Building the right onsite food program and aligning the experience to your organizations culture, and even to some of the firms’ initiatives, can be complex – how do you compare apples, lemons, and oranges?
Typical C-Suite level questions include: How will the food program improve my employee’s day? Will it save them time? Is the food safe? What will it cost? How will it benefit the business?
Food programs today help save employees time and help firms build an inclusive community driven culture. Employee’s morale improves and they feel appreciated when the company invests in programs that enhance their day.
“Figuring out what’s best for your firm is the tricky part. How do you compare the Apples, the Limes, and the Oranges and make sense of it all?”
As you commence this journey, it is imperative to define what foodservice means to your organization. Ensuring the executive team is aligned to the programs goal and purpose is critical.
Questions to answer and discuss:
What are the goals of your foodservice program?
Is it a service that is viewed as a normal cost of doing business and will you fund a percentage of the expense, or do you expect the employee to cover some or all the cost?
Is it a key feature of your overall value proposition for your employees?
Is it central to your strategy of driving employee morale, engagement and building the right community at work?
Are you looking to provide a full-service café, a coffee bar with food options, or a self-service pantry? Or a combination of all the options?
Understanding these things first will allow you to determine the options that make the most sense for your organization. Then deciding whether to outsource or insource the program is a natural next step.
Insourcing vs. Outsourcing
Each industry and sector are different and there are different drivers to why an organization would insource versus outsource.
In business & industry for example, the level of food service outsourcing is by far the highest at approximately 95%+ of the market, and for the most part, those that do insource are usually very large in nature, and even then, in some cases they still outsource pockets of their food service portfolio or certain parts of the operation like general staffing.
"Because foodservice is not a core part of the business, many organizations are hesitant to invest in the labor, infrastructure, and health and safety of their operations."
In some markets, high levels of Union involvement can make it more difficult to outsource, but even then, there are management only models where the partner manages the client retained employees. It may also be, like in some other sectors such as Senior Living for example, that there is an affinity and protectionism to long term employees and they prefer to retain direct employment of their teams and hire management companies to manage efficiency. On the flip side it can save a firm cost to outsource as the labor pool may be less experienced and lower in salary.
Although you may well have many of the functional support functions required to manage food service like finance, Human Resources, health, and safety, is the in-house breadth of expertise sufficient to cover the nuances of food service effectively?
“Then, what other additional expertise would you need to add to your team to address and manage a safe, thriving, and successful foodservice operation?”
For most, that is too big of a responsibility and diversification from core business to swallow.
So, couldn’t I just get a local restaurant to take it on?
The short answer is that yes you could but be aware of the many pitfalls in taking such a decision.
Firstly, for the most part, the food service business is a very different model - usually lower consumer pricing, access to a lower number of potential customers than a high street restaurant, with different expectations, price points, cost sensitivity, usually absence of alcohol sales (a major source of profit for restaurants), limited operations hours/days, and the list goes on.
That said, if your operating environment is a parallel to the restaurant environment then this may be an option but likely preserved to such areas as Leisure, Museums, Stadiums, and Airports for example – high volume, retail priced opportunities with a similar profile to the high street.
"All in all, unless you are operating in such a high-volume environment, then the financial construct is very different and a decision to take on a high street restaurant, may be with all the best intentions in the world can often (and in most cases) be doing the restauranteur a disservice in the long run."
If you are looking for local food, from local restaurants some of the food companies can utilize a station for this purpose and manage a local restaurant program. In this scenario you have the onsite food team for everything else in the program such as breakfast, other lunch stations or grab and go options, snacks, beverages, pantry services, coffee bars and catering.
THE BIG 5
The foodservice industry is a global big multi-billion industry with a handful of large global players, otherwise known as the BIG 5, including (in order of size):
For clients who have large, multi-location operations, even internationally, these global giants can not only handle big volume accounts in multiple parts of the world but they also often provide additional service extensions for bundled services including such things as:
Refreshment and Office Coffee Services (OCS)
Uniforms & Workwear
Quality Life Services including Concierge
Facilities and Janitorial Services
Integrated Facilities Management
Conference Centers and other Amenity Services
They also operate across multiple sectors including Business & Industry, Higher Education, Education, Healthcare, Leisure, Sports & Stadia, Correctional Facilities, even Oil & Gas, Mining and Remote Sites.
in Compass’s case operating in different sectors with different brands such as (B&I below), Morrisons in Healthcare, Unidine in Senior Living, Chartwell's in Education, and many other brands including Eurest.
