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Chapter 1

INTRODUCTION

1.1 Background

This thesis is a replication from the original journal titled “The effects of

dining atmospherics on behavioral intentions through quality perception”, written by

Jooyeon Ha and SooCheong Jang (2012).

A restaurant provides primary needs of human beings such as food and

beverages, therefore it can be considered as a lifetime business. In today’s

competitive market, the main role of a restaurant is more than serving food, but to

convert the act of eating into an experience (Powers & Barrows, 2006). Historically

according to Arora (2012), restaurant is a place that provides meals and a place for

people to sit down and enjoy their food and do a self service or get a service from the

waiter. The market in this industry is divided into eating market and dining market.

The eating market focuses on the biological needs of customer which is fulfilling

their hunger, this type of restaurants only concentrated on selling food. In reverse,

the dining market focuses on fulfilling the social needs of the customers such as

fulfilling their lifestyle needs, followed by fulfilling their biological needs as well.

As the industry becoming more competitive, various types of restaurant are

present nowadays, such as quick service restaurants, fast casual restaurants, casual

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restaurants and dining restaurants. The following is the brief explanation of different

types of restaurants (Barrows, Powers, & Reynolds, 2012).

Quick service restaurant popular for its speed of service in serving the food

and convenience. Most of quick service is a fast food restaurant, such as

McDonald’s and Burger King. It is notable that quick service served a meal

less than 10 minutes time, inexpensive meal, and simple décor.

Fast casual restaurant has been described as offering full service quality food

in a quick-service format. According to National Restaurant Associations, it

is stated that fast casual is a hybrid concept that offers the convenience of

quick service while combining food offerings and more casual table service

operations. Usually they offer a healthy options food, the best example of fast

casual in Jakarta is The Soup Spoon located in Grand Indonesia and City

Walk.

Casual restaurant is serving affordable food and relaxed atmospherics. Often

indicated to family the growing of casual restaurants in Jakarta is going

broader to Specialty restaurant such as; seafood, pasta, or steaks, Ethnic

restaurant such as focus on one cuisine such as Chinese, Korean, Mexican,

Indian, and Eatertainment restaurant where entertainment is provided by

restaurants’ stage set like décor, here the food is secondary consideration,

Hard Rock Café in Jakarta is one of the most famous eatertainment

restaurant. The price charged is moderated.

Dining restaurants is the full service restaurants that give extra attentions and

extra ordinary dining experience to the guests. Dining restaurants is divided

into two:

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- Fine dining is a full service restaurant that offers diners an elegant

atmospherics with high quality service and specific dedicated

meal courses. Fine dining charges premium price due to the finest

food quality & service, famous chef, and attention given. As

targeted to the high level income people, the guests are willing to

pay for the excellence experience.

- Casual upscale dining is a full service restaurant that offers a

casual theme in terms of the atmospherics such as ambient,

interior decor, menu and exterior of the building. It has been

classified as the top end of casual restaurant. The price is casual

upscale dining is below the fine dining. The movement of baby

boomers explains the growth of casual upscale dining. The

concept of casual upscale dining is casual/relaxed compare to fine

dining. Casual upscale dining is slightly different to casual

restaurants as they offer fusion cuisines, more costly, and more

into “lifestyle theme” to fulfill demand of Jakarta consumers

especially to meet the expectations from the society.

Currently, Indonesia holds a record as one of the most urbanized county in

South East Asia. It is believed that urbanization creates beneficial factors such as;

rising income of the citizen, economic growth, and productivity gain. Looking at the

growth of the Gross National Income in 2013, it increased from $2,200 to $3,563, it

gives opportunity for entrepreneur to build a business in Indonesia (Setiawati, 2013).

Restaurant industry in Indonesia is dominated by 63% of foreign restaurants and

37% local, which dominated by Chinese food restaurants, Japanese, Italian, and

American. Jakarta as the metropolitan city has a great influence for life style, as the

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economic is improving, entrepreneur sees an opportunity to open a business in

Jakarta which results in more job opportunity and more income for the citizen, and

indirectly it affects the people to spend more for themselves. Being a metropolitan

city, it is common for people to dine out especially for middle to high income level

people to spend their Saturday night or their business meetings at the restaurants. The

power of buying in Jakarta is increases due to the reasons mentioned above, affecting

the growth of dining restaurants in Jakarta as people are willing to spend more or

results in higher consumption rate.

