The signs are pointing upward for corporate food services, according to two recent surveys of the industry, but not for everyone. The story’s a little different at every company.
Overall, customer counts and the average sales per customers increased in 2012, compared to 2009 at the depth of the recession, according to the 2013 Industry Standards and Benchmark Comparison study conduced by the Society for Hospitality and Foodservice Management. The study found customer counts increased by10.6% and customers were spending 16.5% more for breakfast and 9% more for lunch than in 2009.
The unevenness of the improvement is illustrated in the findings of a separate survey by FoodService Director magazine, where 59% of corporate food service operators reported a 10% increase in sales this year over last, but 29% reported a 10% decrease in sales.
The results reflected the findings of a survey of corporate food service managers conducted earlier in the year by Clarion Group and Food Management magazine, where half of respondents reported sales increased by 5% or more in 2012 over 2011. The other half said sales were flat or declined.
Corporate food service operators have to work harder to achieve these favorable results. Increased employment and price increases alone won’t do it. Operators have to do more to entice recession-conditioned customers back to purchasing their meals in the company café. Every survey on the subject says people are more attuned to the value of their purchases than to just price.
Here are a few suggestions corporate food service operators can use to increase sales and the bottom line:
• Sell the sizzle. Active marketing and promotions via the company intranet, posters and fliers can emphasize periodic "specials." They needn’t be reduced prices, just greater perceived value.
• Special events, promoting a holiday or a new food offering every few weeks will help bring in customers who usually go out for lunch or bring their own to work. If you get them once, you may be able to convert them to regulars.
• Make good use of social media to promote the café. A small restaurant chain in California is using an app to communicate with customers in its limited territory. The same would work for a corporate food service operation.
• A visiting chef from a popular local restaurant almost always attracts a bigger crowd. You can keep them coming by offering your version of the restaurant’s most popular dishes on succeeding days.
• An "action station" where a chef prepares meals to order at the counter as the customer watches is the surest way to convey "fresh" and "healthy" to you customers.
Above all make sure the food you offer is good, service is warm, friendly and prompt and the café is clean and attractive. Combine all these elements and sales and profitability are bound to rise.
About Clarion Group
Clarion Group is an consulting firm that advises companies, professional firms, colleges and universities, independent schools and institutions in the management, operation and improvement of their in-house employee/student food services, catering, conference, lodging and related hospitality services throughout the U.S. and Canada.
For information, contact:
Tom Mac Dermott, FCSI, President
Clarion Group
PO Box 158, Kingston, NH 03848-0158
603/642-8011 or TWM@clariongp.com
Website: www.clariongp.com
Sunday, December 1, 2013
Texas A&M Got Big Money for Outsourcing Dining Services. What's Their Risk?
Article revised December 2, 2013
Be careful what you ask for. You might get it, and a lot more in the bargain.
We're talking about the large investments major food service contractors are offering colleges for the opportunity to operate their campus food services. The dollars certainly are enticing, but not quite so attractive when you look at the long strings – really thick cords – attached to them.
The biggest recent example is Texas A&M University, College Station, TX, which outsourced its food service operations to the Chartwells Division of Compass Group last year. A separate Compass division also was awarded landscaping and maintenance contracts.
With an enrollment of 56,000 students including 8,000 campus residents, Texas A&M certainly isn’t a typical university, but the rewards the administration hopes to receive and the risks they're taking, scaled down, are the same for any college or university that accepts a contractor's "investments."
The financial commitments Chartwells made to the university to gain control of the campus food services are enormous, yet it has already caused problems, maybe more problems than it cured.
According to the local newspaper, The Eagle, the company paid the university a "signing bonus" of some $45 million upon being awarded a five-year contract, with an option for another five years. It paid another $6.5 million this year and spent some $5 million in dining facility renovations, with additional payments to come throughout the contract’s life. The total cost to Chartwells over the 10 years -- if the contract runs that long -- is the $45 million signing bonus, plus a total of $25 .5 million in facilities improvements, a 5 percent commission on sales in the first year and a 10 percent commission on sales in the remaining years, about $2.5 million, for a potential total of around $73 million.
The administration apparently sees that as a real bargain, since it reported losing $1 million a year running the food service on its own
That’s the good news. But here’s the other side: Meal plans for resident freshmen and sophomores have been made mandatory. By the 2016 academic year, all 8,000 resident students will be required to joint the meal plans at prices that currently range from $1,236 to $2,096 per semester and will increase by up to 3% a year. When all resident students are required to belong to a meal plan, Chartwells’ revenue from the plans will be about $27 million a year; potentially $270 million if the contract runs for the full ten years, not counting revenue from retail outlets, catering and other sources.
Of the total $270 million in potential meal plan revenue, the $73 million in payments and commissions equal some 27%. Chartwells has to generate a profit on top of that big enough to justify the payments, probably 8 to 10 percent of sales, leaving about 65% or less of total revenue for food, labor and operating expenses.
But what if all doesn’t go well? The Eagle reports a great deal of student unhappiness and agitation over the mandatory meals plans, price increases and new restrictions on meal plan options. Already, Chartwells has had to replace the campus general manager, a sure sign of trouble.
A college or university has only one good option when its food services become unsatisfactory and the contractor cannot improve them. It must replace the contractor. But wait, what about those dollars the contractor provided? The institution has to reimburse all the money the contractor provided, prorated by the number of years left in the contract. Not many institutions can afford that – the money has been spent – so it may have to go along with the unsatisfactory food service operation and hope the contractor can improve its performance.
Of course, the money isn’t really an investment, it's an advance or loan. Repayment comes from higher meal plan charges and other prices and maybe reduced services. The college never knows how much return the contractor is making on the loan. It’s buried in the cost structure of the financial reports it sends to the client. A college would do better to borrow the money at a known interest rate and let the contractor operate at a known rate of profit.
College and university administrators should carefully look the gift horse in the mouth and think about the possible long-term consequences to the campus food services and the institution of accepting immediate money in exchange for a long-term commitment to a single provider.
About Clarion Group
Clarion Group is a consulting firm that advises colleges and universities, companies, professional firms and institutions in the management, operation and improvement of their in-house employee/student food services, catering, conference, lodging and related hospitality services throughout the U.S. and Canada.
For information, contact:
Tom Mac Dermott, FCSI, President
Clarion Group
PO Box 158, Kingston, NH 03848-0158
603/642-8011 or TWM@clariongp.com
Website: www.clariongp.com
Be careful what you ask for. You might get it, and a lot more in the bargain.
We're talking about the large investments major food service contractors are offering colleges for the opportunity to operate their campus food services. The dollars certainly are enticing, but not quite so attractive when you look at the long strings – really thick cords – attached to them.
The biggest recent example is Texas A&M University, College Station, TX, which outsourced its food service operations to the Chartwells Division of Compass Group last year. A separate Compass division also was awarded landscaping and maintenance contracts.
With an enrollment of 56,000 students including 8,000 campus residents, Texas A&M certainly isn’t a typical university, but the rewards the administration hopes to receive and the risks they're taking, scaled down, are the same for any college or university that accepts a contractor's "investments."
The financial commitments Chartwells made to the university to gain control of the campus food services are enormous, yet it has already caused problems, maybe more problems than it cured.
According to the local newspaper, The Eagle, the company paid the university a "signing bonus" of some $45 million upon being awarded a five-year contract, with an option for another five years. It paid another $6.5 million this year and spent some $5 million in dining facility renovations, with additional payments to come throughout the contract’s life. The total cost to Chartwells over the 10 years -- if the contract runs that long -- is the $45 million signing bonus, plus a total of $25 .5 million in facilities improvements, a 5 percent commission on sales in the first year and a 10 percent commission on sales in the remaining years, about $2.5 million, for a potential total of around $73 million.
The administration apparently sees that as a real bargain, since it reported losing $1 million a year running the food service on its own
That’s the good news. But here’s the other side: Meal plans for resident freshmen and sophomores have been made mandatory. By the 2016 academic year, all 8,000 resident students will be required to joint the meal plans at prices that currently range from $1,236 to $2,096 per semester and will increase by up to 3% a year. When all resident students are required to belong to a meal plan, Chartwells’ revenue from the plans will be about $27 million a year; potentially $270 million if the contract runs for the full ten years, not counting revenue from retail outlets, catering and other sources.
Of the total $270 million in potential meal plan revenue, the $73 million in payments and commissions equal some 27%. Chartwells has to generate a profit on top of that big enough to justify the payments, probably 8 to 10 percent of sales, leaving about 65% or less of total revenue for food, labor and operating expenses.
