A company has a large office building with 3,500 employees. Why would the company make the decision to have food services offered within the building rather than NOT to offer these services? Why would the company make the decision to outsource the operati

Business and Industry Foodservices

I I I I I I I I I I I I I I I I T I

This chapter \vas authored by Curtis Lease, District Manager, ARAMARK Business Sen'ices,

Houston, Texas.

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Some large corporations have jets with in flighl meals provided by their fo o d seru i c e op era ti ons.

After studying this chapter you will be able to:

l. Provide an overview of the business and industry foodservices segment with an emphasis on what it is and why it is important.

2. Review alternative financial goals of business and industry foodservice operations.

'3. Explore the range of foodservice a[ernatives offered in business and in- dustry foodservices.

4. , Review the organization of management positions in business and in- dustry foodservice operations.

5. Review challenges applicable to foodservice managers in business and industry or gantzations.

6. Explain unique challenges faced by contract management companies operating business and industry foodservices.

3 5 8

You are responsible for the foodservice opera- tions in a relatively large company. It is the head- quarters for a product manufacturer and has several thousand office workers and about the same number of plant (assembly line) personnel in a complex of buildings on the same site.

Office employees have access to a large serving area and dining room open throughout the working day. A series of separate ser-vice sta- tions offer a range of items, from components of a continental breakfast through a fairly sub- stantial variety of hot meal items. The lunch features made-to-order sandwiches, pizza, hot food stations, salads and desserts, and other items. An office coffee service and vending ma- chines are also available throughout the office building. The personnel in the manufacturing plant have access to two straight-line cafeteria counters and a large bank of vending units in a central serving site, many featuring foods that can be reconstituted.

Food for both the office and assembly-line staff is produced from a central kitchen in the of- fice complex. A short-order station is available in the assembly plant for items such as hot sand- wiches, which are prepared in small batches.

There has been a downturn in the national economy, and this company, like many others, has suffered. The first round of layoffs has oc- curred and, although it was small, the rumor mill about "what's next" is in full gear. There have been no wage increases for the company's staff for the last one and a half vears: none are expected.

Does it sound familiar? Students participating in a foodselice program at a postsecondary high school, or grade school want a wide variety of menu se- lections and "surprises" so that they don't get bored. They will "votmuith their feet" (eat fewer meals), even though they may have relatively few options if they are not satisfied. At the same'time, if the foodser-vice experience is enjoy- able, there will be steady participation because they have many other things to worry about besides where to eat.

Foodservice managers in -business and industry operations have the salne types of challenges. First, there is the potential to attract many guests who, while perhaps not a captive market, are at least in a central location when meal periods are scheduled and/or when people normally like to eat. More similarities: concerns about lack of variety, eating in the "same old place," and a sense of boredom that can arise as one settles into a dining routine. Also, like all segments of the hospitality industry guests dining in

{-:Iii\P'["]:.i{. ?t} Business and Industry Foodservices 359

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The foodser-vice operations have always had very focused financial goals and these have not changed: it must break even; there can be no subsidies from the company. In fact, over the past several years, more overhead costs that were not charged to the foodservice operations are being allocated to it.

At the same time, the number of employees being served has decreased. This is due, in pan, to the initial layoffs and, as well, to employee concern that, in the tough economy, they can do better by bringing food from home and/or by sending someone in a work group to one of the nearby quick-service restaurants. (In fact, several of these operations take fax and telephone or- ders, and a fairly large group of regulars pick up orders that have been separately bagged as soon as they arrive at the restaurants.)

The problem is clear: costs are going up and revenues are going dou'n. At the same time, foodservices must break even without a subsidy, and the contract management com- pany must make a fair profit or it u,ill not be able to continue providing foodsen,ices. What, if anything, can vou do to better manage the op- eration (to reduce costs without sacrificing quality standards) and to do more effective marketing (to increase guest counts, check ar'- erages, and revenues)?