In modern world, restaurant is perceived to be more than just a place to

satisfy biological needs such as hunger, but also the social needs (Hsu, 2001). Dining

restaurants offer more than just high quality taste; it offers high quality of services

and finest ambience which makes it different from other types of restaurant.

According to Sonya (2014), marketer in restaurant industry realized that restaurant is

no more considered as a place to eat but also a part of lifestyle, there are several

reasons why people do visit restaurant;

- Celebrations: On birthday and anniversary many people celebrate it in the

restaurants.

- Avoids daily routine: Visit restaurant and eat there give people opportunity to

take a break from their daily routine such as cooking.

- Meetings or social occasions: It becomes common in today’s era to have a

meeting with clients or business partner in a restaurant because of its

convenient, people do not have to worry about preparing food and just

concentrate on their works. When it comes to friends or family, gathered at

restaurant is convenient because of the environment and also elegancy factor.

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- Trying different food/cuisines: People that enjoy eating different food from

different countries often visit restaurants that offer variety of cuisines. People

are curious to try cuisine from other part of the world, example: Greek food,

Russian food.

- Emergency: Some cases force people to eat in a restaurant, such as less time

to prepare food at home or need to do a lot of work.

- Travelling: During travelling, cooking is not a convenient option, as they do

have alternative and choose to eat in a restaurant.

- New opening: Some group of people like to try something new and when new

restaurants are open they would like to be the first one to try.

Figure 1.1 below shows that visiting a restaurant has become more

popular in Indonesia, it can be seen that 8, 04% of the cost living expenses is

being distributed to visit a restaurant. The chart shows an average of

Indonesian citizen, whereas restaurants play a significant role in Indonesian

lifestyle especially Jakarta as the capital city of Indonesia stands in first line

of the most up-to-date lifestyle all over Indonesia and dining out becomes one

of the favorite social activities. (Debnath, 2008).

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Source: The Jakarta Post2008

Figure 1.1: Consumer costs of living in Indonesia

According to Badan Pusat Statistik, the restaurant industry becomes one of

the most powerful sectors in Jakarta, as the growth of restaurant sector in Jakarta that

reaches 12, 7% in the year 2013. It is strongly believed that the increases of this

sector due to the lifestyle, demography and the development of tourism. Being

supported to high demand and high curiosity of customer in Jakarta, it becomes a

challenge for restaurants owner to compete and attract customers. They find new

ways to attract customers, from find new meals to serve, new way to serve, new

theme or design interior, someone new to train, until new ways of promotion and

marketing.

1.2 Dining restaurants in Jakarta

Culinary business in Jakarta is lately increased, as the consumption rate is

increasing and as the era is changing to become modern, people from middle to high

income level that come from modern family with high level of education demand

higher lifestyle especially in the restaurant sector. It becomes a lifestyle for people to

visit the restaurants. Both fine dining and casual upscale dining offer full service

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starting from the food, service, to the atmospherics. The difference between both

consists of the price which is higher for fine dining compared to casual upscale

dining; the concept of fine dining is formal compare to casual upscale which is

casual. As dining out is common for them, people in this generation and lifestyle

demand for something that is less formal, and it is reasonable to spend on casual

upscale dining as it offers full services as fine dining but less expensive. Besides that,

the growth of casual upscale dining in Jakarta is increasing by 7.75% in 2013

according to Hotel & Restaurant Associations, while fine dining in Jakarta increases

only by 4%, this makes casual upscale business becomes one of the most profitable

business in Jakarta. Another fact of casual upscale dining is it caters the medium to

high income people, whereas fine dining only attract high income level, which is

focus on a narrow market. It is proved that people who go to casual upscale instead

of fine dining or any other type of restaurants are mostly those who enjoyed the relax

atmospherics and more food choices (Hasana, 2013). Due to those researches, the

author will elaborate more on the dining restaurants especially in casual upscale

dining as it attracts author’s interest to examine the concept of casual upscale dining

in Jakarta.

Fine dining is a full service restaurant that offers the experience of luxury,

starts from receiving full attention from the trained staffs, taste the finest food, served

a well presented food prepared by the professional chef, feel an elegant ambience

until pay the premium price for excellence food, service and atmosphere

(Milliman.R, 1986). Being in a premium level affecting the food sales of fine dining

industry which is 2% every year, but the positive side is the majority of its customers

are repeat customers. The atmosphere in fine dining is a formal concept. In Jakarta

itself, fine dining is popular among high end customers.

