The Demand for Food Away from Home: Full-Service or Fast Food?
by Hayden Stewart
, Noel Blisard, Sanjib Bhuyan, and Rodolfo M. Nayga, Jr.
Agricultural Economic Report No. (AER-829) 23 pp, January 2004
It has been well documented that Americans, as they grow more
affluent and time-stretched, spend more dollars on food away from
home than at home. Fast food and full-service restaurants must
continually jockey for this revenue. The fast food segment had once
grown accustomed to an ever-increasing market share. With those
days apparently behind them, some fast food restaurants are now
offering more of the variety of items and heightened amenities
typically associated with full-service establishments.
This report examines how the demand for food away from home is
changing, how these changes could affect the size of the
full-service and fast food segments, and how restaurants might
respond to these shifting demand signals. U.S. households are
becoming, on average, richer, older, smaller, more ethnically
diverse, and more likely to contain single people or multiple
adults without live-at-home children. These changes each have
foreseeable impacts on the demand for food away from home, the
subsequent offerings of foodservice establishments, and ultimately
the diet and health of all those going out to eat.
What Is the Issue?
Both full-service and fast food restaurants are increasing the
variety of foods and services available to their customers.
Applebee's Neighborhood Grill & Bar, a full-service restaurant,
for example, reports that new and significantly improved menu items
account for over 50 percent of its offerings. Even among larger
fast food chains, such as McDonald's, the situation is similar.
Restaurants affiliated with this pioneer of the limited-menu
concept can now offer over four dozen items on their menus,
including a fruit and yogurt parfait as well as a grilled chicken
salad. What is driving these improvements?
Although many factors could be contributing to the evolution of
the foodservice industry, a sustained shift in consumer demand
appears to be the primary force. A change in demand can alter the
competitive dynamics of a market. If consumer demand is shifting in
favor of the foods and services traditionally offered by
full-service restaurants, full-service restaurant companies will be
encouraged to operate more outlets offering more variety and dining
amenities. Fast food restaurants might also introduce many of these
same foods and services themselves. So, in order to understand why
restaurants are adjusting what menu items and services they offer,
it must be asked what consumers are demanding when they eat
How Was the Study Conducted?
Economic theory and household survey data were used to update
existing studies showing how rising income, shrinking household
size, and an aging population might influence household
expenditures at full-service and fast food restaurants. In
addition, we examine the significance of the changing structure of
American households. Traditional families, defined as a married
couple with children, accounted for 30 percent of all households in
1980. However, they totaled only 24 percent of all households in
2000 and may further decrease in share to about 17 percent by 2020.
By contrast, single-person households increased from 23 percent of
all households in 1980 to 26 percent in 2000, and may reach 29
percent in 2020.
Household survey data were used to quantify the relationship
between a household's spending at each type of restaurant and its
demographic characteristics, including its structure, income, age,
and race. The resulting statistical model enables us to simulate
how much a "typical" household spends on fast food and full-service
The statistical model was next combined with projections from
the Bureau of the Census on how the demographic characteristics of
American households are likely to change. The results of this
exercise indicate how the demand for foodservice may change under
these projections and assumptions about the future behavior of
consumers and firms.
What Did the Study Find?
Simulations indicate that, between 2000 and 2020, per capita
spending could rise by about 18 percent at full-service
restaurants, versus about 6 percent for fast food. In other words,
both segments are likely to grow, but trends favor full-service
restaurants relative to fast food establishments. This suggests
that, while consumers will value convenience, they will also want
meals with more variety, amenities, and recreation traditionally
associated with full-service restaurants.
Not surprisingly, an assumed increase in incomes will have the
largest impact on the away-from-home market. Members of a higher
income household spend more money away from home, especially on
full-service dining occasions that are richer in variety and other
services. However, the changing structure of households will also
have a major impact. Both single-person households and households
with multiple adults but no children tend to spend more money per
capita-versus a traditional household with children-in both market
segments. To be sure, not all anticipated developments in the
population bode well for each type of restaurant. The aging of the
American population will dampen the demand for fast food.
Our simulations show how the demand for foodservice is changing.
Not only could these developments affect the quality of people's
diets and, ultimately, their health and well-being, but they will
likely affect the structure of the foodservice industry. Restaurant
companies and their suppliers will be encouraged to cooperate to
ensure the variety of foods and services demanded by consumers.
This study lays a critical foundation for future analyses of such