As you read this chapter, think about your answers to these questions and then get feedback from the real world at the end of the chapter,

s u h s i d . v f u n d s p r o v i d e d b y a n o r g a n i z a t i o n i n s u p p o r t o f its foodservice program

h u s i n { i s s a n c l i n d u s i r v f o q r d s r l r r r i c r : $ t h e s e g m e n t o f t h e n o n c o m m e r c i a l f o o d s e r v i c e industry that provides meals o r p a r t i a l m e a l c o m p o n e n t s t o employees while they are at work; frequently referred to as B&1

36() *}AR"$" 4 Noncommercial Foodservices Operations

c l l i t i . i r r * l n ; * r k e , : l t h e r e l a - t i v e l y r a r e s i t u a t i o n i n w h i c h consumers have absolutely no c h o i c e o f p r o d u c t o r s e r v i c e a l t e r n a t i v e s ; e x a m p l e s i n foodservices include inmates in a correctional institution a n d n a v a l p e r s o n n e l o n l o n g - t e r m s e a d u t y

OlJice workers in this high rise offce building probably have access to middav foodseruices.

business or industrrr operations are looking for value. They desire good products, appropriate levels of service, and a pleasing and comfortable dining enriironment at the lowest possible cost.

You can see, then, that managers working ih both the educational and business and industry foodservice op- erations have several challenges in common. The good news: many of the tactics useful to address opportunities in one segment are equally applicable in the other.

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oBtEcTrvE I Provide an overview of the business and industry foodservices segment with an emphasis on what it is and why it is important.

Business and industry foodservices (frequently abbreviated B&I) are those available, as the name implies, to em- ployees while they are at work. Organi- zations offering foodser-vices to their employees and visitors include manu- facturing plants, office and multi-

tenant buildings, and public institutions such as government buildings.

Throughout this book, we have divided the vast world of foodservices into two types: commercial and noncommercial. As you have learned, the former (commercial) relates to operations that exist to generate profit on the sale of food and beverage products. The latter (noncommercial operations) exist for other reasons, but must provide food and beverage services as part of their efforts.

The term noncommercial has bothered administrators in this segment for years. While some believe it is better than the more antiquat ed institutional foodsewices, many industry observers still seek a term that better exemplifies and describes this very large industry.

The solution: a relatively new term, on-site foodseruices, has been proposed. An ad- vantage: the term is contemporary and does describe these operations. A disadvantage: a literal interpretation (food produced and served at the same location) also applies to almost all segrnents of the commercial foodservice industry. Another term , mana.ged ser- vices, is also becoming popular. It is also contemporary and describes the appropriate operations. It also shares a potential disadvantage with the previous term: the world of work has many other services besides foodservices that must be managed.

Some persons may view terminology concerns as a semantic exercise with little practical value. fn fact, in today's world of hospitality business, marketing is everything (or almost everything!). The ability to attract persons to work within the industry and others to consume the food produced by it may well be influenced by what the industry segment is called.

Any ideas? Hospitality professionals have debated this issue for manv vears. Per- haps you have the answer!

{if iAP"fi-iR 2{"} Business and Industry Foodservices 361

Commerce park buildings and those on a corporate campus may have a central site for foodseruices.

Foodservices in business and industry settings easily meet the definition of noncommercial foodservices utilized throughout this book: they are offered by organizations that, unlike their commercial foodservice counterparts, do not exist primarily to produce, serve, and generate profits from the sale of food and beverage products. They also fit our definition because they are not typi- cally available to the public.

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Today a significant majority of all business and industry operations are managed by contract management companies, and this percentage is increasing. Much of this growth occurred when management companies assumed the operation of existing self- operated foodservices that were unable to meet their financial goals. Other growth has occurred as businesses with successful contract management company relationships ex- panded to additional locations and retained existing or other management companies for the new sites.

As business organizations become largeq, the management of their foodservice al- ternatives becomes more complex. It is not uncommon, for example, for a large global company to have some outlets managed by its own employees (self-operated sites) and, at the same time, to utilize one or even several contract management companies to op- erate foodservices in other locations. To add to the complexity, vending and office coffee service operations may be handled by still other organrzations.

Foodservice liaisons may be employed by organizations to represent them in the day to day management of foodservices when contract rTl?tnagement companies are uti- lized. While their job is never easy, it becomes a significantly greater challenge when their responsibilities are expanded from one unit to the management of foodservices in a diverse network such as that described above.

