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Commercial vs non-commercial food services: What is the difference?

EHL Insights
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From the local snack bar to the gastronomic restaurant serving culinary delights, the food and beverage industry is plentiful in diversity. This broad and varied landscape can be broken down into more homogeneous categories. Chief among the distinctions is the split between commercial food services and non-commercial food services. But what is the difference? And where do institutional food services fit in?

 

What is a commercial food service?

Flagship food services, from fast food restaurants to fine dining establishments, fall into the most recognizable and widespread of food service categories: commercial food services. Also referred to as “market-oriented food services”, this category accounts for the lion’s share of consumer spending on food and beverage products outside of the home. An entire spectrum of segments from food trucks to nightclubs fall into this category. Below is a breakdown of defining characteristics that set commercial food services apart from their non-commercial counterparts followed by an overview of the respective types.

Primary goal

When differentiating between commercial and non-commercial food and beverage services, here’s the very first question to ask: Is selling F&B products the primary goal in this setting? If the answer is “yes”, you are dealing with a commercial enterprise. Ensuring a positive guest experience may be conducive to reaching this goal. Full-service restaurants, which come in many shapes and sizes from high-end, niche outlets to casual, family-oriented restaurants, seek to do so by providing friendly table service, for example. Quick-service restaurants, on the other hand, aim to appeal by offering speed, efficiency and competitive prices, while keeping the service level to a minimum. This is just the tip of the iceberg in terms of segmentation in this category.

Profit-orientation, funding and financial viability

In line with their primary goal, commercial F&B outlets must be financially viable as they operate on a for-profit basis. With funding unlikely to be funneled in from elsewhere other than personal financial sacrifice or the parent company, all operational endeavors are geared towards ensuring profitability. From choosing suppliers offering produce at the right price, while also considering what customers will expect in terms of transparency, sourcing to USPs, experience design in the pursuit of repeat business and good reviews - money must be made!

Ownership, legal form and organizational structure

Commercial F&B outlets are usually privately owned. They may be independent legal entities, franchises or form part of a chain.

Quality of fare and dining experience

Customers have to have specific reasons to choose one commercial F&B outlet over another. Whether it be convenience, excellent quality, unique interior decor or otherwise, the enterprise is inherently motivated to please its guests.

Commercial F&B outlets – examples

  • Quick-service restaurants : drive-through outlets, outlets within retail stores, fast food restaurants.
  • Limited-service restaurants
  • Full-service restaurants : fine dining restaurants, family restaurants, ethnic restaurants, casual restaurants.
  • Catering & banqueting : catering companies, conference centers, wedding venues, festival food coordinators.
  • Drinking establishments : bars, pubs, nightclubs, cabarets.

 

What is a non-commercial food service?

Non-commercial food service establishments serve F&B products, but either as an addition to other services or for non-profit reasons. For example, it is hard to imagine a fully functioning hospital without meals delivered to patients or a cafeteria for staff and visitors alike. And how could you possibly sell long-haul flight tickets without the option to feed your travelers on route? Would your local golf club be the same without refreshments? These are just a few of the settings in which you are likely to find non-commercial food services, accounting for a far smaller market share than commercial undertakings.

Primary goal

Clearly, selling F&B products is not the primary goal in these instances, but rather a secondary support service. Whenever non-commercial food services are at play, they are a facilitating factor. Without them, the overarching operations of the host organization would be compromised.

Profit-orientation, funding and financial viability

Non-commercial F&B outlets are more likely to be concerned with covering their costs than making profits. In some instances, they may be subsidized or even funded by the host institution or company. Financial viability may therefore take a back seat to simply facilitating its smooth functioning. Of course, the service provision may be outsourced, with franchises or external suppliers stepping in. In these cases, the operator itself is profit-oriented, but may have to make some concessions in service design to accommodate the host’s specific needs and circumstances.

Ownership, legal form and organizational structure

Large or small food service operators may be contracted in to run non-commercial food service operations, while chains or franchises may operate individual sections of larger non-commercial food courts. Alternatively, the host organizations themselves may choose to provide their own non-commercial food services, tying them into the respective organizational structure more directly.

Quality of fare and dining experience

The stereotype of stodgy school dinners and abysmal hospital canteens has long reigned supreme. However, efforts to tie food services into the overall strategic direction of the host organization are gaining momentum. Private schools offering healthy, brain-boosting meals, for instance. Or universities and employers attempting to lure in top talent with outstanding fare, say.

Non-commercial F&B outlets – examples

  • Institutional food services : hospitals, educations institutions, corporate staff cafeterias, cruise ships, airports and transportation terminals and operations.
  • Accommodation food services : hotels restaurants and bars, room service.
  • Membership-based facilities : clubs, groups.
  • Vending machines & automated food services

 

What is the difference between commercial and institutional food services?

Let’s round off the discussion with a reflection on the difference between commercial and institutional food services. As shown in the table above, institutional food services are those provided by institutions of all kinds, whether these be in the healthcare, education, travel sector, or catering to employees or military personnel, etc. As they do not constitute the primary goal of these institutions, but instead provide necessary services to enable them to operate well; they are considered non-commercial food services. This does not mean, however, that none of their objectives or characteristics fall in line with commercial endeavors. They may be profitable in their own right, seeking to add value by providing good-quality fare or provide a competitive edge by adhering to or even enhancing the image otherwise pursued by their institution.

 

In sum, the F&B landscape comprises a vast array of business models and segments. Each with their own characterizing facets, whether in direct pursuit of profits or otherwise, they offer consumers diversity of choice and, in the case of non-commercial food services, they enable businesses, clubs and more to pursue their operations resting assured their visitors’ culinary needs are tended to.

 

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