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Casual upscale dining is a theme restaurant that focuses on serving customers

with high quality food and service with moderated price level compare to fine dining

(Kavila, 1997). It is also concerned with creating a memorable experience of each

consumer by providing a comfortable dining atmospherics. The atmospherics in

casual upscale dining is more casual and cozy. The food variety is also available in

casual upscale dining, as combining different cuisines can attract group of people

that have different likes and tastes.

Below is the list of 7 top Fine dining and Casual Upscale Dining in Jakarta,

Indonesia according to Indonesia Hotel & Restaurants association:

Table 1.1: Seven Top Fine Dining and Casual Upscale Dining in Jakarta

Source: Jakarta Hotel & Restaurant Association

No. Fine Dining Casual Upscale Dining

1. Amuz Gourmet Social House

2. Le Quartier Union

3. Rosso Blue Grass

4. Altitude – The Plaza Loewy

5. Sriwijaya Fine Dining Monolog

6. Scusa Colonial

7. Cassis Movida Tapas

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According to Indonesia Hotel & Restaurant Associations, statistic shows that

in 2012, the number of casual upscale dining in Jakarta was 1,966 business units,

while in 2013 the number was increased to 2.118 business units mostly were found in

the South Jakarta such as SCBD areas, Senopati, and other part of Jakarta. As the

year grew and the industry becomes more competitive, the number of casual upscale

dining is also increasing in Jakarta as more of expatriate from around the world are

staying in Jakarta for working, it influences the lifestyle of the local citizen to also

try their living style, one of them is by visiting a casual upscale dining to have

foreign cuisines, and wine & dine at different atmospherics. Casual upscale dining

proposes a complete package of food, service, and atmospherics to create an

emotion.

Every restaurant has a standard to meet customer’s demand, for full service

restaurants, the factors that is demanded by the customers consist of (Ramapuram &

Batra, 2006):

Table 1.2: The Standard Requirement of full service restaurants

Atmosphere Convenience Service Food

o Level of

comfort

o Parking facility o Friendly/polite

helpful staff

o Tastiness of food

o Level of

Noise

o Handling of

reservations

o Speed of service o Freshness of food

o View from

the restaurant

o Opening/closing

hours

o Attentiveness of

staff

o Presentation of

food

o Overall

Cleanliness

o Location o Food/beverage

knowledge of staff

o Temperature of

food

Souce: The journal of Marketing

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This research is examining the casual upscale dining restaurants that provide

those three out of four elements whether they are able to create an emotion for

customers and an attachment towards the restaurant. The author will investigate two

out of seven casual upscale dining that have been mentioned above as an example of

casual upscale dining in Jakarta that offers the element of atmospherics. The two

casual upscale dining that will be discussed are Social House and Union. As the two

restaurants present a similar concept of dining, offer similar menu such as Western

and Asian cuisines, and similar price range (Libby, 2013). The author decided to

choose these two dining based on preliminary research conducted by the author to 35

respondents where they are asked to rate the 7 top casual upscale dining in Jakarta,

and the result shows that Social House and Union as the top two most visited. The

author fact is that based on The Jakarta Post published in 2013, it is written that the

two dining be at the top of most favorite casual upscale dining in Jakarta.

In casual upscale dining, the focus is more as it is not only to fulfill the

biological needs but also the social needs (Powers & Barrows 2006). The two factors

in restaurant industry especially casual upscale dining need to be fulfill to reach

customers emotion. The intrinsic factor of a restaurant is consider as the components

of the product or services it offers, According to (Olson, Zeithaml, Jooyeon, &

SooCheong, 1977), the intrinsic factor in the casual upscale dining is the food and

services that is being offered to the customers such as; the quality of food, the

presentations of the food, the customer service, and the service from the waiters. On

the other side, the extrinsic factor is not a part of the food and service, but related to

the environment elements or the atmospherics such as; the ambient, design, and

social (Zeithaml, 1988). Previous study suggested that extrinsic factors could

influence customer’s belief about the quality they would receive even before the

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actual consumption of the food or the service (Zeithaml, 1988). The environmental

settings influenced customer’s perception on their behavior intentions as they set a

certain belief of a quality of the food and service from its atmospherics.

Source: www.technomic.com

Figure 1.2: Spotlight on casual dining consumers

Based on figure 1.2, 80% of casual dining customer in USA, visit their

favorite restaurant at least once a month. The rating for casual upscale dining based

on their food quality and taste, variety of adult beverages such as wine and liquor, the

quality of service, its decoration and ambience also the menu differentiation.