As discussed throughout this text, there are no secrets to the successful manage- ment of a foodse+vice,or other tlpe of hospitality operation. Successful programs can be operated by the organization itself or with the use of a contract management company. The principles of doing so are the same, and it is the knowledge, skills, and abilities of the management team, not the management alternative (self-operated or contract man- agement company), that are most instrumental in determining the success or failure of the foodservice program.

362 *3:\{tl* 4 Noncommercial Foodservices Operations

Many business and industry foodserices are available because of emplover convenience and/or benefit. In companies with relativelv short, scheduled lunch breaks, there is relativelv little time for

"mployees to leave for off-site

foodservices, and the option of packing a lunch is not attractive to many feople. Organizations with locations remote from commercial food- service alternatives encounter another problem: no place to go. Another issue related to employ- ees leaving the vu'ork site are the concerns that they will return late (or not at all) and that they might return in an impaired condition (if, for example, they have had a three-martini lunch). As well, off-job accidents that occur when em- ployees must drive to a restaurant for lunch can be reduced.

Bank employees appreciate o

i i ; i * t : - t : : ; , l l l . i t t i ! l t n c i l a p h r a s e r e f e r r i n g t o t h e ( s o m e t i m e s e x c e s s i v e ) c o n s u m p t i o n o f a l c o h o l i c beverages by business persons during the w o r k d a y

well-run foodseruice operation The issue of employer convenience is in- creasingly superseded by another concern: cost.

Economic issues are typically at the heart of a decision to utilize self- operated or contract management company-operated foodser-vices. (These

alternatives for operating noncommercial foodservices were the topic of

C h a p t e r 1 7 . ) Exhibit 20.1 summarizes an employer's concerns about foodselices.

The answer to the question of whether to offer foodservices to emplovees is

t-vpically no when the employer does not envision the responsibility or advan- tages of doing so. If it is seen to be a convenience or a necessity by the em- plo5rer, the question of ho'uv to do it becomes a priority. Basic concerns about the need to minimize complaints from employees and to minimize costs are at the forefront of the decision. The two basic options (self-operated or con- tract management company-operated) are then assessed, and the best alter- native is selected.

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Self-Operated

Contract Managemenl Company-Operated

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We have already noted that business and industry foodservices shar:e the fi- nancial concerns of their counterparts in other segments. Exhibit 20.2 illus- trates a historical perspective on the economic goals of foodselices in this segment. Although the term business and induslry is oversimplified (the seg- ment is diverse: foodser-vices programs operate all along the continuum shown), it does illustrate an evolution in financial goals.

o In the past, employers often treated foodservices as an employee fringe benefit; some organizations offered free meals and others operated food- services at a loss. (Since employee payments did not cover operating costs, this subsidy was seen as an employee benefit.)

o Recentlv, organizations have reduced costs ever].r,vhere, including food- services. Programs were expected to break even, surpluses were decreas- ingly provided, and programs were less frequently offered as an employee benefit.

. Today, foodservices are increasinglv expected to generate at least some profit. Sometimes this expectation is met because some costs, not his- torically allocated to the foodservices, are now allocated to the program. In other instances, some money in the form of rebates or commissions from the contract management company may be expected.

. Future foodservice operations will increasingly have profit-making goals. Higher levels of rebates from contract management companies r,r'ill be negotiated, even though they will likely be at the expense of food- selice consumers.

We have been discussing economic goals from the perspectirre of the sponsoring organization, and this over-vierv applies directlv to self-operated programs. What about financial goals when a contract management company is involved? Exhibit 20.3 addresses this question, where we see that a range of financial arrangements is possible between the sponsoring organization and the contract management company.

o Assume, for example, that the sponsoring organization is willing to subsi- dize foodservices as a benefit to employees. The management company might negotiate a contract for a set fee (also called cost plus). Under this arrangement the sponsor provides monies in addition to those generated from employee revenues to pay the fee. Alternatively, the company could specify lower than required meal charges for employees and pay (subsi- dize) the contract management company for the difference.

