Restaurant industry - Business in United States of America
Definition: Industry providing meals and refreshments in sit-down dining facilities and through take-out establishments
Significance: Since the early twentieth century, the American restaurant industry has boomed and made a major contribution to the transformation of American culture. A significant part of the twenty-first century American economy, the industry is one of the leading employers of workers—particularly teenagers—in the private sector.
The huge American restaurant industry is largely a late twentieth century and early twenty-first century development. Before the mid-twentieth century, few American ate out frequently. During the nineteenth century, restaurants catered primarily to members of both the upper and the lower classes. High-class restaurants, such as Delmonico’s, which opened in New York City in 1845, offered exquisite cuisine to the wealthy. Upscale hotels followed suit by adding fine dining establishments to serve their own guests. At the other end of the economic scale, members of the urban lower class, many of whose abodes lacked kitchens, patronized saloons and cheap “eating houses” that served only the most basic fare. Members of the middle class rarely dined out, unless they were traveling. In 1870, the general public was introduced to the first chain restaurants, the Harvey Houses, which were located by train stations. Other restaurant chains soon followed.
In 1921, White Castle became the first hamburger chain. Between 1923 and 1931, it opened one hundred of its restaurants throughout the United States. Over the ensuing years, the chain improved the nutritional content of its hamburgers and worked to develop standards that would ensure consistent quality. During the 1930’s, White Castle became the first restaurant chain to sell food through takeout windows, and it began issuing coupons in newspapers to increase demand. As part of its 1930’s marketing campaign, White Castle hired women as “Julia Joyce” hostesses, who gave women tours of the restaurants to show off their cleanliness. Visitors were also given 10-cent hamburgers to take home to promote the concept of carry-out service for families.
National Restaurant Association
In 1919, the National Restaurant Association (NRA) was established in Kansas City, Missouri. It became a powerful advocate for the industry by lobbying and influencing legislation and providing education to restaurant operators. Over the years, the NRA has used national advertising campaigns to influence public buying habits. The NRA developed advertising campaigns to promote dining out with such slogans as Enjoy Life—Eat Out More Often and Take Her Out to Dinner at Least Once a Week. These campaigns helped popularize the concept of chain restaurants, as increasing numbers of middleclass Americans began dining out. Before World War II, the NRA estimated that American restaurants served about twenty million meals per day. After the war, the National Restaurant Association reported that restaurants were serving sixty million meals a day.
A Harvey House at the depot in the Atchison, Topeka and Santa Fe Railroad yard in Needles, California, in 1943. (Library of Congress)
Late Twentieth Century Trends
The advent of what would become known as the fast-food industry is generally dated to 1955, when Ray Kroc opened the first McDonald’s franchise in Illinois. The first McDonald’s restaurants were drive-ins with carhops. After Kroc took over McDonald’s from its founders, he developed their assembly-line food production system, eliminated carhops, and cut the cost of meals in half. The success of McDonald’s production method soon inspired imitators, such as Burger King and Taco Bell. Meanwhile, the NRA began endorsing take-home meals that families could enjoy while watching television, one of the great technological innovations of the same era.
Between 1930 and 1960, restaurant chains proliferated, and during the 1960’s, chains such as McDonald’s, Kentucky Fried Chicken (later KFC), and Denny’s began going public. Meanwhile, full service restaurant chains were becoming major players. In 1968, Red Lobster was founded, followed by the Cheesecake Factory and Ruby Tuesday in 1972, Chili’s in 1975, and Damon’s in 1979. Starbucks coffee houses—which would become a twenty-first century sensation—began in 1971.
The 1970’s also saw the advent of conglomerates, with Pizza Hut and Kentucky Fried Chicken being bought by PepsiCo, which also purchased Taco Bell in 1978. The trends of the 1970’s continued into the 1980’s and 1990’s with restaurants being bought and sold like commodities. In 1997, PepsiCo spun off its fast-food restaurants to create Tricon Global Restaurants, which acquired Long John Silver’s and A&W Restaurants and became Yum! Brands in 2002. In 1995, General Mills spun off Darden, a group of casual-dining chain restaurants, that began with Red Lobster and grew to also contain, as of 2008, Olive Garden, Long Horn Steak house, The Capital Grille, Bahama Breeze, and Seasons 52.