But what if all doesn’t go well? The Eagle reports a great deal of student unhappiness and agitation over the mandatory meals plans, price increases and new restrictions on meal plan options. Already, Chartwells has had to replace the campus general manager, a sure sign of trouble.
A college or university has only one good option when its food services become unsatisfactory and the contractor cannot improve them. It must replace the contractor. But wait, what about those dollars the contractor provided? The institution has to reimburse all the money the contractor provided, prorated by the number of years left in the contract. Not many institutions can afford that – the money has been spent – so it may have to go along with the unsatisfactory food service operation and hope the contractor can improve its performance.
Of course, the money isn’t really an investment, it's an advance or loan. Repayment comes from higher meal plan charges and other prices and maybe reduced services. The college never knows how much return the contractor is making on the loan. It’s buried in the cost structure of the financial reports it sends to the client. A college would do better to borrow the money at a known interest rate and let the contractor operate at a known rate of profit.
College and university administrators should carefully look the gift horse in the mouth and think about the possible long-term consequences to the campus food services and the institution of accepting immediate money in exchange for a long-term commitment to a single provider.
About Clarion Group
Clarion Group is a consulting firm that advises colleges and universities, companies, professional firms and institutions in the management, operation and improvement of their in-house employee/student food services, catering, conference, lodging and related hospitality services throughout the U.S. and Canada.
For information, contact:
Tom Mac Dermott, FCSI, President
Clarion Group
PO Box 158, Kingston, NH 03848-0158
603/642-8011 or TWM@clariongp.com
Website: www.clariongp.com
Tuesday, October 15, 2013
Should a College Operate Its Own Food Services?
Should a college or university operate its campus food services on its own, or turn the role over to a food service contractor? That’s a question with an ambiguous answer, according to Tom Mac Dermott, FCSI, president of the food service consultant firm Clarion Group.
It depends on a number of factors primarily, how important food services is considered to be to the institution’s core mission and how competently the service is being managed.
Some 90 percent of all colleges and universities (from community colleges through graduate schools) now outsource their food services to a contractor; the exceptions being the largest campuses of state universities and a small number of state and independent colleges.
The big state universities’ dining services with budgets of $20 million or more are larger than many regional food service companies and have the resources to employ professional staffs and operate successfully.
Among smaller institutions, the decision to remain self-managed is based on the value the college sees in its dining services and a desire to keep it as an integral part of the campus community. Over the past 30 or so years, colleges have increasingly outsourced food service operations almost invariably for economic reasons. The decision usually was made when the food service operation was losing money or a competent manager retired and the successor was not competent.
In recent years, colleges have converted to contractor management because the contractor offered a substantial financial investment to upgrade – or even build – the food service’s facilities. Some of these investments have been in the millions of dollars, even for relatively small institutions. Of course, the investments do not come without strings in the form of a long-term contract, sometimes for more than ten years.
Some medium-sized and smaller colleges have a long history of self-management and have been successful. Davidson College in North Carolina, Saint Anselm College in New Hampshire, Bowden and Bates Colleges in Maine and Middlebury College in Vermont are examples. Many of these regularly appear on the Princeton Review’s annual "Best Campus Food" list, indicating the importance food service plays in their campus' lives.
At one time, colleges would outsource their food services because the contractor claimed its buying power would enable it to reduce the operation’s food costs, but that’s no longer the case (if it ever was true). Food service companies now retain all the advantages gained by their purchasing volume and promise no more than to match local market prices – the same prices a competent independent operator could get on his or her own.
"Competent" is the key word. The self-managed food service operation is only as good as its manager, and purchasing food economically is only a part of the picture. The manager’s skills in creating imaginative menus that reflect the tastes and preferences of the campus community; adaptability in meeting the needs of the college and students, and leading a well-motivated, well-trained staff are more important.
The college or university that is considering outsourcing its self-managed food services should be aware that, while it’s comparatively easy to convert to contractor management, its far more difficult to do the reverse, revert back to self-management. The infrastructure to support the operation has to be reassembled and a competent manager found and hired.
Only one Clarion client in 18 years, New York Institute of Technology, Westbury NY, made the switch and has been successfully self-managing its multi-unit campus food service operations for the past five years.
About Clarion Group
We are a consulting firm that advises companies, professional firms, colleges and universities, independent schools and institutions in the management, operation and improvement of their in-house employee/student food services, catering, conference, lodging and related hospitality services throughout the U.S. and Canada.
For information, contact:
Tom Mac Dermott, FCSI, President
Clarion Group
PO Box 158, Kingston, NH 03848-0158
603/642-8011 or TWM@clariongp.com
Website: www.clariongp.com
It depends on a number of factors primarily, how important food services is considered to be to the institution’s core mission and how competently the service is being managed.
Some 90 percent of all colleges and universities (from community colleges through graduate schools) now outsource their food services to a contractor; the exceptions being the largest campuses of state universities and a small number of state and independent colleges.
The big state universities’ dining services with budgets of $20 million or more are larger than many regional food service companies and have the resources to employ professional staffs and operate successfully.
Among smaller institutions, the decision to remain self-managed is based on the value the college sees in its dining services and a desire to keep it as an integral part of the campus community. Over the past 30 or so years, colleges have increasingly outsourced food service operations almost invariably for economic reasons. The decision usually was made when the food service operation was losing money or a competent manager retired and the successor was not competent.
In recent years, colleges have converted to contractor management because the contractor offered a substantial financial investment to upgrade – or even build – the food service’s facilities. Some of these investments have been in the millions of dollars, even for relatively small institutions. Of course, the investments do not come without strings in the form of a long-term contract, sometimes for more than ten years.
Some medium-sized and smaller colleges have a long history of self-management and have been successful. Davidson College in North Carolina, Saint Anselm College in New Hampshire, Bowden and Bates Colleges in Maine and Middlebury College in Vermont are examples. Many of these regularly appear on the Princeton Review’s annual "Best Campus Food" list, indicating the importance food service plays in their campus' lives.
At one time, colleges would outsource their food services because the contractor claimed its buying power would enable it to reduce the operation’s food costs, but that’s no longer the case (if it ever was true). Food service companies now retain all the advantages gained by their purchasing volume and promise no more than to match local market prices – the same prices a competent independent operator could get on his or her own.
"Competent" is the key word. The self-managed food service operation is only as good as its manager, and purchasing food economically is only a part of the picture. The manager’s skills in creating imaginative menus that reflect the tastes and preferences of the campus community; adaptability in meeting the needs of the college and students, and leading a well-motivated, well-trained staff are more important.
The college or university that is considering outsourcing its self-managed food services should be aware that, while it’s comparatively easy to convert to contractor management, its far more difficult to do the reverse, revert back to self-management. The infrastructure to support the operation has to be reassembled and a competent manager found and hired.
Only one Clarion client in 18 years, New York Institute of Technology, Westbury NY, made the switch and has been successfully self-managing its multi-unit campus food service operations for the past five years.
About Clarion Group
We are a consulting firm that advises companies, professional firms, colleges and universities, independent schools and institutions in the management, operation and improvement of their in-house employee/student food services, catering, conference, lodging and related hospitality services throughout the U.S. and Canada.
For information, contact:
Tom Mac Dermott, FCSI, President
Clarion Group
PO Box 158, Kingston, NH 03848-0158
603/642-8011 or TWM@clariongp.com
Website: www.clariongp.com
Micromarts Merge Food Service and Vending
Convergence is a term usually associated with communications, the blurring of lines between television, the internet, smart phones and the like.
Now convergence has come to corporate food service. The line between staffed employee cafes and vending is being blurred with the emergence of the unattended food service option called micromarkets.
The new concept provides fresh and packaged foods in a compact convenience store-style setting, but requires no attendant or cashier. Customers select their products from glass-front refrigerated display cases, shelves and racks, then pay for the purchases at a touchscreen kiosk, similar to those found at Home Depot and some supermarkets.
A surveillance camera monitors the space, discouraging pilferage. Current operators say their pilferage loss is about 2%.
The micromarket concept is designed for workplaces that are too small to support a staffed café and where vending is an inadequate solution, generally between 150 and 500 population.
The concept can supplement the corporate food service’s central dining center for a company whose population spread among several buildings on a campus. The compact units can be installed in buildings that are too far from the central dining center to be convenient to employees. It also would work for a company in a high rise where the employee café isn’t convenient to some floors.
It could be useful in a company that has a population in evenings, overnight or on weekends, when the dining center is closed. It also can replace the staffed company store or c-store, selling sundries and company-logo products in addition to light foods, snacks and beverages. These units usually are losers, because low sales can’t support the attendant’s wages.