o Assume that the sponsoring organization wants to break even; it does not want to subsidize the program nor does it wish to generate a profit. The

; - * L : ; r t * m o n i e s p a i d t o a s p o n s o r i n g o r g a n i z a t i o n b y t h e c o n t r a c t m a n a g e m e n t company; typically based on the profitability of the foodser- v i c e o p e r a t i o n t o t h e c o n t r a c t m a n a g e m e n t c o m p a n y

i r - ) t } ] t ] l ! $ 5 i { } t 1 a p a r , t m e n t m a d e b y a c o n t r a c t m a n a g e - m e n t c o m p a n y t o a c l i e n t t h a t i s t y p i c a l l y b a s e d o n a p e r - c e n t a g e o f r e v e n u e s g e n e r - a t e d f r o m s a l e s a t t h e c l i e n t ' s l o c a t i o n

cr:st ph-r,.,q a financial agree- m e n t i n w h i c h a c o n t r a c t m a n a g e m e n t c o m p a n y e s t a b - l i s h e s a c h a r g e t o t h e s p o n - s o r i n g o r g a n i z a t i o n b a s e d o n a c t u a l i n c u r r e d c o s t s p l u s a fee for its services

ln the Past Recently Today I n t h e F u t u r e

Generate H i g h e r Profit

h " x r - { t m i l " 2 * " 2 A History of an Organization's Goals for Business and Industry Foodservices

oBIECTTVE 2 Review alternative financial goals of business and industry foodservice operations.

364 PAR'I- 4 Noncommercial Foodservices Operations

Clarie Schulze Food Service Director ARAMARK Business Services San Antonio, Texas

The Hospitality Industry Is Customer Service

What is your educational background? I graduated with an undergraduate degree in food science and technology, with a minor in business administration.

What is your work experience?

I completed internships with the quality assur- ance departments of several manufacturing com- panies that service the restaurant and foodservice industry. The work involved hazard analysis criti- cal control point (HACCP) svstems enforcement, implementation, and development. I also worked on projects relatin-e to control testing on product attributes to maintain product consistency and employee training relating to food safety.

What are the most significant challenges facing your segment of the industry?

Mv rriew of challenges is, perhaps, different from that of some of my colleagues. This is good, and it is understandable since managers have diverse backgrounds and views about the future and r,vhat we should do now to help to shape it. The challenges I would like to address focus on food qualitSr and food safety, since food (along with customer service) is what our company and our

industry is all about. A significant challenge re- lates to ensuring that all the food we produce and serve is safe for consumption. This requires the consistent application of HACCP principles and procedures. Operators must also be able to segregate allergens (food ingredients that create allergies in some persons) and/or other ingredi- ents to which some persons are chemically sensi- tive. The complete segregation of allergens and the reduction or elimination of chemically sensi- tive ingredients such as monosodium glutamate (MSG) need to be long-term goals for the hospi- tality industry.

Here at ARAMARK we are implementing HACCP temperature logs, and unit leadership is being proactive to incorporate the HACCP svs- tem into the way we do things. However, this is a challenge because it requires formal training in each unit.

What are your career plans?

I intend to increase my focus on management and the human resources principles that affect emplovee-management relationships and our contacts with our clients (account managers) and customers (consumers of our products).

What is your advice to young people considering a career in your industry segment?

It is impor[ant, first, to know about your business. An integral aspect is knowing how to interact rvith the guests and your staff members. Remember, the hospitality industry ls guest service.

Goal of . S p o n s o r i n g Organization

Contract M a n a g e m e n t Company's

F i n a n c i a l P l a n

S u b s i d i z e

F e e ( C o s t P l u s )

Break Even

Profit or Loss

Generate Profit

Rebate to Sponsor

fi_KHirirT ?f")"3 Range of Financial Agreements in Contracted Foodservices

CHAPTER 20 Business and Industry Foodservices 365

contract management company may negotiate a profit and loss agree- ment in which it generates a profit (or loss) based on its financial success.

. Assume that the sponsoring organization desires to profit from its foodser- vices. The contract management company will then pay a commission liom the revenues it generates from paying guests (and, of course, charges to con- sumers may need to be higher than otherwise to generate this excess rev- enue unless commissions are paid on the basis of higher business volume).