The BIG 5 Specialist Foodservice Brands
Before we go on to talk about regional players, it’s important to point out that each of the Big 5 have either created or acquired their own niche brands to cater for the more discerning clients seeking high end food and experiences. Here are some of those boutique brands within a brand:
LifeWorks Restaurant Group (Aramark)
LifeWorks is an Aramark created boutique restaurant business focused on the business & industry sector with accounts across the US. Originally founded in California, and in Silicon Valley, the brand has grown to many marquee accounts across the nation and prides itself that no two restaurants are ever the same. LifeWorks also has its sister brand based in London.
Restaurant Associates (Compass)
Acquired by UK headquartered, Compass Group, Restaurant Associates (RA) was borne in the Northeast, US and although primarily in business & industry, they are a powerhouse in the Northeast markets, and in New York City and in financial services, professional services and technology clients. RA also has operations in the UK.
Bon Appetit (Compass)
Another Compass acquisition, Bon Appetit’s (BA) roots are in Northern California, in San Francisco, and Silicon Valley. BA operate in multiple sectors including primarily business & industry and higher education. To many, they are considered the IBM of the free food world with many of the big free food B&I accounts.
Artisan is a homegrown brand from Sodexo delivering the best culinary and experiences the French company has to offer. Recent acquisitions and investments from Sodexo have seen a doubling down in their food focus including expanding their commissary kitchen capacity and recent acquisition of Nourish Inc. and The Good Eating Company.
Danish firm ISS, acquired culinary focused grandfather of the foodservice industry, founded on the steps of Stanford University at the heart and crucible of Silicon Valley. With business & industry and education, Guckenheimer has spread its wings from its heartlands in Northern California to across the US, and with the now ownership in Denmark, potentially to Europe too.
Regional Foodservice Brands
Although for some, the large internationals are the right option. For others, to have a niche brand with more local support is also attractive, but for some, the smaller regional players give you a more personalized and tailored level of support but also the opportunity to support local and regional business, and in some cases with the added draw of minority, woman, veteran business ownership (MWVBE).
There are many great options out there and depending on what sector you are focused on - some specialize in B&I, education, senior living etc. and some span across multiple sectors. Here are some of the regional players that stand out:
Headquartered in San Francisco and the Bay Area, Epicurean is a minority and woman owned business and remains fiercely independent and retains its commitment to fresh, honest, local food and experiences. About 30% of its business is in B&I, around 50% in Higher Education and the balance in Senior Living and Prep Schools.
Headquartered in Dallas, Pennsylvania, Metz is a regional powerhouse on the East coast, USA. The business has a focus on healthcare and education representing over 85% of its business with the balance being in business & industry and senior living. They also have a growing housekeeping and janitorial services business.
American Dining Creations
Headquartered in Syracuse, NY, American Food & Vending and its sister, American Dining Creations offer food services in business & industry, universities and colleges, and in K-12 education with operations throughout the Northwest and in Central USA.
This is just a small sample of the Top 50 Food Service Management Companies in the US. The full list gets updated every year ranging from the giant multi-billion-dollar enterprises to companies in the sub $20M range.
For the full list of the Top 50 Foodservice Management Companies in 2021 visit: Meet the 2021 FM Top 50 contract management companies (food-management.com)
So that’s the field of play, what next?
So, going back to the very beginning, how does foodservice fit in with your business and contribute to the achievement of your overall objectives? Regardless of whether you decide contracting, self-operating, or hiring a concession partner is right for you, to create sustainable success, then you will need to build sustainable commercial terms for your chosen path.
“Ultimately to be successful and satisfy your organizational goals, you need to choose the right partnership path that meets your needs, but also the right commercial framework for your partner to be able to deliver the agreed success factors, measure the success, and for them to make a profit.”
