Viewpoint

Adapting to Changing Times
Dining Insights, Fall 2009

The times they are a-changing
Bob Dylan wrote and sung that back in 1964 in a time of ferment and change. It would have been just as timely if he had introduced it in 2009.

At Clarion Group, we've been changing to keep up with - and get a step or two ahead of - the changes in the economy, in companies, on campuses and in life that have been going on around us, for the benefit of our clients.

Over the course of 2009, we have . . .

• Redesigned our website, clariongp.com, to provide more information about campus and corporate dining and our organization's capabilities.


• Launched this blog to provide a forum for everyone interested in on-site food services and opened new pages in Linkedin, Facebook and Plaxo.


• Developed a Six Sigma-based system for operational and financial evaluations of dining services to more effectively analyze systems, services and financials and create imaginative, effective solutions.


• Created the "Fresh & Natural" program to bring healthy and sustainable dining to campuses and companies.

Now we've taken a new, big step to broaden our horizons to encompass all the other facilitiees services that interact with dining services. These include conference and event services and management, space and servies reservation systems, audio/visual services and lodging.

Ernie Wilder, who managed all these services at the International Monetary Fund, has joine Clarion to add the expertise we need to effectively consult on these specialties - either as an integrated project covering all dining and facilities servicesor for the separate components.

We worked with Ernie at the IMF and know his capabilities and his potential to add value to clients' facilitiess services.

We're still focused on our traditional capabilities, including outsourcing, vendor negotiations and maagement, systems, operating systems, food quality and service improvements, feasibility studies, concept development and facility design.

What changes will come in 2010? Stay tuned.

- Tom Mac Dermott

Clarion Expands to Facilities Services Consulting

Clarion Group has expanded the scope of its consulting practice to include facilities services in addition to dining services, Tom Mac Dermott, Clarion's president, has announced.

The firm has also added an office in Saint Augustine, FL to its existing offices in Kingston, NH and Maplewood, NJ.

Ernest W. Wilder, former Chief of Hospitality Services at the International Monetary Fund (IMF), has joined Clarion Group as vice president to lead consulting projects that encompass corporate and university/college support services.

"The addition of Ernie to our team expands the scope of our services to such areas related to dining servics as conference management, audio/visual services and lodging services," Tom said. "His unique experience as a manager of hospitality services and facilities provides our clients the opportunity to improve and integrate their food, meeting, lodging and other support services."

As Chief of the IMF's Hospitality Services, Ernie integrated management of the Fund's dining and catering services, conference and events management, audio/visual services and the IMF's 177-room hotel into a "one-stop shop" to support the highly specialized requirements of this multi-national organization.

Ernie joined the IMF in 1990 as a capital project manager after a 13-year career with several architectural and engineering firms. He later became Chief of Facilities and, in 1997, Chief of Hospitality Services.

He will head the Saint Augustine, FL office. Angela Phelan, Senior Vice President, heads the New York City metro area office in Maplewood, NJ. The firm's headquarters is in Kingston, NH.

Established in 1995, Clarion Group is a consulting firm that helps, companies, universities/colleges, schools and institution to improve operations, reduce costs and plan new facilities for their dining and facilities services.

Viewpoint
The unseen financial side of the journey from farm to fork
Dining Insights, Summer 2009

The fate of CIT Group, the financial firm that supports some one million small and mid-sized businesses and isn't too big to fail, is still hanging in the balance as of this writing. But its misadventures brought to mind the little-known role similar companies, called "factors," play in getting food from the farm to your fork.

Farmers, both corporate and family, have nothing to sell, and no income, until harvest time. They get by on the profits from the last year's crop and loans, typically from banks, using their land and equipment as security. Food processors, the companies that make sausages and corn flakes, have year 'round income from a steady flow of products.

But what about the folks in the middle, the distributors who deliver the products to your kitchen? They sell to you or your food service contractor on credit. At the end of the month, they send a statement and get paid, hopefully within 30 days. But 30 days end-of-month is 60 days from the first delivery. They have to pay cash on delivery for the products they buy to resell to you and, in some cases, even before their supplier will ship to them.

