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. 

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

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

The Unung Heros of Corporate Food Service

By Tom Mac Dermott, FCSI, President, Clarion Group

www.clariongp.com

 

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.”    

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.

Sustainability and Food Service

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

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

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

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

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

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