Space requirements are minimal,. As little as a 20x20-foot semi-enclosed room or alcove is all that’s needed, enough for a two- or three-door refrigerated display case, shelving and racks for non-refrigerated products, a payment kiosk and surveillance camera.
The concept is gaining a niche in corporate food service. There were a total of 2,642 micromarkets in operation at the end of 2012, up by 170% from 2011, according to industry reports.
So far, independent vending companies that have fresh food commissaries and the national Canteen division of Compass Group are the ones promoting micromarkets. Vendors say sales double when a micromarket replaces a bank of vending machines. The low cost and ease of installation makes the option especially attractive.
There’s nothing to prevent a company or its food service operator from installing a micromarket, supported from the central kitchen instead of an outside commissary.
The key for anyone who wants to include a micromarket in its corporate food service portfolio is to ensure the food offered is fresh, appealing and well packaged. That means daily restocking and strict rotation of product. Just a few customers having a bad experience will be enough to destroy acceptance and sales. That’s why fresh food vending often is unsuccessful. Customers don’t believe the food is fresh.
Micromarkets are only one of many creative solutions Clarion Group can bring to your employee dining, executive dining, catering and other hospitality services. To learn how we can improve value, increase sales and crate a more cost-effective food service program, contact Tom Mac Dermott, 603/642-8011 or Angela Phelan, 609/619-3295 or e-mail us at info@clariongp.com. Take a look at our website, www.clariongp.com,
Now convergence has come to corporate food service. The line between staffed employee cafes and vending is being blurred with the emergence of the unattended food service option called micromarkets.
The new concept provides fresh and packaged foods in a compact convenience store-style setting, but requires no attendant or cashier. Customers select their products from glass-front refrigerated display cases, shelves and racks, then pay for the purchases at a touchscreen kiosk, similar to those found at Home Depot and some supermarkets.
A surveillance camera monitors the space, discouraging pilferage. Current operators say their pilferage loss is about 2%.
The micromarket concept is designed for workplaces that are too small to support a staffed café and where vending is an inadequate solution, generally between 150 and 500 population.
The concept can supplement the corporate food service’s central dining center for a company whose population spread among several buildings on a campus. The compact units can be installed in buildings that are too far from the central dining center to be convenient to employees. It also would work for a company in a high rise where the employee café isn’t convenient to some floors.
It could be useful in a company that has a population in evenings, overnight or on weekends, when the dining center is closed. It also can replace the staffed company store or c-store, selling sundries and company-logo products in addition to light foods, snacks and beverages. These units usually are losers, because low sales can’t support the attendant’s wages.
Space requirements are minimal,. As little as a 20x20-foot semi-enclosed room or alcove is all that’s needed, enough for a two- or three-door refrigerated display case, shelving and racks for non-refrigerated products, a payment kiosk and surveillance camera.
The concept is gaining a niche in corporate food service. There were a total of 2,642 micromarkets in operation at the end of 2012, up by 170% from 2011, according to industry reports.
So far, independent vending companies that have fresh food commissaries and the national Canteen division of Compass Group are the ones promoting micromarkets. Vendors say sales double when a micromarket replaces a bank of vending machines. The low cost and ease of installation makes the option especially attractive.
There’s nothing to prevent a company or its food service operator from installing a micromarket, supported from the central kitchen instead of an outside commissary.
The key for anyone who wants to include a micromarket in its corporate food service portfolio is to ensure the food offered is fresh, appealing and well packaged. That means daily restocking and strict rotation of product. Just a few customers having a bad experience will be enough to destroy acceptance and sales. That’s why fresh food vending often is unsuccessful. Customers don’t believe the food is fresh.
Micromarkets are only one of many creative solutions Clarion Group can bring to your employee dining, executive dining, catering and other hospitality services. To learn how we can improve value, increase sales and crate a more cost-effective food service program, contact Tom Mac Dermott, 603/642-8011 or Angela Phelan, 609/619-3295 or e-mail us at info@clariongp.com. Take a look at our website, www.clariongp.com,
Thursday, September 12, 2013
Contractor Investments: Look the Gift Horse in the Mouth
With low interest rates and the Federal Reserve’s easy money policy, the major food service contractors have been more generous in offering financial investments to potential college and university clients.
In Clarion Group college food service projects, we've seen recent seven-figure investment offers to college clients where the apparent profitability to the contractor doesn’t merit such large sums. Clearly, the contractors are seeing a return on investment (ROI) that’s not apparent to the client.
A food service contractor needs a 20% ROI – total annual profit – to justify a large investment. That means for a $1 million investment, its annual profit must be at least $200,000 a year for five years.
A minimal profit for the contractor is about 8% – 5% to cover its general and administrative expenses and 3% net, pre-tax profit. It would take $2.5 million in annual sales to generate an 8% rate of profitability to cover a $1 million investment.
Some contractors have offered investments that on the surface don’t come close to yielding a 20% ROI. Their actual profit is far above 8% or whatever profit margin they show to their clients on their budgets and financial statements.
Recent Clarion Group reviews of college food service financial statements indicate where the additional profit comes from. There are at least three principal areas:
Vendor rebates: Contractors no longer deny that they receive rebates and discounts from their vendors. An audit by the New York State Attorney General found contractors were withholding rebates equal to 14% of purchases from state university and public school clients. Other documents we've reviewed indicate the rebates may be as high as 18% of purchases.
A $2.5 million dining service might have a 35% food cost and 4% paper/disposables cost, about $975,000. At 14% of these purchases, the contractor's rebates are $136,500.
Wage-related taxes, benefits and insurance: Contractors typically charge between 30% and 40% of direct payroll (salaries, wages, overtime and paid time off) on their operating statements. A college administrator may not question this cost because the college’s own payroll tax and benefits package may run as high as 40% to 50% of payroll.
The food service contractor’s actual cost is about 25% to 27% of payroll, sometimes less. The contractor retains the difference as part of its profit. Low-wage food service employees often can’t afford their share of the cost of the contractor’s health insurance; young employees don’t think they need insurance, and some have a spouse with better coverage. Typically, half or fewer of full-time hourly employees – and none of the student or other part-time employees – accept the company’s benefits package.
A $2.5 million sales, dining service's direct salaries and wages cost may be about $850,000. If the contractor charges 30% of payroll, but has an actual cost of 25%, its indirect profit is about $42,500.
Liability insurance: Contractors typically charge between 1% and 1.8% of total sales for liability insurance, although their actual cost is about 0.5% of sales; up to 0.8% for small contractors, Clarion financial reviews have found. What that's worth to the contractor? At 1.5% of $2.5 million in sales, the insurance charge is $37,500. A large contractor's actual cost at 0.5% of sales is $12,500, leaving $25,000 in the contractor's pocket, an undisclosed 1% of sales.
Altogether, the contractor in this example has generated about $204,000 in profits not visible to the client -- some 8% of sales -- in addition to the profit shown on the operating statement.
The trap: Contractors typically ask for five- to ten-year contracts when they make an investment, and sometimes longer, if the investment is large. This may seem like a minor consideration when the college is seeking the investment dollars, but it can prove to be disadvantageous. The operating contract will require the college to refund the undepreciated balance of the investment if the contract is terminated by either party for any reason before the contract term has expired.
If a college that accepted a $1 million investment, depreciated over a 10-year contract and by the fifth year, the college is dissatisfied with the operation of the campus food services, it must pay back $500,000 to terminate the contract. The college may not have the resources to make such a repayment.
Colleges should be cautious about asking for or accepting large investments from food service contractors. Their services may not live up to the promises they made to secure the contract. Measuring the value of food service contractors by the size of their investment offers shuts out the smaller, but often more capable, regional and local food service companies from consideration.
Clarion Group works with colleges and universities, corporations and institutions to improve the quality and cost-effectiveness of their food service and hospitality services and in the competitive selection of food service providers. For information about Clarion and the value we can bring to your organizations, contact Tom Mac Dermott, FCSI, president, 603/642-8011 or Angela Phelan, senior vice president, 609/619-3925 or e-mail us at info@clariongp.com. We look forward to hearing from you.
In Clarion Group college food service projects, we've seen recent seven-figure investment offers to college clients where the apparent profitability to the contractor doesn’t merit such large sums. Clearly, the contractors are seeing a return on investment (ROI) that’s not apparent to the client.
A food service contractor needs a 20% ROI – total annual profit – to justify a large investment. That means for a $1 million investment, its annual profit must be at least $200,000 a year for five years.