-

You can see, then, that there is a range of agreements between sponsoring or- ganizations and contract management companies to address the organiza- tiont financial expectations for the foodservices program.

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oBIECTTVE 3 Explore the range of foodservice alternatives offered in business and industry foodservices.

Just as educational facilities offer numerous foodservice options, so do those in business and industry. Sometimes a straight-line serving line is used. In- creasingly, however, food products are offered using a scramble cafeteria system. For example, separate stations in a food court may be established for the following:

Business and industry foodservice operations provide services to in- creasingly more sophisticated customers who are, in effect, looking for a "retall" environment: a "real restaurant with real food choices." Business and industry diners like brand-name choices such as McDonald's and Starbucks and a surprising staple to some observers: pizza.

Here's some interesting information about the cafeterias at four of Atlanta's best known corporations:

& Chick-Fil-A. Not surprisingly, Chick-Fil-A sandwiches and other chicken products are a big favortte. Pizzas are baked in a stone- tiled oven in plain view. The kitchen makes irresistible desserts and, sometimes, unusual creations, such as spicy cornbread salad. Turice a year, homemade jambalaya is offered with zydeco music playing in the background.

s UPS. The cafe at UPS headquarters prepares 2,000 meals daily, all served on china and washable flatware (no to-go boxes). Many cus- tomers like the "action station" that prepares stir fry. One fact: maca- roni and cheese must be made only with real milk, butte4 and cheese.

s Coca-Cola. The Boulevard operation offers numerous stations, most of which offer made-to-order items. Hot food choices on a typical day include pan-carved roast bison, curried pumpkin soup, and chicken Oscar. No surprise: soft drinks are free and are posi- tioned everywhere in the dining area, and there is no Pepsi!

* Georgia-Pacific. The cafeteria for these employees is also open to the public. It features a large salad bar and daily specials ranging from pork loin to salmon. No surprise: all the plates are made of cardboard.

Source: John Kessler. Company cafeterias go

cialties. Atlant a J oumal- C onstit ution, February

200 6 from www. aj c. printthis. clickability. com.

upscale with more choices, spe-

13,2006. Retrieved February 14,

366 Fr\R'i' ;$ Noncommercial Foodservices Operations

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individual responsible for

p r o v i d i n g s p e c i a l i z e d p e r s o n a l a n d p r o f e s s i o n a l a s s i s t a n c e t o o r g a n i z a t i o n s a n d s e l e c t e d staff members within it

Salads Hot entrees Sandwiches (often made to order) Ptzza and Mediterranean Grab and go Exhibition and display cooking (Asian and pasta, for example) Soups and breads Ethnic (including Mexican, Asian, and Indian) Sushi Can ery (carved meats) Grill and American Specialty bars (such as top-your-own baked potato) Barbecue Desserts Beverages

Guests can quickly move from station to station to select desired items. There may be Italian and/or vegetarian or other stations that offer popular selec- tions (often with a daily special).

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There are many small contract management companies whose relationship with a busi- ness or industry organization is limited to its contract for foodservices. These compa- nies specialize in managing foodservices, and they do it well. Other; especially very large national (and even Sfobal), contract management compalles offer organizations a wide range of services in iddition to the provision of meals. Siamples include facility man- agement (including custodial services), uniform rental, laundry services, and business services (including managing organization-owned conference centers). Some manage- ment companies even offer concierge services to provide a wide range of assistance to key officials within the organization.

Organizations experiencing a successful relationship with the operation of its food- services may seek another division of the same contract management company for as- sistance with other services. While profits rendered to the contract management company for operation of foodservices may be less than desired, the management com- pany may be compensated as it provides other services. (Important Note: Large contract management companies offer excellent career opportunities in divisions other than those that are traditionally considered to be part of the hospitality industry.)

{"lf-lAP"|L,F{ :t} Business and Industry Foodservices 367

Auto workers con- sumefood and beverages during meals and other breaks.

Dining areas range from modest to first class. Those in many business and industry settings are designed and furnished in a manner similar to or even more attractively and comfortably than their counterparts in commer- cial operations.