Restaurant Sales, 1970-2008
Source: Data from the National Restaurant Association
Note: Dollars are current (2008) dollars, and 2008 figures are projections.
Twenty-first Century Trends
The growth of the modern restaurant industry can be seen in National Restaurant Association figures for total industry sales. In 1970, restaurants took in $42.8 billion. In 2008, they took in $558 billion—a thirteen fold increase in less than four decades. By 2008, Americans were spending 48 percent of their food dollars at restaurants, a figure nearly double that of four decades earlier. The 13.1 million workers employed by 945,000 American restaurants made the restaurant industry the largest private sector employer in the United States. Indeed, about 9 percent of all salaried persons in the American workforce are employed in food service industries.
Despite its remarkable growth, the restaurant industry encountered a number of problems during the first decade of the twenty-first century. Some of the major mergers and expansions were not working well. Examples included the merger of Wendy’s and Tim Hortons (coffee and doughnut chain) and the McDonald’s acquisition of the Donatos pizza chain. Other chains were encountering problems from overly rapid expansion. Examples included Boston Market, Bob Evans, and Starbucks. Bad publicity was also damaging the industry, thanks in large part to Eric Schlosser’s 2001 book, Fast Food Nation: The Dark Side of the All-American Meal, and Morgan Spurlock’s 2004 film documentary, Super Size Me, both of which blamed the fast-food industry for much of the nation’s health and obesity problems.
In response, many restaurants added more healthful options to their menus. Government agencies also increased their regulatory oversight of the industry. In 2007, for example, New York City voted to ban trans saturated fats in restaurant cooking. Although an NRA spokesperson countered that the city’s ban was misguided and could be challenged legally, many chains such as Wendy’s subsequently discontinued using trans saturated fats in response to public pressures.
Anderson, Steven C., and Steven Steinhauser. Restaurant Industry Operations Report 2004. Washington, D.C.: National Restaurant Association, 2005. Annual industry report giving industry statistics based on market segment and sales volume.
Hogan, David. Selling ’em by the Sack: White Castle and the Creation of American Food. New York: New York University Press, 1999. History of the restaurant industry, focusing on the White Castle hamburger chain.
Jakle, John A., and Keith A. Sculle. Fast Food: Roadside Restaurants in the Automobile Age. Baltimore: Johns Hopkins University Press, 1999. Well researched and illustrated study of the culture of the automobile and quick-service restaurants.
Love, John F. McDonald’s: Behind the Arches. Rev. ed. New York: Bantam Books, 1995. Comprehensive chronicle of the rise of McDonald’s, including behind-the-scenes stories. Illustrated. Index.
Mariani, John. America Eats Out: An Illustrated History of Restaurants, Taverns, Coffee Shops, Speakeasies, and Other Establishments That Have Fed Us for 350 Years. New York: William Morrow, 1991. Picturesque and anecdotal history of the restaurant industry.
Schlosser, Eric. Fast Food Nation: The Dark Side of the All-American Meal. New York: Houghton Mifflin, 2001. Strong critique of the fast-food industry and its health implications.
Spurlock, Morgan. Don’t Eat This Book: Fast Food and the Supersizing of America. New York: G. P. Putnam’s Sons, 2005. Humorous account of how the maker of the film Super Size Me lived solely on fast food for thirty days and the effect on his health.
See also: Alcoholic beverage industry; Diners Club; Drive-through businesses; Food and Drug Administration; Food processing industries; Hotel and motel industry; United Food and Commercial Workers; vending machines.
Drive-through businesses: Food and Gas
Cola industry: Coca-Cola vs. Pepsi Cola
United Food and Commercial Workers (UFCW)
Indra K. Nooyi