A minimal profit for the contractor is about 8% – 5% to cover its general and administrative expenses and 3% net, pre-tax profit. It would take $2.5 million in annual sales to generate an 8% rate of profitability to cover a $1 million investment.
Some contractors have offered investments that on the surface don’t come close to yielding a 20% ROI. Their actual profit is far above 8% or whatever profit margin they show to their clients on their budgets and financial statements.
Recent Clarion Group reviews of college food service financial statements indicate where the additional profit comes from. There are at least three principal areas:
Vendor rebates: Contractors no longer deny that they receive rebates and discounts from their vendors. An audit by the New York State Attorney General found contractors were withholding rebates equal to 14% of purchases from state university and public school clients. Other documents we've reviewed indicate the rebates may be as high as 18% of purchases.
A $2.5 million dining service might have a 35% food cost and 4% paper/disposables cost, about $975,000. At 14% of these purchases, the contractor's rebates are $136,500.
Wage-related taxes, benefits and insurance: Contractors typically charge between 30% and 40% of direct payroll (salaries, wages, overtime and paid time off) on their operating statements. A college administrator may not question this cost because the college’s own payroll tax and benefits package may run as high as 40% to 50% of payroll.
The food service contractor’s actual cost is about 25% to 27% of payroll, sometimes less. The contractor retains the difference as part of its profit. Low-wage food service employees often can’t afford their share of the cost of the contractor’s health insurance; young employees don’t think they need insurance, and some have a spouse with better coverage. Typically, half or fewer of full-time hourly employees – and none of the student or other part-time employees – accept the company’s benefits package.
A $2.5 million sales, dining service's direct salaries and wages cost may be about $850,000. If the contractor charges 30% of payroll, but has an actual cost of 25%, its indirect profit is about $42,500.
Liability insurance: Contractors typically charge between 1% and 1.8% of total sales for liability insurance, although their actual cost is about 0.5% of sales; up to 0.8% for small contractors, Clarion financial reviews have found. What that's worth to the contractor? At 1.5% of $2.5 million in sales, the insurance charge is $37,500. A large contractor's actual cost at 0.5% of sales is $12,500, leaving $25,000 in the contractor's pocket, an undisclosed 1% of sales.
Altogether, the contractor in this example has generated about $204,000 in profits not visible to the client -- some 8% of sales -- in addition to the profit shown on the operating statement.
The trap: Contractors typically ask for five- to ten-year contracts when they make an investment, and sometimes longer, if the investment is large. This may seem like a minor consideration when the college is seeking the investment dollars, but it can prove to be disadvantageous. The operating contract will require the college to refund the undepreciated balance of the investment if the contract is terminated by either party for any reason before the contract term has expired.
If a college that accepted a $1 million investment, depreciated over a 10-year contract and by the fifth year, the college is dissatisfied with the operation of the campus food services, it must pay back $500,000 to terminate the contract. The college may not have the resources to make such a repayment.
Colleges should be cautious about asking for or accepting large investments from food service contractors. Their services may not live up to the promises they made to secure the contract. Measuring the value of food service contractors by the size of their investment offers shuts out the smaller, but often more capable, regional and local food service companies from consideration.
Clarion Group works with colleges and universities, corporations and institutions to improve the quality and cost-effectiveness of their food service and hospitality services and in the competitive selection of food service providers. For information about Clarion and the value we can bring to your organizations, contact Tom Mac Dermott, FCSI, president, 603/642-8011 or Angela Phelan, senior vice president, 609/619-3925 or e-mail us at info@clariongp.com. We look forward to hearing from you.
Wednesday, August 28, 2013
Is Self-Management Still a Good Option for Campus Dining Services?
Should a college or university operate its campus food services on its own, or turn the role over to a food service contractor? That’s a question with an ambiguous answer, according to Tom Mac Dermott, FCSI, president of the dining service consultant firm. Clarion Group.
"It depends on a number of factors," Mac Dermott says, "primarily, how important food services is considered to be to the institution’s core mission and how competently the service is being managed."
Some 90 percent of all colleges and universities now outsource their food services to a contractor; the exceptions being the largest campuses of state universities and a small number of state and independent colleges, he says. "The big state universities’ dining services with budgets of $20 million or more are larger than many regional food service companies and have the resources to employ professional staffs and operate successfully."
"Among smaller institutions, the decision to remain self-managed is based on the value the college sees in its dining services and a desire to keep it as an integral part of the campus community," Mac Dermott says. "Over the past 30 or so years, colleges have increasingly outsourced food service operations almost invariably for economic reasons."
The decision usually was made, he says, when the food service operation was losing money or a competent manager retired and the successor was not competent.
"In recent years, colleges have converted to contractor management because the contractor offered a substantial financial investment to upgrade – or event build – the food service’s facilities. Some of these investments have been in the millions of dollars, even for relatively small institutions," according to Mac Dermott. "Of course, the investments do not come without strings in the form of a long-term contract, sometimes for more than ten years."
Some medium-sized and smaller colleges have a long history of self-management and have been successful. Davidson College in North Carolina, Saint Anselm College in New Hampshire, Bowden and Bates Colleges in Maine and Middlebury College in Vermont are examples. "Many of these regularly appear on the Princeton Review’s annual ‘Best Campus Food’ list," he notes.
"At one time, colleges would outsource their food services because the contractor claimed its buying power would enable it to reduce the operation’s food costs," Mac Dermott says, "but that’s no longer the case, if it ever was true. Food service companies now retain all the advantages gained by their purchasing volume and promise no more than to match local market prices – the same prices a competent independent operator could get on his or her own."
"Competent" is the key word, according to Mac Dermott. "The self-managed food service operation is only as good as its manager, and purchasing food economically is only a part of the picture. The manager’s skills in creating imaginative menus that reflect the tastes and preferences of the campus community; adaptability in meeting the needs of the college and students, and leading a well-motivated, well-trained staff are more important."
"The college or university that is considering outsourcing its self-managed food services should be aware that, while it’s comparatively easy to convert to contractor management, its far more difficult to do the reverse, revert back to self-management. The infrastructure to support the operation has to be reassembled and a competent manager found and hired," he notes.
About Clarion Group
We're a consulting firm that advises companies, professional firms, colleges and universities, independent schools and institutions in the management, operation and improvement of their in-house employee/student food services, catering, conference, lodging and related hospitality services throughout the U.S. and Canada.
For information, contact:
Tom Mac Dermott, FCSI, President
Clarion Group
PO Box 158, Kingston, NH 03848-0158
603/642-8011 or TWM@clariongp.com
Website: www.clariongp.com
"It depends on a number of factors," Mac Dermott says, "primarily, how important food services is considered to be to the institution’s core mission and how competently the service is being managed."
Some 90 percent of all colleges and universities now outsource their food services to a contractor; the exceptions being the largest campuses of state universities and a small number of state and independent colleges, he says. "The big state universities’ dining services with budgets of $20 million or more are larger than many regional food service companies and have the resources to employ professional staffs and operate successfully."
"Among smaller institutions, the decision to remain self-managed is based on the value the college sees in its dining services and a desire to keep it as an integral part of the campus community," Mac Dermott says. "Over the past 30 or so years, colleges have increasingly outsourced food service operations almost invariably for economic reasons."
The decision usually was made, he says, when the food service operation was losing money or a competent manager retired and the successor was not competent.
"In recent years, colleges have converted to contractor management because the contractor offered a substantial financial investment to upgrade – or event build – the food service’s facilities. Some of these investments have been in the millions of dollars, even for relatively small institutions," according to Mac Dermott. "Of course, the investments do not come without strings in the form of a long-term contract, sometimes for more than ten years."
Some medium-sized and smaller colleges have a long history of self-management and have been successful. Davidson College in North Carolina, Saint Anselm College in New Hampshire, Bowden and Bates Colleges in Maine and Middlebury College in Vermont are examples. "Many of these regularly appear on the Princeton Review’s annual ‘Best Campus Food’ list," he notes.
"At one time, colleges would outsource their food services because the contractor claimed its buying power would enable it to reduce the operation’s food costs," Mac Dermott says, "but that’s no longer the case, if it ever was true. Food service companies now retain all the advantages gained by their purchasing volume and promise no more than to match local market prices – the same prices a competent independent operator could get on his or her own."
"Competent" is the key word, according to Mac Dermott. "The self-managed food service operation is only as good as its manager, and purchasing food economically is only a part of the picture. The manager’s skills in creating imaginative menus that reflect the tastes and preferences of the campus community; adaptability in meeting the needs of the college and students, and leading a well-motivated, well-trained staff are more important."