Are food courts with attached dining areas the only foodservice options in business and industry? The answer is no. Other ways in which foodser-vices are provided to employees include the following:

o Executive dining. Table-service restaurants with gourmet menus and fur- niture, fixtures, and table appointments of the very highest quality may be available in a few business and industry locations. Smaller board and conference rooms may be available where executive dinins is also provided.

o Traditional banquers. Foodservices for food quality, variety, and service equal mercial caterers.

o Other catering. Creative managers in business and industry settings may provide foodser-vices for office parties and picnics (both on- and off-site) and even deliver pizza, sandwiches, and/or other items to employees at their work stations.

o Vending. A variety of food products (such as sandwiches and desserts pro- duced on-site) may be made available to employees by mechanical means.

Executive dining rooms available in some business and industry operations ofier meals and seruice equal to their upscale restaurant countetparts in the community.

large groups ma.y- be offered with to that offered bv hotels and com-

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br;lrrri*;J ii-r*ct food and,/or b e v e r a g e i t e m s m a n u f a c t u r e d b y o r g a n i z a t i o n s w i t h , t y p i - c a l l y , n a t i o n a l l y r e c o g n i z e d f l a f f i e s ; e x a m p l e s i n c l u d e Starbucks (coffee) and Pizza Hut (przza)

s * l f h r a n d s f o o d a n d , z o r b e v e r a g e p r o d u c t s m a n u f a c - t u r e d b y a n o r g a n i z a t i o n s p o n s o r i n g o r o p e r a t i n g foodservices at the site

oBIECTTVE 4 Review the organiza- tion of management positions in business and industry foodser- vice operations.

368 p, R';' '$ Noncommercial Foodservices Operations

Office coffee sentices. Employees in office settings may have refreshment

breaks provideld by the organization's foodservice personnel. Horne meal replacement. Some, but relatively few foodservice opera- tions may produce whole meals and/or meal components that employees may purchase for takeout and consumption at home, the quality of which is equivalent to or better than that of carryout selices offered by commercial restaurants. In-flight loodseruices. Organizations owning private aircraft may selve

onboard meals and beverages prepared by the organrzation's foodser- vice program. Branded fbod courts. Operations may offer branded or self-brands of products such as specialty coffees and pizza. Food courts in B&I are similar to those found in shopping malls; competitors offering alterna- tive food products are located next to each other, with guests consuming their selections in a common dining area. Cafes and bistros. These operations range from upscale to limited ser-vice to grab and go. Convenience stores (C-stores). Consumers may utilize retail stores offer- ing foodservices, including snacks and beverages and, perhaps, other items, such as company logo merchandise, gifts, gift baskets, gourmet

retail items, sundries, and personal care items.

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The organization of a business and industry foodsen,ice operation is similar to that of other noncommercial operations. A primarv difference relates to

the names given to these positions. Exhibit 20.4 shows several organiza- tional possibilities. Part A illustrates the most basic organizational system: a

self-operated program in a single unit. The foodservice director is super-vised by a business manager. (In some organrzations, the foodserice director ma]'

be super-vised by a human resources, facilities, or procurement administra- tor.) In turn, the foodser-vice director supen'ises the work of a head cook (with food production responsibilities) and a cafeteria supervisor (u,ith seru- i n g r e s p o n s i b i l i t i e s ) .

Part B of Exhibit 20.4 illustrates a self- operated program with outlets in several loca- tions. Note that the foodservice director superwises the work of foodser-vice managers in each unit who, in turn, superwise persons with food pro- duction (head cook) and food serving (cafeteria

supelisor) responsibilities. Part C shows how a contract management

.o-pun5i6perated program might be organized in an operation without a foodservice liaison. The foodservice director (who is an emplo}'ee of the management company) reporls to the organi- zation's business manager (or human resources, facilities, or procurement administrator) and also to an external district manager who is an employee of the contract management compan.v. The foodservice director, in turn, supervises the work of the head cook and cafeteria superuisor.

Finally, in Part D you see the organization modified because a foodservices liaison is used.