How do they meet their payrolls, pay overhead costs and buy more products in the meantime? Enter the factor.

When your cafe manager signs for a delivery, the invoice is sold to a factor for immediate cash, usually about 80% of face value. When you pay the invoice, the factor pays the balance to the distributor, minus its fee. The later you pay the bill, the less the distributor receives.

The factor, in turn, borrows from banks and other sources to keep up its cash flow, so it can keep sending that 80% to your distributor. (That's where CIT ran into trouble. Its lenders stopped lending.)

Complications arise along the financial chain when more customers pay late, or don't pay at all. The cost is passed back up the chain, ending up in higher prices to you.

So, when you pay the cashier for lunch in the cafe today, you're not only paying for the food and the labor of the farmer, trucker, chef and other folks who brought you the meal, you're also paying for the complex web of financing that lubricates the whole system.

When Will Happy Days Be Here Again?

Happy days are here again, the skies above are blue again . . .

That was Al Smith's campaign song when he ran for president in 1928. He lost to Herbert Hoover and happy days departed for quite a while.

When will we see happy days again? Not for some time, I fear - at least three and maybe five years before we get back to a reasonable level of prosperity and probably eight to 10 years before our next burst of irrational exuberance.

Now, my advanced economics degree is a masters in hard knocks (I'm working on my doctorate) at the University of Trial and Error, but I've been in business through every boom and bust since the 1960s. That's taught me a few things that the academics and professional economists won't get from their computer models.

The wise seers are saying the stock market or the housing market or unemployment "appears to be near or reached a bottom." That's the good news. Well, the Titanic reached bottom too.

During each boom and bubble, the promotors of the stock market or the dot-coms or subprime mortgages were saying "this time it's different," meaning prosperity will now grow forever.

It appears this time it really is different. The entire structure of the financial world has shrunk and altered and is now a virtual ward of the government. Two of our largest manufacturing (and job-generating) companies have just collapsed into bankruptcy. The entire auto market has shrunk by about 40% from a peak of 12 million cars a year to seven million, debilitating their entire chain of suppliers and the suppliers' suppliers and all the businesses that depend on them. Unemployment has passed the three million mark, over 9% of the workforce, and is expected to reach 10%.

The optimists say the lost jobs in automotive and other industries will be replaced by new, better "green" jobs, like making windmills and solar panels. Is it realistic to believe we'll be churning out 10 to 12 million windmills a year? And be doing it by next year?

Folks who don't have jobs, or have had their pay cut, are not likely to generate a consumer spending-led recovery - or pay much in taxes to support the government's stimulus efforts. Neither will companies that are not making profits.

So, how will the economy turn around? New growth is likely to come from innovations, probably in the high tech arena. But that, like solar panel manufacturing, will take a few years before it can have a significant effect on the economy or generate new jobs. And jobs, at wages that support a family, are the key to recovery.

We'll climb out of this hole, but slowly, with the initial stages suported by the government's stimulus spending, then by new innovations and/or by some other causes, including recovery in other parts of the world, that are not apparent now.

When we get there, our economics and our world will be different and will depend in large part on the size, shape and health of the financial sector. It will surely be a while before credit flows smoothly again - to us through our credit cards and mortgages and to busines for new plant, equipment and expansion. And jobs will have to await the regrowth of business.

As happens after every good party, we'll have a collective hangover: stupendous federal debt and unfunded or underfunded Social Security, Medicare and other programs. Hopefully, we won't face a new, or continued, war.

The need to get the government's fiscal house back in order will dominate everything. How? that's 'way beyond my ability to foresee. But it will have to be done, and sooner rather than later. The hard decisions have been postponed for too long to be ignored now.

So, as individuals, we'll have to tighen up (which won't help the economy but is necessary for survival) and sweat it out.

At your job, I hope you're thinking about and planning new ways to grow, through innovative, new products and services that add real value, so that people and companies will want to buy and invest and get the happy days rolling again.

