1995   25 Years   2020 

July 4, 2020

We're celebrating Clarion Group's quarter century of providing solutions and uncovering opportunities in dining and hospitality services.

Take a look at our prior years' posts below.  You may find something that's useful today. 

Minimum Wage Myths and Realities

 

Minimum Wage Myths and Realities

January 19, 2019
Twenty-nine states and some cities have minimum hourly wage rates above the federal $7.25 minimum.  Twenty states are raising their minimums again in 2019; some already are at the $15.00 widely-proclaimed living wage; other minimums are raised to $12.00 as part of annual step-ups to $15.00 by 2023.

Some minimum wage increase advocates say a person working full-time at the minimum wage should be able to support a family.  At $15.00 an hour, a full-time worker would earn $31,200 a year.  At $12.00, it would be $24,960.

According to the U.S. Department of Health and Human Services (www.healthcare.gov), the current “poverty line” for a family of three is $20,780; for a family of four, $25,100 and for five (mom, dad, three kids), $30,170.

Could a family of three to five people survive, let alone thrive, on $25,000 to $31,000 in New York, Chicago, Los Angeles or any other  major metropolitan area?

However well-intentioned, the minimum wage increase is – and has been since it went up from 75 cents to a dollar in 1954 – a temporary bandaid.  Necessary for folks at the bottom of the ladder, but still a short-lived benefit.

When the minimum wage increases, it has a ripple effect upwards, at least for the next four or five wage levels.  Since labor cost is a component of a company’s, a college’s, a non-profit’s and a government’s total costs, prices, tuition and institutional and government revenues must rise to cover higher costs – or organizations must be willing to absorb reduced profits or even losses – or take other steps to compensate for higher labor costs.

As these steps are taken, up the line from the local shop to the giant corporation, there are two effects: prices rise and organizations, especially businesses, strive to increase productivity – achieve the same -- or higher -- output with fewer labor hours.

Rising prices is the definition of inflation, eroding the value of the higher minimum wage until, in three or so years, it’s time to raise the minimum again.  That’s been going on since the federal minimum wage law went into effect in 1938 at 25 cents an hour, $10.00 a week.  (As a point of reference, my grandfather was a trolley car driver in Brooklyn in the late 1800s-early 1900s for $7.00 a week. Thirty years later, $10.00 wasn’t much of an advance)

The other effect of rising labor costs is increased automation, driving up productivity but reducing work opportunities for the less-skilled people at the bottom of the ladder, those the minimum wage increase was intended to benefit.

Nothing I’ve said here is a novel insight; it’s been said over and over every time the topic of increasing the minimum wage comes up.  The problem is the stance of the two sides: The proponents talk persuasively about the needs of people to earn a decent living; the opponents warn persuasively about the costs – high prices, fewer jobs for the un- and marginally-skilled worker.

Both are more-or-less right.  Higher wages help poor people.  Higher costs force prices up and/or efficiencies that reduce the need for labor.  Since nothing is done to adjust cause and effect, the cycle starts up again.

If the cost of the basics of life – food, clothing, shelter and an internet connection – somehow stays flat or rises less than the minimum wage rises, it’s likely the increased wage would provide a greater benefit to more people and last longer.  If more and more people emerge above the poverty line, however it’s defined, the benefit to the nation as a whole would be enormous.

Imagine what it would be like if the poorest people in the country had enough to eat, decent clothes, a non-leaky roof and an electronic link to the rest of the world (and of course, a good education) so they could climb from the bottom rungs up a few so the next cohort filling in below also could climb the ladder, following upward behind them -- paying higher taxes on increasing income, reducing the need for government aid and contributing to the nation's well-being.

How could that happen?  It would take a collection of wiser heads than mine, especially heads attached to the movers and shakers of government, labor, social movements and business – the people with most skin in the game – to put aside their self-interests to work it out.

Could that, would that ever, happen?  I hope so.  It’s the only answer I can see.
                                                                                                                            - Tom Mac Dermott

You can receive Clarion Group's newsletter, Dining Insights, in your postal mail box or via e-mail. Send your contact info to us at info@clariongp.com.  To learn about the services we offer, visit our website, www.clariongp.com or call Tom Mac Dermott, 603/642-8011 or Ted Mayer, 617/875-7882.

Are You a Co-Employer With Your Food Service Contractor?

            Companies, colleges and others who have outside contractors operating their on-site food services should beware of the risks they face in the rapidly evolving arena of employment law.  The widely publicized finding of the National Labor Relations Board General Counsel that McDonald’s is responsible for the employment actions of its franchisees is fair warning.

            The NLRB’s General Counsel has “found merit” in charges that McDonald’s and some of its franchisees “violated the rights of employees,” according to a NLRB press release.  “If the parties cannot reach settlement in these cases, complaints will issue and McDonald’s USA LLC will be named as a joint employer respondent.”

            Another warning comes in the NLRB’s current consideration of the relationship between companies and on-site contractors.  The case involves a company and its on-site service contractor.  A union is trying to have the company declared a joint employer who must participate in the collective bargaining between the contractor and the union.  The case is pending. 

             If these views stand, it isn’t a far reach to see how an organization could be held responsible for the employment actions of food service and other contractors on its premises.

             The U.S. Department of Labor, other regulators and labor unions have long tried to tie the host company or institutions to its service companies’ employees as a joint employer.  Sometimes, the host has made it easy to be linked – and held responsible financially – for actions over which it has, at best, only indirect control.

            The NLRB defines joint employment as when “two entities . . . share or co-determine those matters governing the essential terms and conditions of employment [including] matters relating to the employment relationship such as hiring, firing, discipline, supervision and direction.”

            When an organization requires its onsite food service contractor to submit candidates for key management positions and makes the selection itself, it’s opening the door to a finding that it is a joint employer.

            Other actions organizations often take that can lead to a finding that it is a joint employer with its on-site contractor include:

            • Negotiating with the contractor over the wage rates, pay raises and benefits the contractor offers its employees working on the premises.

            • Directing the contractor to promote, demote, transfer or take another action affecting one or more of the contractor’s employees.

            • Telling the contractor what hours its employees should work, rather than what hours of service to provide.

            • Paying bonuses or making other payments to the contractor’s employees or authorizing the contractor to make the payments and reimbursing the expense.

            • Treating the contractor’s employees as “members of the family” with privileges the same as, or similar to, those of its own employees – access to the on-site fitness center, for example.

            The basic defense against a claim of a joint employer relationship is a strong, clear statement in the operating contract that the contractor is the sole employer and has sole authority over all aspects of its employment relationships.    But if management interferes, even indirectly, in the actions of its on-site contractor related to the contractor’s employees and their wages, working conditions and the like, then the barrier created in the contract crumbles.

Clarion Group can analyze your dining and hospitality services and contractual relationship with your provider to help you avoid creating a joint employer relationship -- and improve operational and financial performance of you services.  For information, contact Tom Mac Dermott, president (603/642-8011 or TWM@clariongp.com) and visit our website, www.clariongp.com.

         

Ensure Your Food Service Operating Contract Protects Your Interests

The managers of corporate and campus food services and related hospitality services often make a mistake when they outsource these services by accepting the vendor’s "standard contract." Based on our experience, we recommend that you don’t accept this contract. It’s one-sided and not in your favor.

This isn’t the same situation as renting a car or buying a computer program where your options are take it or leave it. A food service contract, worth from several hundred thousand to many millions of dollars in sales, is much more important to the vendor than an individual customer is to a car rental company.

When we’re helping a Clarion Group client select a food service operator, we turn the tables and present the vendor with our "standard contract." We draft the contract in collaboration with our client’s attorney to ensure it’s fair to the vendor, but clearly delineates the vendor’s responsibilities and fully protects our client’s interests.

We’ve developed our contract format over two decades of food service consulting and adapt it to each client’s specific circumstances. Then we negotiate the final terms and conditions with the vendor, with our client’s participation and final approval.

Food service operating agreements used to be simple two- or three-page documents, but changing times and circumstances in the food service industry, government regulations and other factors have dictated that these agreements be much more detailed.

Important points to be included in a food service management contract, often omitted in the contractor’s proposed form:

• The vendor’s responsibilities should be clearly defined and the vendor should agree to perform its services to a high standard, defined as clearly as possible.
• The vendor should be an independent contractor, solely responsible for its employees and for its actions and not able to act as an agent for the client company. (If the vendor makes purchases or other commitments as the client’s agent, the client can be held liable for the vendor’s unpaid debts or other commitments.)
• The vendor has sole responsibility for the food it serves, from the farm field to the diner’s plate. Its program for ensuring the food it serves is wholesome, healthy and safe for consumption should be clearly described in the operating contract.
• Financial terms should be unambiguous, including the contractor’s responsibility for producing accurate operating statements promptly and providing satisfactory supporting material for its claims for reimbursement of costs. A contractor can produce financial statements within 10 days of an accounting period’s end date.
• Contractors receive rebate payments from their vendors, which they keep as additional income and do not disclose to clients. We have negotiated for our clients to receive a share of these rebates.
• The contract should be enforceable in your home state, not the vendor’s.

These are just highlights of the terms a food service contract should include. In our role as consultants, we level the playing field for our clients in their dealings with food service contractors because we know the players, their tactics and objectives. We ensure our clients have comprehensive, fair and enforceable contracts to guide their relations with their on-site service operators.

To learn how Clarion Group can ensure the operating agreement with your current or future food service contractor can be both fair to both you and the operator and fully protect your interests, contact us at info@clariongp.com or call Tom Mac Dermott, president, at 603/642-8011. 

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

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

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.    

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

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

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.

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.

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 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.