New Morningstar Analyst Report for Aramark

Following a leveraged buyout in 2007, Aramark's recent IPO is the third time the food, facilities, and uniform services provider has offered shares to the public. Aramark's North American food service business, which represents nearly 70% of its sales and operating profits, trails only competitor Compass Group in the region. This asset-light outsourcing business generates recurring revenue streams by promising customers more efficient methods of managing costly noncore functions, such as kitchen operations. Corporations that offer employees access to on-site food service generate over one third of Aramark's sales, followed by educational institutions at 30%, health-care providers at 20%, and sports arenas with the remainder. Lengthy client contracts shield Aramark from the vagaries of consumer preference to a certain extent; however, with 70% of food service contracts under a profit and loss structure, the company is still subject to food sales cyclicality and cost inflation.