Case Study 3.3e "The Economics of Dining Out"

Directions: Complete the following case study and record your answers on a separate sheet of paper.

Topic: How much Americans spend on eating out; how that affects the service industry and the overall economy.

Objective: To understand the relationship of market growth on overall spending and the national economy.

Forty-four percent of all adults eat out on a regular basis. This percent of the population consumes an average of 4.2 prepared meals away from home a week. The average cost per person per meal or beverage service was just under $5. However, full-service restaurant meals cost on average between $15 and $24.99. The average American household spends $2,030 per year on food away from home. Globally, the average household per capita expenditures for food away from home is $812. Individuals at higher income levels spend more on food away from home. Households with a yearly income of $70,000 or higher spend, on average, $4,328 per year on food away from home - more than double that of the average household. About 25 percent of households with an income above $65,000 eat fast food meals 11 times or more a month.

CS Question #1: Why does income level affect household spending on food away from home?

Time is an important resource to Americans. The food service industry offers a way to save the time required for meal preparation and cleanup. Many Americans have turned to restaurants as a convenient way to get together with family and friends. Twenty-four percent of full-service dinners away from home occurred primarily for social reasons. It has become an important part of American culture. It is so important that 70 percent of adults said that they could increase their level of saving by eating out less. However, only 18 percent of the 70 percent state that they will most probably eat out less to save more.

CS Question #2: Think of other lifestyle or cultural habits that affect household spending versus saving. What would your household have difficulty giving up if saving was made a priority?

The food service industry continues to grow. Between 1997 and 1998 there was a 5.7 percent increase in expenditures on food away from home. During the same time, there was a 3.6 percent decrease in expenditures on food to be eaten at home. Currently, sales in the food service industry total about $400 billion per year. This means sales of $1.1 billion daily. The continued increase in market demand has positively affected the overall economy. Restaurant sales account for about 4 percent of the U.S. gross domestic product.

CS Question #3: How would a dramatic decrease in the food service industry's market demand affect the economy?

One third of all adults have worked in the food service industry at some point in their lives. It is the nation's second largest employer next to the government. The food service industry employs 11.3 million people, or 8 percent of employed individuals. The biggest challenge of employers in the food service industry is hiring and retaining employees. The high-tech and information industries have affected the service industry's labor supply. Since 1997 the labor supply in the service industry has been less than that of overall national job growth. Prior to 1997 this had occurred only three other times since 1958. Still, the food service industry has added over 100,000 jobs to the economy yearly since 1991.

CS Question #4: What would happen to food service job growth if there was a change in the food service market demand?

Further Thought: