, sandwich shops, and delivery services. Quick-
service or fast-food restaurants offer limited menus featuring food such as
hamburgers, fries, hot dogs, chicken (in all forms), tacos, burritos, gyros,
teriyaki bowls, various finger foods, and other items for the convenience of
 people on the go. Customers order their food at a counter under a brightly lit
menu featuring color photographs of food items. Customers are even
encouraged to clear their own trays, which helps reduce costs. The following
are examples of the different types of quick-service/fast-food restaurants:
1. Hamburger
2. Pizza
3. Steak
4. Seafood
5. Chicken
6. Sandwich
7. Mexican
8. Drive-thru/drive-in/delivery
Quick-service restaurants have increased in popularity because of their
location strategies. They are found in very convenient locations in every
possible area. Their menus are limited, which makes it easy for customers to
make quick decisions on what to eat. The world equates time with money
these days, and most people do not want to spend time trying to look through
long menus to make an eating decision. These restaurants deliver fast service
and usually include self-service facilities, too. Such restaurants also use
cheaper, processed ingredients, which allow them to have extremely low,
competitive prices. Quick service restaurants also require minimum use of
both skilled and unskilled labor, which increases the profit margins.
FOOD TRENDS AND PRACTICES
As the level of professionalism rises for the chef of the twenty-first century,
chefs will need a strong culinary foundation with a structure that includes multiculture
cooking skills and strong employability traits, such as passion, dependability,
cooperation, and initiative. Additional management skills include strong supervisory
training, sense of urgency, accounting skills, sanitation/safety knowledge, nutritional
awareness, and marketing/merchandising skills.
The term back-to-basic cooking has been redefined to mean taking classical
cooking methods and infusing modern technology and science to create healthy and
flavorful dishes. Some examples of this include the following:
 Thickening soups and sauces by processing and using the food item’s
natural starches instead of traditional thickening methods;
 Redefining the basic mother sauces to omit the béchamel and egg-
based sauces and add or replace them with coulis, salsas, or chutneys;
 Pursuing more cultural culinary infusion to develop bold and aggressive
flavors;
 Experimenting with sweet and hot flavors;
 Taking advantage of the shrinking globe and disappearance of national
borders to bring new ideas and flavors to restaurants;
  Evaluating recipes and substituting ingredients for better flavor; that is,
flavored liquid instead of water, infused oils and vinegars instead of
nonflavored oils and vinegars;
 Substituting herbs and spices for salt;
 Returning to one-pot cooking to capture flavors;
 Offering more healthy dining choices in restaurants
Today, being a chef is considered a profession that offers a variety of
opportunities in every segment of the hospitality industry and anywhere in the world.
CULINARY PRACTICES
In this new millennium, we are seeing culinary education setting the pace for
dining exploration. As you prepare for a career in the hospitality industry, you will find
it imperative that you develop a strong culinary foundation. Within the structure of
this you will need to develop cooking skills, strong employability traits, people skills,
menu development skills, nutrition knowledge, sanitation/safety knowledge,
accounting skills, and computer skills.
Before you can become a successful chef, you have to be a good cook. To be
a good cook, you have to understand the basic techniques and principles of cooking.
The art of cooking has not changed much in thousands of years. And, although the
concept of cooking has not changed, science and technology have allowed us to
improve the methods of food preparation. We still use fire for cooking: Grilling,
broiling, and simmering are still popular methods of cooking.
To become a successful chef, you will need to learn all of the basic cooking
methods in order to understand flavor profiles. As you look at recipes to cook, try to
enhance the basic ingredient list to improve the flavor. As an example, always try to
substitute a flavored liquid if water is called for in a recipe. It is also important to
understand basic ingredient flavors so that you can improve flavor. The idea behind
back-to-basic cooking means you evaluate your recipe and look for flavor
improvement with each item.
Employability traits are those skills that focus on attitude, passion, initiative,
dedication, sense of urgency, and dependability. These traits are not always traits
that can be taught, but a good chef can demonstrate them by example. Most of the
employers with job opportunities for students consider these skills to be more
important than technical skills. The belief is that if you have strong employability
traits, your technical skills will be strong.
One of the most important things to realize about the restaurant industry is
that you can’t do it alone. Each person in your operation has to work together for you
to be successful. The most important ingredient in managing people is to respect
them. Many words can be used to describe a manager (coach, supervisor, boss,
mentor), but whatever term is used, you have to be in the game to be effective.
Managing a kitchen is like coaching a football team—everyone must work together to
be effective. The difference between a football team and a kitchen is that