This may sound obvious, but it is surprising how often misalignment gets in the way of success. The food business is largely about two things – food and people and when the focus is simply to reduce cost, then the thing that suffers is the quality of the food, service, and the experience. So going back to some questions to ask of yourself, what are you trying to achieve:
Your employees to have high rates of engagement, collaboration, satisfaction that in turn aid attraction and retention of the best and brightest talent?
Your students to have access to a range of convenient, healthy, and value for money food experiences that satisfies the needs of not just the students but the parents too.
Your residents have access to healthy, nutritious food options and experiences that are convenient, customized, and tailored to their absent loved ones needs and creates a highlight to their day in care.
If these are the types of qualitative outcomes you are seeking, then its important as you construct your partnership agreements that not only include Key Performance Indicators (KPI’s) but Value Performance Indicators (VPI’s) too. Make sure in both that they are driving the behaviors that will give you the outcomes that meet your ultimate needs – both soft and hard. Here are just some examples:
But what about the myriad of contract agreements?
Choosing the right contractual terms is also critically important, and that they align to what it is you are seeking to achieve from food service, and your business. Here are some examples:
Cost Plus: Where your partner passes all actual costs of operation (at cost) on to the client and charges a management fee for the services they provide. The management fee is typically a percentage of costs with a minimum in place or a fixed fee based on contract value. This can be particularly useful in a highly seasonal business for example, or where trading patterns are unknown. This could be an events center, or a conference center.
Full Subsidy: Like Cost Plus, however with a budget that predicts volume patterns and therefore annual cost, however, ultimately, the total cost of the service is the liability of the client. This could be a free food or highly subsidized food operation. This could also be a proper subsidy amount for a firm as the sales cover part of the subsidy. Many factors weigh into what impacts subsidy. Population, size of food program, sales volume, selling prices, program goals, number of stations, labor levels, catering sales, and more.
Fixed Subsidy: Usually after a period of known trading history, a Cost Plus and/or a Full Subsidy arrangement can be converted to a Fixed Subsidy whereby the partner takes on more of the risk of financial performance. These agreements typically have inflation escalators, and variances from anticipated trading patterns to revisit the fixed subsidy. In this scenario there is normally a guaranteed population and guaranteed catering sales volume.
Capped Subsidy: These types of arrangements usually occur in a more static environment where populations for example are more stable, and where revenue is less reliant on consumer patterns. For example, where there is a boarding school, or a residential senior living campus, then this Capped Subsidy acts like a “not to exceed” clause that gives clients the certainty not to exceed fixed annual budgets.
Profit & Loss: This is where your partner lives solely from the revenue that it collects directly from the consumer. The client often has no financial commitment or liability to the performance of the service or the operator. This arrangement usually requires large, expected volumes of consumers, and revenue. The danger exists in poorly put together or negotiated agreements that quality of service and experience can suffer as a result.
Concession: Where your operating partner sees sufficient volume and revenue that they can afford to pay a lease, rent, and even utilities. To be successful, this arrangement needs retail pricing, and high foot traffic to succeed.
It’s also a question of materiality too
Finally, and highly recommended is to work out your own return on investment opportunity for your business. What does foodservice really mean to you? How can it contribute, impact business betterment, maybe even bottom-line improvement to your business? Consider the following:
Employee Turnover Taking the example of a 1,000-employee business, at an average of $100K salary, and according to the Society of Human Resource Management (SHRM) the cost of turnover is 33% of annual salary, then each 1% reduction in employee turnover is worth $330K. So, can foodservice help to reduce that attrition rate, at 5% and just 50 employees, that’s a $1M+ business benefit each year.
Time savings According to the Society of Hospitality and Foodservice Management (SHRM), where attractive food service options are not available within a 5 minute food commute, then an organization will lose on average 20 minutes per day per employee productivity. In the 1,000 employees, earning $100K, then that’s a whopping $4M!
“Beyond just food and just labor, the foodservice market has many complexities, and with the right approach you can build a program that is not only a nice to have but one that drives business betterment too.”