1.3 Social House and Union Dining

Social House is a casual upscale dining located in Grand Indonesia Mall,

since 2008 it has a reputation as one of the most known and casual restaurants in

Jakarta. It continues to create an outstanding atmospherics as well as creating new

menus for breakfast, brunch, lunch, dinner, and super. According to Indonesia Hotel

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and Restaurant Associations it ranked on the 163 position out of 2,118 restaurants in

Jakarta as the most visited and satisfied dining experience. Social House understands

that casual upscale dining needs to have a theme, and they chose to create a

“Lifestyle” theme especially for Jakarta consumers (Leso, 2014).

Source: www.ismaya.com/socialhouse

Figure 1.3: The appearance of Social House

As can be seen in Figure 1.3, the entrance of Social House is unique as they

display more than 300 wine varieties that can be picked by customers directly or they

can see the list from the menu and order through the waiters. The view to Bunderan

Hotel Indonesia is the most preferred as it shows the beautiful side of Jakarta. The

figures show social house is surrounded by eye-catching views and attractive design,

and pleasant dining experience. The extrinsic factors of Social House have been well

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presented. Music plays at social house at all times, variety of music such as;

instrumental, pop, rock, and RnB can be in the options.

Source: www.urbanouters.com

Figure 1.4: the Menu and food presentations at Social House

The intrinsic factors such as; the varieties of food, the presentation of food,

and the quality of food of Social House can be seen in Figure 1.4 shows the menu

available at Social House, from cheese and ham to salmon sushi, this shows the

variety of food they offered that can fulfill each customer’s preferences. Also the

presentation of the food, as can be seen the food is prepared horizontally in one slot.

The second casual upscale dining in Jakarta that located in Plaza Senayan,

Jakarta opened since July 2011 has become a recommended lunch or dinner place.

Located in business area, also increase the advantages of Union as many customers

visit Union. According to Indonesia Hotel and Restaurant Associations it ranked on

the 458 position out of 2,118 restaurants in Jakarta. It creates a classy environment as

can be seen in the figure 1.5; the atmospherics of Union shows the cozy ambient and

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attention-grabber of the design of the furniture and layout. The setting shows an

elegancy of a dining place. The tempting food presentation served by Union can be

seen in figure below:

Source: www.unionjkt.com

Figure 1.5: the appearance of Union

Source: www.unionjkt.com

Figure 1.6: the food presentation at Union

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1.4 Problem statement

Knowing that food industries are growing in each and every corner of Jakarta,

especially for casual upscale dining that offers Western and Asian cuisines. Currently

taste of the food is not the only determining factor that make consumer visit the

restaurant often. The audience is looking for more than that, such as ambiance. The

author of this journal (J.Baker, 1994; Jang and Ha, 2012), mentioned atmospherics or

physical environment consists of;

- Ambient ; Scent, noise, color, and music

- Design ; Layout, furniture, wall composition

- Social ; Types of customers, employees appearance, crowding

In this competitive market, many casual upscale dining collapse in the

introduction stage as the customers demand and desire have become higher than

before. They are looking for single place which offer those mentioned variables

according to their standard. It becomes a touch point for restaurant business to mix

business with pleasure in today’s world, where people are looking for a single place

to get multiple satisfaction.

This research is intended to find out whether ambience can have positive

outcome to the behavior of consumers and the perception of the quality food and

service. For consumers in Jakarta that live a high lifestyle or living standard,

ambience plays an important role as it is directly interrelated with perception of high

quality of food as well the service. Consumer perceived that full service restaurants

are offering a complete package; besides offering pleasant atmospherics, they

believed that they should offer high quality of food as well as the high quality

service. This becomes a challenge for restaurant industry on leaving a lasting

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impression not only in the atmospherics factors, but also make sure that it provides

high quality on both food and service. This issue can be quite challenging for every

service provider to keep their customers or lose them. Understanding the market that

provides a good atmospherics such as the ambient, layout, or unique theme is not

enough; but it can be admitted at first impression when consumers enter the casual

upscale dining they feel a good sensation by looking at the atmospherics, their mind

is set to believe that they are going to receive superiority of food and services. As a

result, when restaurants only able to provide an excellent atmospherics without

providing the good food and service quality, it may result to the failure of repeat

customers. The behavior intentions of customers to re visit will depend on the three

factors they would receive, which are the physical environment of the restaurants, the

food quality they would taste, and the services they would get. The main issue with

the casual upscale dining in Jakarta is to create a good ambience followed by

offering high quality of food taste and services. It is expected that successful casual

upscale dining makes consumers re-visit the restaurants and recommend it to others.