chefs/managers cannot supervise from the sidelines; they have to be in the game.
One of my favorite examples of excellent people management skills is that of the
general manager of a hotel who had the ware-washing team report directly to him.
When asked why, he indicated that they are the people who know what is being
thrown in the garbage, they are the people who know what the customers are not
eating, and they are the people most responsible for the sanitation and safety of an
operation. There are many components to managing people—training, evaluating,
nurturing, delegating, and so on—but the most important is respect.
DEVELOPING A RESTAURANT
Developing a restaurant may be the ultimate entrepreneurial dream. In which
other industry can you get into a business like a restaurant for only a few thousand
pesos? Of course, you need to have acquired the knowledge and skills along the
way by getting experience in the kind of restaurant you intend to open. Yes,
independent restaurants are a rush for the owners—they are one of the few places
where guests use all of their senses to enjoy the experience. Through taste, sight,
smell, hearing, and touch, all employees and guests can savor the food, service, and
atmosphere of the restaurant. The successful operation of a restaurant is dependent
on a number of factors. Let’s examine the factors that make for a successful
restaurant development, from the operating philosophy to controls, and all the
functions in between.
FACTORS FOR A SUCCESSFUL RESTAURANT DEVELOPMENT
Operating Philosophy, Mission, Goals and Objectives:
At the heart of an enterprise is the philosophy of the owner. The philosophy
represents the way the company does business. It is an expression of the ethics,
morals, and values by which the company operates. Many companies have formal
mission statements that explain their reason for being in business.
Restaurant Market:
The market is composed of those guests who will patronize the restaurant. A
respective restaurant owner will analyze the market to determine whether sufficient
demand exists in a particular market niche, such as Italian or Southern cuisine. A
niche is a marketing term used to describe a specific share or slot of a certain
market. A good indication of the size of the market can be ascertained by taking a
radius of from one to five miles around the restaurant. The distance will vary
according to the type and location of the restaurant. The area that falls within the
radius is called the catchment area. The demographics of the population within the
catchment area is analyzed to reveal age, number of people in various age brackets,
sex, ethnicity, religion, income levels, and so on.
One yardstick used to determine the potential viability of a restaurant is to
divide the number of restaurants in the catchment area by the total population. The
average number of people per restaurant in the United States is about 500. Perhaps
this kind of saturation is one of the reasons for the high failure rate of restaurants.
Obviously, each area is different; one location may have several Italian restaurants
but no Southern restaurant. Therefore, a Southern restaurant would be unique in the
market and, if properly positioned, may have a competitive advantage. If someone in
the catchment area wanted to eat Italian food, he or she would have to choose
among the various Italian restaurants. In marketing terms, the number of potential
guests for the Italian restaurant would be divided by the number of Italian restaurants
to determine fair market share (the average number of guests that would, if all other
things went equal, eat at any one of the Italian restaurants). If they all decided to eat
Italian in the fair market share scenario, each restaurant would receive 100 guests.
In reality, we know this does not happen—for various reasons, one restaurant
becomes more popular. The number of guests that this and the other restaurants
receive then is called the actual market share.
Restaurant Concept:
Successful restaurant concepts are created with guests in mind. All too
frequently someone thinks it would be a good idea to open up a particular kind of
restaurant, only to find there are insufficient guests to make it viable.
For the winners, creating and operating a restaurant business is fun—lots of
people coming and going, new faces, old friends. Restaurants provide a social
gathering place where employees, guests, and management can get their adrenaline
flowing in positive ways. The restaurant business is exciting and challenging; with
the right location, food, atmosphere, and service it is possible to extract the market
and make a good return on investment.
The challenge is to create a restaurant concept and bring it into being, a
concept that fits a definite market, a concept better suited to its market than that
presented by competing restaurants. Every restaurant represents a concept and
projects a total impression or an image. The image appeals to a certain market—
casual, formal, children, adults, ethnic, and so on. The concept should fit the location
and reach out to its target market. A restaurant’s concept, location, menu, and decor
should intertwine.
For the operation of a restaurant to be successful, the following factors need
to be addressed:
 Mission
 Goals
 Objectives
 Market
 Concept
 Location
 Menu planning
 Ambiance
 Lease
 Other occupational costs
Restaurant concept is undoubtedly one of the major components of any
successful operation. Some restaurants are looking for a concept; some concepts
are searching for a restaurant.
 Restaurant Location:
The restaurant concept must fit the location, and the location must fit the
concept.