Business and industty foodseruices provide catered meals for compony picnics.

Ut-{;\PT-fu,R ?t} Business and Industry Foodservices 369

Foodservice Manager ( U n i t 1 )

I

Foodservice Director

I

A. Self-Operated: Single Unit

B . S e l f - O p e r a t e d : M u l t i u n i t

Foodservice Manager ( U n i t 1 )

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District Manager (Management Company)

D. Contract Management Company: With Foodservice Liaison

Foodseruice Director (Management Company)

District Manager (Management Company)

Foodservice Director

C . C o n t r a c t M a n a g e m e n t C o m p a n y : W i t h o u t F o o d s e r v i c e L i a i s o n

Foodservice Director (Management Company)

fr.xi-{{[3{T' :s.4 Organization of Management Positions in Business and Industry Foodservices

The foodservice liaison (an employee of the organization) is supenrised by the business manager (or other administrator within the sponsoring organiza- tion). The liaison, in turn, is responsible for the foodservice operation as it is managed by the foodser-vice director (a management company employee). The relationships between the foodservice director, district manager, and on- site managers (head cook and cafeteria supervisor) are the same as in Part C.

37O PAlq"T' 4 Noncommercial Foodservices Operations

oBIECTTVE 5 Review challenges applicable to food- service managers in business and industry organizations.

You will note that each of the four basic orsarllzational charts discussed has two factors in common:

o A represeintative of the sponsoring organizaJion is ultimately responsible for its foodservice program.

o The unit foodservice manager is responsible for. food production and service within the unit. (This is true regardless of whether the foodser- vices are operated by the sponsoring organrzation or a contract manage- m e n t c o m o a n v . )

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Access to a pleasantfoodservice experi- ence is important to persons doing tedious assemblv work.

Managers in business and industry foodser"vice operations share some chal- lenges with their counterparts in other industry segments, as well as chal- lenges unique to the segment. We will discuss both types in this section.

Consumers can become bored, and it is a constant challenge to keep them returning. They are very cost conscious and tend to compare what they receive (products and service) not only with rvhat they pay (the concept of value), but also with what they would pay elsewhere. Many guests in business and industry foodservices believe that their employers should be giving them a benefit and therefore perceive that the value they receive should be signifi- cantly greater than it would be elsewhere.

Managers need to keep pace with technology. Business and industrv foodser-vices are changing in many ways because of technology. Managers in this segment utilize technologv in much the same way as do their counter- parts in other segments (for example, for assistance in purchasing, revenue control, employee scheduling, and production forecasting, among man'u' oth-

ers). However, some technology is available but is either not cost effective to utilize and/or not easy to implement. For example, it is theoretically possible to utilize input from cash registers (u'hich

record the number of unit sales) to forecast when additional quan- tities of batch-cooked foods should be prepared. Also, it is theoret- ically possible for consumers to order food by computer for later pickup at a cafeteria or other location. Numerous technical details have slowed the widespread use of these technologies, r.vhich could benefit both foodservice operations and those being served.

There is a need to educate those responsible for foodser-vices in an organrzation, as

"vell as the consumers (employees). Organi-

zatrort officials, for example, might utilize the services of an exter- nal caterer for a special event. These funds would likely be better spent if the organrzation's own foodservices supported the event. In the case of a self-operated program or subsidized contract pro- gram, the additional revenGs could reduce the potential of loss. Depending on the agreement with a contract management com- pany, use of the internal supplier could increase the amount of commission paid to the organlzation.

Employees are typically unaware of the financial expectations of the foodservice program. They are likewise unaware of the often significant expenses required to operate the foodservice program. (In fact, many believe that "since there are no or few costs, we are entitled to very low charges for the foods we purchase." The chal- lenge of educating administrators and consumers of the foodser- v i c e s i s v e r y i m p o r t a n t .

Marketing challenges are significant. Issues relating to organi- zational downsizins that result in fewer suest counts and increased

CIIAPTER 20 Business and Industry Foodservices 371

consumer resistance to price increases were noted in the Feedback from the Real World section at the beginning of this chapter and will be discussed at its conclusion. Organization representatives tlpically believe the solution to be additional marketing and,/or promdtion tactics. Sometimes, ironical]y, ideas that are suggested (advertising on the organization's closed-circuit television network, including information with paychecks, and desk drops of advertising materials when work stations are cleaned, for example) are not permitted.