"The college or university that is considering outsourcing its self-managed food services should be aware that, while it’s comparatively easy to convert to contractor management, its far more difficult to do the reverse, revert back to self-management. The infrastructure to support the operation has to be reassembled and a competent manager found and hired," he notes.
About Clarion Group
We're a consulting firm that advises companies, professional firms, colleges and universities, independent schools and institutions in the management, operation and improvement of their in-house employee/student food services, catering, conference, lodging and related hospitality services throughout the U.S. and Canada.
For information, contact:
Tom Mac Dermott, FCSI, President
Clarion Group
PO Box 158, Kingston, NH 03848-0158
603/642-8011 or TWM@clariongp.com
Website: www.clariongp.com
Tuesday, July 9, 2013
College Food Services Face New Challenge
By Clarion Group Food Service Consultants
www.clariongp.com
College food service operators are finding a new competitor for their voluntary meal plans. In addition to the usual off-campus restaurants, fast food, pizza and deli outlets, there now are a growing number of off-campus student residences, some of which have an in-house dining operation.
"Student housing development has remained robust [and] continues to boom, and analysts predict growth in the coming years," The New York Timers reported recently. The growth in off-campus housing has appeared in such diverse place as Columbia, MO, home to the University of Missouri, and Manchester, NH.
In Columbia, private developers have opened student residences with more than 3,800 beds since 2011 with more under construction, the Times reports. In Manchester, NH, a developer is building a residence for students of the local campuses of the University of New Hampshire, Southern New Hampshire University, Saint Anselm College and Hesser College.
The dining service operator at one large eastern university faces a special dilemma – a developer is building a new residence and dining hall on campus and plans to use a separate food service contractor. The new dining center is likely to lure some student meal plan members from the main campus food service, Mac Dermott notes.
At a college that is struggling to keep its on-campus residence halls full, the off-campus competitor, such as the ones in Columbia and Manchester, can be a challenge.
The University of Missouri in Columbia, with an enrollment of 35,000, probably doesn’t need to worry too much about off-campus competition. But the option of living near but off campus may lure some students away from the dorms and meal plans of the nearby, much smaller Columbia and Stevens Colleges.
The colleges in and near Manchester may feel a pinch when the new private residence hall opens there next year.
College food service operators have a few weapons to meet the new competition. The off-campus food service facility isn’t convenient when the student on campus. The food service can actively promote its commuter meal plan or a low-cost "block-meal" plan – a plan proving a fixed number of meals per semester – to capture some of the optional dollars.
The college food service also can extend its meal plan to incorporate some local restaurants, a popular option at some campuses. While this type of plan does drain some revenue from the on-campus food services, it has proven valuable in attracting participants to a meal plan.
A good example is Iona College in New Rochelle, NY. The all-declining balance meal plan includes an allowance for spending at local restaurants in addition to the four on-campus food service locations, but the service is still profitable for the operator and the college.
But the most important element in competing with the off-campus residence operator and it food services is having a really good, imaginative and responsive operation that will attract students on its merits.
Clarion Group can help your campus dining service meet its long-standing and new challenges. For information, contact Tom Mac Dermott, president, 603/642-8011, or Angela Phelan, senior vice president, 201/305-8653, or Ernie Wilder, 703/282-4040, or e-mail us at info@clariongp.com.
Visit our website, www.clariongp.com
www.clariongp.com
College food service operators are finding a new competitor for their voluntary meal plans. In addition to the usual off-campus restaurants, fast food, pizza and deli outlets, there now are a growing number of off-campus student residences, some of which have an in-house dining operation.
"Student housing development has remained robust [and] continues to boom, and analysts predict growth in the coming years," The New York Timers reported recently. The growth in off-campus housing has appeared in such diverse place as Columbia, MO, home to the University of Missouri, and Manchester, NH.
In Columbia, private developers have opened student residences with more than 3,800 beds since 2011 with more under construction, the Times reports. In Manchester, NH, a developer is building a residence for students of the local campuses of the University of New Hampshire, Southern New Hampshire University, Saint Anselm College and Hesser College.
The dining service operator at one large eastern university faces a special dilemma – a developer is building a new residence and dining hall on campus and plans to use a separate food service contractor. The new dining center is likely to lure some student meal plan members from the main campus food service, Mac Dermott notes.
At a college that is struggling to keep its on-campus residence halls full, the off-campus competitor, such as the ones in Columbia and Manchester, can be a challenge.
The University of Missouri in Columbia, with an enrollment of 35,000, probably doesn’t need to worry too much about off-campus competition. But the option of living near but off campus may lure some students away from the dorms and meal plans of the nearby, much smaller Columbia and Stevens Colleges.
The colleges in and near Manchester may feel a pinch when the new private residence hall opens there next year.
College food service operators have a few weapons to meet the new competition. The off-campus food service facility isn’t convenient when the student on campus. The food service can actively promote its commuter meal plan or a low-cost "block-meal" plan – a plan proving a fixed number of meals per semester – to capture some of the optional dollars.
The college food service also can extend its meal plan to incorporate some local restaurants, a popular option at some campuses. While this type of plan does drain some revenue from the on-campus food services, it has proven valuable in attracting participants to a meal plan.
A good example is Iona College in New Rochelle, NY. The all-declining balance meal plan includes an allowance for spending at local restaurants in addition to the four on-campus food service locations, but the service is still profitable for the operator and the college.
But the most important element in competing with the off-campus residence operator and it food services is having a really good, imaginative and responsive operation that will attract students on its merits.
Clarion Group can help your campus dining service meet its long-standing and new challenges. For information, contact Tom Mac Dermott, president, 603/642-8011, or Angela Phelan, senior vice president, 201/305-8653, or Ernie Wilder, 703/282-4040, or e-mail us at info@clariongp.com.
Visit our website, www.clariongp.com
The Unung Heros of Corporate Food Service
By
Tom Mac Dermott, FCSI, President, Clarion Group
A version of this article appeared in the
online newsletter of Food Management magazine
“It
doesn’t matter which company, it’s the manager they send me that makes the
difference,” is a frequent comment by corporate facilities managers and others
who are responsible for their organizations’ on-site food services that are
operated by a food service management company.
And
they’re right – to an extent. The
manager of an on-site food service certainly has the primary responsibility
for the day-to-day operation, including the quality of meals, service and
catering; hiring, training and overseeing hourly employees; financial results,
and sometimes, more.
But
who ensures the on-site manager is doing the job properly, provides advice and
support and brings in the food service company’s specialized resources as
needed? That’s the district manager (or
equivalent title, such as director of operations).
Company
executives usually get most of the attention and credit, but it’s their district
managers who are in the field making sure everything goes right at the dozen or
so operations they supervise.
The
DM is the direct link between contractor and client. He or she is the direct overseer of the
on-site manager, is directly responsible for client relations, utilization of
the contractor’s resources to solve problems and improve services, and for the
company’s success or failure at a location.
How
do they manage their multiple responsibilities?
How do they coach their on-site managers, resolve problems, satisfy
clients, deal with personnel, budgets, sales and cost, profit or loss and other
issues?
Close
communication with the on-site manager and the client’s representative is the
key say district managers for several companies.
“No
surprises” is the way Adam Salem, a director of operations for the Flik
International division of Compass Group, sums it up. “I talk to or visit my clients every week and
keep in touch through e-mail.” He’s
responsible for food services at a group of corporate offices and law firms
in the Washington, DC area. With his
regional vice president, he also holds quarterly review meeting with his
clients.
Ken
McIntyre, a long-time director of operations for Guckenheimer overseeing
corporate headquarters accounts, was recently promoted to regional vice
president for the Middle Atlantic and Southeastern region.
He
says client relationship management is structured. The director of operations has “monthly
review meetings with our client and the on-site manager.” A quarterly major review is also attended by
him as regional vice president. “It’s
the centerpiece of the client relationship and a measuring tool [enabling us]
to measure and manage the operation.”
John
Gee, a Culinart Group West Coast district manager for corporate accounts,
agrees. “Getting off to a good start
with a new client is important to establish the relationship.” he says. He has mostly corporate and some education
accounts throughout California. He meets
with clients on a monthly or bi-monthly basis, “unless they have a question” in
the interim.
Gee,
a 20-year veteran with Culinart, has the unusual experience of having been a
district manager on both coasts. After
working in the company’s home region in the Northeast, he transferred in 2006
to their division in Los Angeles with accounts all along the Pacific Coast and
in the Southwest.
What’s
the difference in the business on the two coasts?