MENU
FOOD
QUALITY LOCATION

MARKET AND LEADERSHIP

SERVICE
CONCEPT

PRICE AMBIENCE

The location should appeal to the target market (expected interests). Other
things being equal, prime locations cost more, so operators must either charge more
for their menu items or drive sufficient volume to keep the rent/lease costs to
between 5 and 8 percent of sales.
Key location criteria include the following:
 Demographics—how many people are there in the catchment area?
 The average income of the catchment area population
 Growth or decline of the area
 Zoning, drainage, sewage, and utilities
 Convenience—how easy is it for people to get to the restaurant?
 Visibility—can passersby see the restaurant?
 Accessibility—how accessible is the restaurant?
 Parking—is parking required? If so, how many spaces are needed and
what will it cost?
 Curbside appeal—how inviting is the restaurant?
 Location—how desirable is the neighborhood?
Several popular types of restaurant locations include the following:
  Stand-alone restaurants
 Cluster or restaurant row
 Shopping mall
 Shopping mall—freestanding
 Downtown
 Suburban
Restaurant Ambiance:
The atmosphere that a restaurant creates has both immediate conscious and
unconscious effects on guests. The immediate conscious effect is how guests react
to the ambiance on entering the restaurant—or even more importantly as an element
in the decision-making process used in selecting a restaurant. Too noisy? Are the
tables too close? The subconscious is affected by mood, lighting, furnishings, and
music; these play an important role in leaving a subtle impression on guests. Today,
atmospherics are part of the theme and have an immediate sensory impact on
customers.
Perhaps the most noticeable atmospheric restaurants are those with a theme.
The theme will use color, sound, lighting, decor, texture, and visual stimulation to
create special effects for patrons. Among restaurants with good atmospherics are
Macaroni Grill, Panera Bread, Outback, Hard Rock Cafe, and Chart House.
PRICE AND PRICING STRATEGY
The target market and concept will, to a large extent, determine the menu
price ranges. The selling price of each item must be acceptable to the market and
profitable to the restaurateur. Factors that go into this decision include the following:
 What is the competition charging for a similar item?
 What is the item’s food cost?
 What is the cost of labor that goes into the item?
 What other costs must be covered?
 What profit is expected by the operator?
 What is the contribution margin of the item?

Competition
Prices

Food Cost
Profit PRICE Percentage

Contribution Labor Cost

Margin Percentage
 The figure above illustrates the factors that influence a restaurant’s menu
prices. There are two main ways to price menus: A comparative approach analyzes
the price ranges of the competition and determines the price range for appetizers,
entrées, and desserts. The second method is to cost the individual dish item on the
menu and multiply it by the ratio amount necessary to achieve the desired food cost
percentage. For example, to achieve a 30-percent food cost for an item priced at
P6.95 on the menu, the food cost would have to be P2.09. Beverage items are
priced the same way. This method will result in the same expected food cost
percentage for each item. It would be great if we lived in such a perfect world. The
problem is that if some items were priced out according to a 30-percent food cost,
they might appear to be overpriced according to customers’ perceptions. For
example, some of the more expensive meat and fish would price out at P18 to P21,
when the restaurant would prefer to keep entrée prices under P15. To balance this,
restaurants lower the margin on the more expensive meat and fish items—as long as
there are only one or two of them—and raise the price on some of the other items,
such as soup, salad, chicken, and pasta. This approach is called the weighted
average, whereby the factors of food cost percentage, contribution margin, and sales
volume are weighted.
MENU PLANNING
The menu may be the most important ingredient in a restaurant’s success. A
restaurant’s menu must agree with the concept; the concept must be based on what
the guest in the target market expects; and the menu must exceed those
expectations. The type of menu will depend on the kind of restaurant being operated.
There are six main types of menus:
1. A la carte menus. These menus offer items that are individually priced.
2. Table d’hôte menus. Table d’hôte menus offer a selection of one or more
items for each course at a fixed price. This type of menu is used more
frequently in hotels and in Europe. The advantage is the perception guests
have of receiving good values.
3. Du jour menus. Du jour menus list the items “of the day.”
4. Tourist menus. These menus are used to attract tourists’ attention. They
frequently stress value and food that is acceptable to tourists.
5. California menus. These menus are so named because, in some California
restaurants, guests may order any item on the menu at any time of the day.
6. Cyclical menus. Cyclical menus repeat themselves over a period of time.
A menu generally consists of perhaps six to eight appetizers, two to four
soups, a few salads—both as appetizers and entrées—eight to sixteen entrées, and
about four to six desserts.
The many considerations in menu planning attest to the complexity of the
restaurant business. Considerations include the following:
 Needs and desires of guests
 Capabilities of cooks
 Equipment capacity and layout
 Consistency and availability of menu ingredients
 Price and pricing strategy (cost and profitability)
 Nutritional value
 Accuracy in menu
 Menu analysis (contribution margin)
 Menu design
 Menu engineering
 Chain menus
 ACTIVITY 6

Answer the following questions:

1. Imagine you are starting your own restaurant. In the process, you realize you
need a mission statement. Write a mission statement for your new restaurant.
______________________________________________________________
______________________________________________________________
______________________________________________________________
______________________________________________________________
______________________________________________________________
______________________________________________________________
______________________________________________________________

2. Define the following terms and briefly describe the role they play:
a. Market
___________________________________________________________
___________________________________________________________
___________________________________________________________
___________________________________________________________
___________________________________________________________

b. Concept
___________________________________________________________
___________________________________________________________
___________________________________________________________
___________________________________________________________
___________________________________________________________

c. Ambiance
___________________________________________________________
___________________________________________________________
___________________________________________________________
___________________________________________________________
___________________________________________________________

3. List down and evaluate a restaurant here in the province and write a list of
weaknesses. Then, for each of the weaknesses, decide on which actions you
would take to exceed guest expectations.
______________________________________________________________
______________________________________________________________
______________________________________________________________
______________________________________________________________
______________________________________________________________