- Tom Mac Dermott

Fresh & Natural: Clarion's New Plan for Healthy Dining

Dining Insights, Spring 2009

Twenty years ago, college students' favorite meals included fruit and cottage cheese plates, chicken nuggets and chicken chop suey. Today, it's locally-grown fruits and vegetables, crispy garlic-ginger chicken wings and Vietnamese Pho, according to research by national food service contractor Sodexo.

"The biggest change we've seen is in the demand for locally-grown produce and authentic international cuisine that's made to order," says Chef Rob Morasco, Sodexo's senior director of culinary support in the education market.

The idea that healthy dining, combined with their other wellness initiatives, can help employees become more productive has penetrated the corporate world as well.

In 2008, Clarion was asked by a large corporate client to develop a program that "offers menu variety and nutritional food choices that [are] fundamental components of any best-in-class wellness initiative."

The project was the genesis of our new Fresh & Natural approach to planning on-site dining operations. We began with the premise that healthy food promotes healthy people and that healthy people work or study more productively, enjoy life more fully and find their connection to their campus or employer more enjoyable. While a healthy eating program by itself won't guarantee a healthier population, science has shown that when a third or more of daily caloric intake is in unhealthy calories, there is a significant negative impact on the individual.

Fresh & Natural incorporates elements of the Mediterranean Diet, based primarily on vegetables, fruits, fish and meat. We adapt each specific menu to the tastes, customs and preferences of the group for whom we plan the program.

It includes:

• Developing and implementing imaginative, nutritious meals, prepared from "scratch" using fresh ingredients, locally sourced as possible.
• Eliminating or minimizing junk food.
• Using organic and hormone-free foods to the extent practical.
• Providing nutrition information and education.
• Reinforcing your initiatives to encourage wellness and a healthy lifestyle.

$1.65 for a Dollar

Highmark Blue Cross Blue Shield in western Pennsylvania studied worksite healthy foods and wellness initiatives at companies with a total of 12,000 employees. They said they found a savings of $1.65 for every $1.00 spent on the programs, FoodService Director, an industry magazine reports.

Dining Ini

Sustainability and Food Service

Sustainability in all its many iterations has been embraced enthusiastically by nearly all, if not all, university, college and school communities. It's been less obviously adopted in the corporate world, if only because companies don't have students eager to promote the concept and practice.

In addition to its ecological benefits, sustainability has the potential to reduce costs for those who adopt its procedures. Energy-conserving equipment, utility-usage reduction, more efficient work practices and waste control are all good business, no matter what business you're in.

We're exploring the expanding and evolving world of sustainability and introduced our new "Fresh & Natural" approach to green, healthy dining in the Spring issue of Dining Insights. There also are articles about attracting and retaining customers and other topics involving the world of employee and student dining.

If you don't receive Dining Insights, you can join the 3,000-plus managers, administrators and executives who learn about the workings of on-site food service, outsourcing or "insourcing" their food services, dealing with food service contractors and more.

Just e-mail your name, title and mailing address to info@clariongp.com. We'll be glad to hear from you.

Tom Mac Dermott, FCSI
Clarion Group
www.clariongp.com

Thinking out loud . . .

Are contractors' investments still available?

What with companies, colleges, universities and institutions feeling the pinch of the recession, it's unlikely that food service contractors are faring any better. Every layoff or company closing means less revenue and profit for their food service operator. So, are the contractors still in the mood to provide big investments to current and prospective clients?

Just a short while ago, that would be a silly question. Unable to really differentiate themselves from each other, the "Big Three" contractors, Aramark Corp., Compass Group and Soxexo, Inc., lavished money on clients and prospects in exchange for long-term contracts. Smaller regional companies found they had to offer investments as well, just to stay in the game. Local operators were pretty much shut out, except in instances where the investment was small, or no investment was needed.

How big can investments be? In 2006, a Big Three contractor committed more than $3 million to secure a contract with a large company. The contractor has to amortize the investment over six years, meaning it has to earn $500,000 (about 7% to 9% of total revenue) above operating expenses each year before it can turn a profit -- which may be tough to do in 2009.

That kind of largess may not be available today.

What has been your experience with contractor investments? Let us know, and we'll post your comments right here.

Tom Mac Dermott
Clarion Group