“New
York is very traditional – shirt, tie and suit,” he says. But despite the laid-back, no necktie attitude,
“California is not more relaxed when it comes to work. Don’t underestimated what happens out here.
[Clients expect] greater accountability than on the East Coast: ‘We want it done, and done tomorrow.’”
A
DM’s most important responsibility is ensuring his on-site managers are
performing well, both operationally and financially. This is accomplished by a combination of
individual coaching and formal training through periodic meetings of all the
district’s or region’s managers and online training programs.
Training
programs range from the basics, like culinary skills and accounting, to
regulatory compliance and human resources topics, such as disciplinary
procedures and the prevention and handling of harassment issues.
“I
have weekly meetings with all my managers and chefs via Webex (a web-based
conferencing program),” Guckenheimer’s McIntyre explains. “An HR person, our
regional health and wellness manager, marketing manager and corporate Director
of Culinary Operations (manager of the company’s regional executive chefs)
participate. We have a very chef-driven
culture.”
His
managers also are enrolled in an online training program. “Managers can pick their own topics, but
they’re also required to take some specific courses.”
Adam
Salem of Flik says, “Our regional resources, such as regional chef and
marketing specialist, provide training.
Regional meetings also provide training opportunities.”
“Training
is on-going” at Culinart, according to Gee.
“I have a senior manager work with the less-experienced managers to set
them up for success.”
Despite
their best efforts, things can go wrong at a DM’s account. What do they do when an angry client calls
with a complaint?
“You
can’t wait. You have to anticipate
trouble,” Salem says. “It’s most
important to get in front of the client right away.”
“Get
face-to-face as fast as possible – on the same day,” Gee echoes. “You can’t change the complaint. You have to correct whatever the problem is.”
McIntyre
agrees. “The first thing is to listen and assess the situation. I have to be open-minded and, most important,
be pro-active in responding.”
Like
McIntyre, both Salem and Gee utilize regional or corporate specialists to get
into the account and work with the manager to solve the problem and get the
operation back on track.
Gee’s
approach is to be positive. “I get
positive feedback from the client and [talk to the manager] about the good
things first, build on the good things.
Positive reinforcement is the most effective way” to get a manager to
see and resolve an issue.
“I
meet with the on-site team and go to our resources – the regional chef and
others – and create an action plan,” Salem explains. “I come back to the client with the plan and
follow up.”
But
what if the manager is the problem – he or she isn’t controlling the staff, has
let costs run away or has a conflict with the client?
“Like
a baseball team, we have to have a relief pitcher,” McIntyre says. “It’s very important to have the right person
ready to step in.” He prefers managers
with a culinary background. “Many
talented chefs get burned out in the kitchen and go into management.”
“Recruiting
is on-going,” according to Gee. “We try
to promote from within before going outside” when an on-site manager needs to
be changed.
“A
weak [on-site management team] means I have to spend a lot of time there. It’s not good for the client,” adds
Salem. “I’ve developed sources [to
identify potential managers].”
Financial
performance also is important, whether the operation is P&L (the operator
has the financial risk) or subsidized (client has the financial risk).
“I
have a weekly flash [report],” according to Gee. “By Monday, I have the results. I get on the phone, accounts with bad results
first.”
Other
DMs do essentially the same, relying on weekly “flash” reports from their
managers, usually on the first business day after the accounting week closes.
“I
review each account’s financial reports weekly,” Salem says. “If there’s an issue, I return to the account
and notify the client. It’s important that
there are no surprises.”
Salem
best sums up the job for all DMs: “I’m successful because of the team I’ve
built. Communication is the key to the
job.”
Thursday, June 6, 2013
'Human Cloud' Poses New Challenge to Corporate Food Service
Food service contractors and employed operators of corporate food services may face further diminishment of their customer bases. Operators will have to use technology to counteract the changes technology is forcing on their traditional ways of doing business.
Companies now have new ways to outsource even highly skilled work to freelance workers all over the world, reducing the need for – and cost of – on-site employees.
As reported in MIT Sloan Management Review by Evgeny Kaganer, an assistant professor at the University of Navarra in Barcelona, Spain and three other academics, "A third-generation sourcing ecosystem . . . the 'human cloud' is centered on an online middleman that engages a pool of virtual workers that can be tapped on demand to provide a wide range of services to any interested buyer."
New human cloud organizations can now provide freelance talent for at least 15 major work categories, including content generation, sales and marketing, design and optimization, Kaganer et al say. These are jobs that traditionally are kept in-house, but now may disappear from the office and the food service department’s customer pool.
Human cloud organizations ("platforms") – the middlemen who connect companies and freelancers – saw their revenue increase by 53% in 2010 and 74% in 2011, the authors said. The number of active platforms increased to more than 100 in 2012 from about 40 in 2011.
As rapidly-advancing technology has disrupted other industries, it now is food service management’s turn. Corporate food service operators will have to rethink their business models to stay relevant in this new environment.
For example, a Clarion Group client with $1.5 billion in sales and 4,500 employees nationwide has only 250 employees at its new headquarters, where it is just opening a new food service, and has no food service at any of its other offices. Technology has enabled other Clarion clients to increase sales and profits while reducing on-site headcounts.
The impact of this sharp and still evolving change in the way businesses operate has an impact on both the food service operator and the company it serves. Formerly profitable food services may become unprofitable for the operator, and the company may find it has a choice of either subsidizing its employee food services or reducing their scope.
The solutions will vary from company to company, but all will involve a change in the way the food service operator looks at, and manages, the business. Companies will have to cooperate with their operators as they both adapt to the new reality."
For example, at company with multiple buildings on a large campus, closing cafes in all but the most highly-populated buildings (about 1,000 employees) may be necessary. The other buildings can be serviced by the type of food trucks that now are popular, and successful, on college campuses.
At smaller sites, a mini-café supported from an off-site commissary and staffed by one or two attendants may be a solution.
Vending operators, including some major food service contractors, have begun installing "micromarkets," a c-store-type, compact facility with no attendant. The customer selects foods from refrigerated display cases and shelves and pays for the purchases at a self-checkout kiosk. This option only works in a closed environment with a small population, about 250 or fewer employees.
Clarion Group can help you meet the new challenges of the evolving world of corporate and campus food service. For information, contact Tom Mac Dermott, president, 603/642-8011; Angela Phelan, senior vice president, 201/306-8613, or Ernie Wilder, vice president, 703/282-4040, or e-mail us at info@clariongp.com. Visit our website, www.clariongp.com
Companies now have new ways to outsource even highly skilled work to freelance workers all over the world, reducing the need for – and cost of – on-site employees.
As reported in MIT Sloan Management Review by Evgeny Kaganer, an assistant professor at the University of Navarra in Barcelona, Spain and three other academics, "A third-generation sourcing ecosystem . . . the 'human cloud' is centered on an online middleman that engages a pool of virtual workers that can be tapped on demand to provide a wide range of services to any interested buyer."
New human cloud organizations can now provide freelance talent for at least 15 major work categories, including content generation, sales and marketing, design and optimization, Kaganer et al say. These are jobs that traditionally are kept in-house, but now may disappear from the office and the food service department’s customer pool.
Human cloud organizations ("platforms") – the middlemen who connect companies and freelancers – saw their revenue increase by 53% in 2010 and 74% in 2011, the authors said. The number of active platforms increased to more than 100 in 2012 from about 40 in 2011.
As rapidly-advancing technology has disrupted other industries, it now is food service management’s turn. Corporate food service operators will have to rethink their business models to stay relevant in this new environment.
For example, a Clarion Group client with $1.5 billion in sales and 4,500 employees nationwide has only 250 employees at its new headquarters, where it is just opening a new food service, and has no food service at any of its other offices. Technology has enabled other Clarion clients to increase sales and profits while reducing on-site headcounts.
The impact of this sharp and still evolving change in the way businesses operate has an impact on both the food service operator and the company it serves. Formerly profitable food services may become unprofitable for the operator, and the company may find it has a choice of either subsidizing its employee food services or reducing their scope.
The solutions will vary from company to company, but all will involve a change in the way the food service operator looks at, and manages, the business. Companies will have to cooperate with their operators as they both adapt to the new reality."
For example, at company with multiple buildings on a large campus, closing cafes in all but the most highly-populated buildings (about 1,000 employees) may be necessary. The other buildings can be serviced by the type of food trucks that now are popular, and successful, on college campuses.
At smaller sites, a mini-café supported from an off-site commissary and staffed by one or two attendants may be a solution.