The author decided to use 2 top casual upscale dining in Jakarta, Social House and

Union to examine the research. From the empirical study, the author conducted an

interview with the 2 restaurants that can be used as a reference for the research

purpose. The result can be seen in the Appendix 17.

1.5 Scope

The objective of this research is to examine the perception of atmospherics in

casual upscale dining restaurants on perceived quality of service and food. The other

purpose is to study the impact of quality perception on consumers’ behavioral

intentions, and the effect of mediating variables. The respondents of casual upscale

dining visitor in Jakarta which are from different profession such as university

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students, professionals, and house wives will be filling the questionnaire designed by

the author. The research will be distributed to visitors of Social House and Union

using judgmental sampling method with the age group of 18-55 years old and who

has been to those restaurants in six months time or less. The distribution of the

questionnaire will be held in Jakarta because of the fact that those two restaurants are

based in Jakarta and the majority of customer that visits those restaurants lives in

Jakarta.

1.6 Research Questions

This research is conducted to find out how the perception of atmospherics

setting in western restaurant influence customers’ perception of the food quality and

service quality as well as the effect of quality perception in the relationship between

perception of atmospherics and behavioral intentions in Jakarta. In order to do so,

there are numerous questions that need to be answered as of the following:

RQ1. Do atmospherics positively influence perception of service quality?

RQ2. Do atmospherics positively influence perception of food quality?

RQ3. Do atmospherics positively influence behavioral intentions?

RQ4. Does service quality positively influence behavioral intentions?

RQ5. Does food quality positively influence behavioral intentions?

RQ6. Does service quality mediate the relationship between perception of dining

atmospherics and behavioral intentions of the customers?

RQ7. Does the food quality mediate the relationship between perception of dining

atmospherics and behavioral intentions of the customers?

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1.7 Aim and Benefits

The aims of this study that the author wishes to achieve are as follows:

To investigate the effect of perception of atmospherics in casual

upscale restaurants on customer’s perception of the service and food

quality.

To investigate the impact of quality perception on consumers’

behavioral intentions such as spreading positive word of mouth,

revisit, and act as an advocate.

To investigate the mediating effect of quality perception between

atmospherics of casual upscale restaurant setting and customers’

behavioral intentions.

Provide future guidelines for future research project on dining

atmospherics.

Furthermore, the benefits of this study author hopes to provide are:

For the restaurant industry, the results of this research will create

better understanding about consumer perception of the food and

service quality also their behavior in Jakarta based on the dining

atmospherics.

For marketers, this research can be used to design a suitable

marketing strategy that fits the customer’s perception towards the

settings of ambience and the quality of both service and food in casual

upscale dining restaurants.

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For casual upscale dining companies, the findings can be used for

future guidelines for understanding customer insight towards a

restaurant, to formulate new strategy and improve their performances.

Eventually, to measure overall effectiveness of dining atmospherics

settings on customer’s perception of the quality and their behavior

intentions.

1.8 Structure

The structure of this thesis will be divided into five parts:

CHAPTER 1: Introduction

This chapter discusses the essential background of restaurants industry and

the effect of the atmospherics and facts about customer’s behavior on visiting

restaurants in Jakarta. In addition, the main focus is on casual upscale dining in

Jakarta that gives a sense of high quality food and service through its ambience.

Chapter 1 also mentions the problem statement of the research, the scope, the

research questions, and the aim and benefits of the research.

CHAPTER 2: Literature Review

This chapter shows the framework of dining atmospherics on behavioral

intentions through quality perception in casual upscale dining in Jakarta. Each

variable will be defined in details. The basic theories of atmospherics, behavioral

intentions, service quality, and food quality from previous research will be covered.

CHAPTER 3: Research Methodology

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This chapter shows an in depth details about how the research will be

conducted. The data collection method, the questionnaire, sampling method, and

method analysis will be covered in this chapter.

CHAPTER 4: Results & Analysis

This chapter discusses the findings of the study as well as the outcome of

each hypothesis.

CHAPTER 5: Conclusion and Recommendation

This chapter provides the summary and conclusion of the complete research.

In addition, this chapter will discuss how this research will help casual upscale

dining industry to conquer the market by providing good atmospherics followed by

good quality service and food. The managerial implementation and recommendations

will be provided in this chapter.