Vending operators, including some major food service contractors, have begun installing "micromarkets," a c-store-type, compact facility with no attendant. The customer selects foods from refrigerated display cases and shelves and pays for the purchases at a self-checkout kiosk. This option only works in a closed environment with a small population, about 250 or fewer employees.
Clarion Group can help you meet the new challenges of the evolving world of corporate and campus food service. For information, contact Tom Mac Dermott, president, 603/642-8011; Angela Phelan, senior vice president, 201/306-8613, or Ernie Wilder, vice president, 703/282-4040, or e-mail us at info@clariongp.com. Visit our website, www.clariongp.com
Tuesday, June 4, 2013
Clients Often Miss Full Value of Food Service Consultants
Reprinted from FM Newslinks, on-line newsletter of Food Management magazine.
"Food service consultants frequently aren’t used to their full value by their corporate clients," Tom Mac Dermott, president of Clarion Group, a corporate food service consulting firm, says. "Often, we’re brought into a project too late to provide maximum benefit for our client."
"For example, if a corporate food service facility design project is already underway when the consultant is retained, it may be too late to incorporate important features or modify the plan for maximum efficiency and service," he says.
"A corporate food service consulting project also may not deliver full value if our recommendations are accepted but we’re not retained to implement them," he added.
There are three key components to a successful corporate food service consulting project whose objective is improving performance, service and cost-effectiveness, according to Mac Dermott:
Investigation: What’s happening now? What are the services? How are they being performed? Where are the weaknesses that need to be improved?
Research and Recommendations: The consultant reviews operational and financial records of the food service, researches alternatives to the current methods, procedures and systems and develops solutions to remove obstacles, strengthen inadequate areas and increase the value of the corporate food service to the client.
Implementation: The consultant works with the client and the food service operator to implement the solutions to ensure they are successfully established and maintained.
"This last step is where a corporate food service consulting project actually provides its value," Mac Dermott says. "If the consultant’s report and recommendations are just accepted and filed away, the time, effort and cost invested in the project is wasted."
The food service consultant needs to be retained throughout the implementation phase, Mac Dermott says, "because the operator often has a degree of ‘tunnel vision’ and can’t see beyond his own, comfortable way of doing things and the corporate client doesn’t have the knowledge or experience to know whether the needed improvements are being implemented effectively."
"Our corporate food service consultants have decades of experience in all types of operations and know to work with the on-site manager and staff to clear away obstacles, provide training and solve problems as they arise," he says.
"Food service consultants frequently aren’t used to their full value by their corporate clients," Tom Mac Dermott, president of Clarion Group, a corporate food service consulting firm, says. "Often, we’re brought into a project too late to provide maximum benefit for our client."
"For example, if a corporate food service facility design project is already underway when the consultant is retained, it may be too late to incorporate important features or modify the plan for maximum efficiency and service," he says.
"A corporate food service consulting project also may not deliver full value if our recommendations are accepted but we’re not retained to implement them," he added.
There are three key components to a successful corporate food service consulting project whose objective is improving performance, service and cost-effectiveness, according to Mac Dermott:
Investigation: What’s happening now? What are the services? How are they being performed? Where are the weaknesses that need to be improved?
Research and Recommendations: The consultant reviews operational and financial records of the food service, researches alternatives to the current methods, procedures and systems and develops solutions to remove obstacles, strengthen inadequate areas and increase the value of the corporate food service to the client.
Implementation: The consultant works with the client and the food service operator to implement the solutions to ensure they are successfully established and maintained.
"This last step is where a corporate food service consulting project actually provides its value," Mac Dermott says. "If the consultant’s report and recommendations are just accepted and filed away, the time, effort and cost invested in the project is wasted."
The food service consultant needs to be retained throughout the implementation phase, Mac Dermott says, "because the operator often has a degree of ‘tunnel vision’ and can’t see beyond his own, comfortable way of doing things and the corporate client doesn’t have the knowledge or experience to know whether the needed improvements are being implemented effectively."
"Our corporate food service consultants have decades of experience in all types of operations and know to work with the on-site manager and staff to clear away obstacles, provide training and solve problems as they arise," he says.
Sunday, June 2, 2013
Corporate Food Service: A Benefit or a Convenience?
Companies that once considered low cost meals an employee benefit sometimes now are revising their attitude and thinking of food service as a convenience that should be self-sustaining.
The conversion can be tricky because it inevitably means higher prices and maybe fewer services when the food service has to pay its own way. In working with corporate clients, Clarion Group consultants have seen the conversions completed with minimal disruption and customer acceptance – and disastrously.
The worst way to convert from subsidized to "P&L" (the operator has the risk of profit-or-loss) is all at once. Customers come in one morning and the price of everything is higher.
In one instance we witnessed, customers in a central city corporate headquarters almost completely boycotted the food service. Sales dropped by two-thirds overnight when prices were increased by 20%. Nobody protested, they just began bringing their own meals to work or went out to the dozen or so nearby restaurants, delis and fast food outlets.
The losses were so severe that within a month, the food service operator was threatening to terminate its contract. Two months later, a new operator was in place. Clarion prepared the Request for Proposals and managed the selection process.
The new food service contractor had some advantages. The dirty work – price increases and service reductions – had been done by the predecessor. The new operator gave the café a modest facelift, restored some services, introduced a new menu and rejuvenated what had been a mediocre operation into a model food service program.
Customers returned and sales rose to their former level, although prices hadn’t been reduced; they saw greater value in the new operation and meals offered for the prices.
The most effective way to eliminate or reduce the subsidy is gradually. In cooperation with the food service contractor, a conversion can be made gradually, over a period of two years with minimal, or no, customer backlash.
Companies use long-range planning for the management of their businesses, development of new products or services, advertising and marketing, equipment purchases and the like. They should do the same when they want to eliminate the food service subsidy.
When you want to shift the burden of profit or loss in your company's or organization's food services, we can help plan a successful conversion. For information, contact Tom Mac Dermott, president, 603/642-8011, or Angela Phelan, senior vice president, 201/306-8613 or Ernie Wilder, vice president, 703/282-4040, or e-mail us at info@clariongp.com. Visit our website, www.clariongp.com.
The conversion can be tricky because it inevitably means higher prices and maybe fewer services when the food service has to pay its own way. In working with corporate clients, Clarion Group consultants have seen the conversions completed with minimal disruption and customer acceptance – and disastrously.
The worst way to convert from subsidized to "P&L" (the operator has the risk of profit-or-loss) is all at once. Customers come in one morning and the price of everything is higher.
In one instance we witnessed, customers in a central city corporate headquarters almost completely boycotted the food service. Sales dropped by two-thirds overnight when prices were increased by 20%. Nobody protested, they just began bringing their own meals to work or went out to the dozen or so nearby restaurants, delis and fast food outlets.
The losses were so severe that within a month, the food service operator was threatening to terminate its contract. Two months later, a new operator was in place. Clarion prepared the Request for Proposals and managed the selection process.
The new food service contractor had some advantages. The dirty work – price increases and service reductions – had been done by the predecessor. The new operator gave the café a modest facelift, restored some services, introduced a new menu and rejuvenated what had been a mediocre operation into a model food service program.
Customers returned and sales rose to their former level, although prices hadn’t been reduced; they saw greater value in the new operation and meals offered for the prices.
The most effective way to eliminate or reduce the subsidy is gradually. In cooperation with the food service contractor, a conversion can be made gradually, over a period of two years with minimal, or no, customer backlash.
Companies use long-range planning for the management of their businesses, development of new products or services, advertising and marketing, equipment purchases and the like. They should do the same when they want to eliminate the food service subsidy.
When you want to shift the burden of profit or loss in your company's or organization's food services, we can help plan a successful conversion. For information, contact Tom Mac Dermott, president, 603/642-8011, or Angela Phelan, senior vice president, 201/306-8613 or Ernie Wilder, vice president, 703/282-4040, or e-mail us at info@clariongp.com. Visit our website, www.clariongp.com.
News from Clarion Group Food Service Consultants
The Spring issue of Clarion Group's newsletter is published. Articles include:
Corporate food service operators see improvements in sales.
The coming health care law may not bite too hard.
What do food service customers want? "Food quality" tops the list.
.. . and much more.
To obtain your copy and a complimentary subscription send your contact info (mailing address or e-mail address) to info@clariongp.com
Corporate food service operators see improvements in sales.
The coming health care law may not bite too hard.
What do food service customers want? "Food quality" tops the list.
.. . and much more.
To obtain your copy and a complimentary subscription send your contact info (mailing address or e-mail address) to info@clariongp.com
Corporate food service may gain as work-from-home options are reduced
"Maybe the outgoing tide of more employees leaving the office to work at home is starting to reverse," says Tom Mac Dermott, president of Clarion Group, a food service consulting firm. "That would be good news for the operators of corporate food services."
For more than a decade, the percentage of companies’ employees who work from home has been steadily increasing, reducing the number of customers for the on-site food service. Some 63% of employers in a study conducted by the Family and Work Institute now permit employees to work from home at least part of the time, up from 34% in a similar study in 2005.
Recently, Yahoo, the internet search engine and website, announced it will require all employee to work at the office, starting in June. Several other firms have followed suit.
"Some of the best decisions and insights come from hallway conversations and cafeteria discussions," said Jackie Rese, Yahoo’s human resources director in announcing the new policy. "Speed and quality are often sacrificed when we work from home."
While the wisdom of the decision is hotly disputed, not everyone, including some Yahoo employees, are upset. "Deadwood is hiding at home," one Yahoo employee told The Wall Street Journal.
The food service operator can help its host company implement the improvements in productivity that Yahoo is seeking, according to Mac Dermott. "The on-site food service center can be a place where creativity takes place."
"The staff café is a natural gathering place, generally in a central location," he said If it’s configured to permit groups to work and discuss ideas, as well as have lunch or a mid-morning or afternoon snack and coffee, it can be a valuable asset to the company as well as to the food service operator."
"By providing tables and groups of tables of various sizes to accommodate different numbers of people, especially round tables where six or eight people can gather for easy discussion, the food service operator is providing a comfortable site for productive meetings and informal discussions, " he added.
Other ways of encouraging staff café use the food service operator can implement include partitioning off small areas with seating for from eight to 12, which informal groups can use in place of reserved conference rooms, which often are in short supply, he added.
"Making sure the café is wi-fi-enabled and providing flip charts and other communication aides also helps encourage employees to use the café," Mac Dermott suggests.
"Work-from-home is probably here to stay in some version," he added, "but the food service operator can help make working at the work site an attractive option.
For more than a decade, the percentage of companies’ employees who work from home has been steadily increasing, reducing the number of customers for the on-site food service. Some 63% of employers in a study conducted by the Family and Work Institute now permit employees to work from home at least part of the time, up from 34% in a similar study in 2005.
Recently, Yahoo, the internet search engine and website, announced it will require all employee to work at the office, starting in June. Several other firms have followed suit.
"Some of the best decisions and insights come from hallway conversations and cafeteria discussions," said Jackie Rese, Yahoo’s human resources director in announcing the new policy. "Speed and quality are often sacrificed when we work from home."
While the wisdom of the decision is hotly disputed, not everyone, including some Yahoo employees, are upset. "Deadwood is hiding at home," one Yahoo employee told The Wall Street Journal.
The food service operator can help its host company implement the improvements in productivity that Yahoo is seeking, according to Mac Dermott. "The on-site food service center can be a place where creativity takes place."
"The staff café is a natural gathering place, generally in a central location," he said If it’s configured to permit groups to work and discuss ideas, as well as have lunch or a mid-morning or afternoon snack and coffee, it can be a valuable asset to the company as well as to the food service operator."
"By providing tables and groups of tables of various sizes to accommodate different numbers of people, especially round tables where six or eight people can gather for easy discussion, the food service operator is providing a comfortable site for productive meetings and informal discussions, " he added.
Other ways of encouraging staff café use the food service operator can implement include partitioning off small areas with seating for from eight to 12, which informal groups can use in place of reserved conference rooms, which often are in short supply, he added.
"Making sure the café is wi-fi-enabled and providing flip charts and other communication aides also helps encourage employees to use the café," Mac Dermott suggests.
"Work-from-home is probably here to stay in some version," he added, "but the food service operator can help make working at the work site an attractive option.
Tuesday, January 29, 2013
Food Service Operators Face Diminishing Customer Base
Food service contractors and employed operators of corporate food services may face further diminishment of their customer bases in 2013.
As rapidly-advancing technology has disrupted other industries, it is now food service management's turn. Corporate food service operators have to rethink their business models to stay relevant in this new environment.
In addition to the slow economic recovery, companies now have new ways to outsource even highly skilled work to freelance workers all over the world, reducing the need for -- and cost of -- on-site employees. Of course, fewer employees on-site means fewer food service customers.
"A third generation sourcing system . . . the 'human cloud,' is centered on an online middleman that engages a pool of virtual workers that can be tapped on demand to provide a wide range of services to any interested buyer," according to Evgeny Kaganer, an assistant professor at the University of Navarra in Barcelona, Spain, writing in MIT Sloan Management Review.
The commercial real estate market also provides a gloomy clue to the pace of corporate hiring. "U.S. businesses took on new office space at a sluggish pace in the fourth quarter [of 2012] as employers remained cautious about adding jobs," The Wall Street Jouranl reported.
The impact of the sharp and still evolving change in the way businesses operate has an impact on both the food service operator and the company it serves. Formerly profitable food services may become unprofitable for the operator, and the company may find it has a choice of either subsidizing its employee food services or reducing their scope.
Solutions will vary from company to company, but all will involve the way the food service operator looks at, and manages the business. Companies will have to cooperate with their food service operators as they both adapt to the new reality.
Some potential solutions:
Companies with multiple buildings on a large campus might close food service outlets in all but the highest-population buildings (about 1,000 employees). The other buildings could be serviced by the type of food truck that has become popular on college campuses.
At small sites (500 employees) a mini-cafe, supported by an off-site commissary could be practical.
Companies that find their food service has light breakfast business could close the employee cafe in the morning and replace it with a kiosk near the main employee entrance, serving coffee, cold beverages, muffins and the like. The kiosk could remain open through mid-morning to serve employees who want a morning snack. The cafe would be open only for lunch and maybe afternoon snack business.
Vending operators and some of the major contractors have begun installing "micromarkets," a c-store type, compact facility with no attendant. The customer selects foods and beverages from refrigerated display cases and shelves and pays for the purchases at a self-checkout kiosk -- the sort of "reverse ATM" now common at Home Depot and some supermarkets. This option only works in a closed environment with a small population, about 250 employees.
Changes in the way employee food services are provided are inevitable. Operators will have tto use technology to counteract the changes technology is forcing on their traditional ways of doing business.
As rapidly-advancing technology has disrupted other industries, it is now food service management's turn. Corporate food service operators have to rethink their business models to stay relevant in this new environment.
In addition to the slow economic recovery, companies now have new ways to outsource even highly skilled work to freelance workers all over the world, reducing the need for -- and cost of -- on-site employees. Of course, fewer employees on-site means fewer food service customers.
"A third generation sourcing system . . . the 'human cloud,' is centered on an online middleman that engages a pool of virtual workers that can be tapped on demand to provide a wide range of services to any interested buyer," according to Evgeny Kaganer, an assistant professor at the University of Navarra in Barcelona, Spain, writing in MIT Sloan Management Review.
The commercial real estate market also provides a gloomy clue to the pace of corporate hiring. "U.S. businesses took on new office space at a sluggish pace in the fourth quarter [of 2012] as employers remained cautious about adding jobs," The Wall Street Jouranl reported.
The impact of the sharp and still evolving change in the way businesses operate has an impact on both the food service operator and the company it serves. Formerly profitable food services may become unprofitable for the operator, and the company may find it has a choice of either subsidizing its employee food services or reducing their scope.
Solutions will vary from company to company, but all will involve the way the food service operator looks at, and manages the business. Companies will have to cooperate with their food service operators as they both adapt to the new reality.
Some potential solutions:
Companies with multiple buildings on a large campus might close food service outlets in all but the highest-population buildings (about 1,000 employees). The other buildings could be serviced by the type of food truck that has become popular on college campuses.
At small sites (500 employees) a mini-cafe, supported by an off-site commissary could be practical.
Companies that find their food service has light breakfast business could close the employee cafe in the morning and replace it with a kiosk near the main employee entrance, serving coffee, cold beverages, muffins and the like. The kiosk could remain open through mid-morning to serve employees who want a morning snack. The cafe would be open only for lunch and maybe afternoon snack business.
Vending operators and some of the major contractors have begun installing "micromarkets," a c-store type, compact facility with no attendant. The customer selects foods and beverages from refrigerated display cases and shelves and pays for the purchases at a self-checkout kiosk -- the sort of "reverse ATM" now common at Home Depot and some supermarkets. This option only works in a closed environment with a small population, about 250 employees.
Changes in the way employee food services are provided are inevitable. Operators will have tto use technology to counteract the changes technology is forcing on their traditional ways of doing business.
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