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Contract management companies operating business and industry foodser- vices are confronted by the challenges discussed above. Additionally, they must address at least two other issues:

1. Their companies lack name recognition by potential employees; this complicates tactics to recruit new staff members. Many persons recog- nize the names of some of the world's largest manufacturers, financial in- stitutions, and insurance companies, for example, that may employ them to work in self-operated foodservices. (In the case of famous and not so famous commercial foodservices, name recognition may also be influential in making emplovment decisions.) Significantlv fewer, if any, potential applicants are familiar with the names of contract management companies in organizations employing them to manage foodservices.

2. Clients are different. Traditionally, contract management companies in- teracted r,nith foodser-vice liaisons, human resources officials, and busi- ness and finance administrators who had some knou,led,ee about the management of foodsen'ices. This made it relativelv easv to negotiate and administer contracts for foodser-vices. Today, howevef an increasing number of sponsoring organrzations are delegating foodser-vice coordi- nating tasks to administrators with extensive knowledge about facility management and procurement. Their past experiences have less, if any, relationship with foodservices, and an educational effort is necessary to help them to recognrze factors important in managing foodservices.

Foodseruices for correctional facilities can be self-operated or managed by a contract management company.

oBIECTTVE 6 Explain unique chal- lenges faced by con- tract management companies operating business and industry foodservices.

3 7 2 PAit'}' 4 Noncommercial Foodservices Operations

1 . Provide an overview of the businesS and in- dustry foodservice segment with an empha- sis on what it is and why it is important. Business and industry foodservices (B&I) are those made available to employees while they are at work. These services may be offered by organrzations because of convenience to em- plovees and/or because they also benefit the companies. (Short lunch breaks may allow lit- tle time for off-site consumption, and there is a concern that employees may return late, not at all, or in an impaired condition.

Review alternative financial goals of busi- ness and industry foodservice operations. Financial goals have moved along a contin- uum from the past, when foodser-vices were subsidized as an employee benefit; to recently, lr'hen goals related to breaking even; to to- day, rvhen some profits are expected; to the fu- ture, when higher levels of profits will likely be expected. Contracts rn'ith management compa- nies can be developed that reco gmze the fi- nancial goals of the sponsoring organization.

Explore the range of foodservice alterna- tives offered in business and industry food- services. B&I foodsen'ices can be delivered in food courts utilizing a straight-line serving svstem or a scramble cafeteria system. Dining areas can range from modest to more attractive (comfortable) than those in commercial oper- ations. In addition to traditional cafeteria operations, foodservice alternatives include executive dining, traditional banquet and other catering activities, vending, office coffee

senrices, home meal replacement, and even in- flight foodservices.

Review the organization of management positions in business and industry food' service operations. B&I foodservices are organized in a manner similar to other noncommercial foodservice op- erations. \pically, a unit foodser"vice director is supervised by a business manager or other ad- ministrator of the sponsoring organiz.ation. He or she, in turn, directs the work of a foodservice manage6 who supervises others with food pro- duction and food serving responsibilities. Orga- nizations utilizing the senrices of a contract management company may provide a foodser- vice liaison to represent the organization in its dealings with the management company.

Review challenges applicable to foodser- vice managers in business and industry or- ganizations. Challenges include the need to be creative to encourage repeat business, the need to find wavs to utilize available technology, the need to educate organization officials and employees about the role of foodserices, and marketing issues relating to organizational dou'nsizing.

Explain unique challenges faced by con- tract management companies operating business and industry foodservices. Contract management companies in the B&I segment are confronted by two additional chal- lenges: the lack of name recognition, rvhich hin- ders employee recr-uitment effor-ts, and the need to educate the new generation of organizational representatives responsible for foodservices.

4 .

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6 .

Our real-world advice iomes from Curtis Lease, District Manage4 ARAMARK Business Services, Houston, Texas.

Curtis has experience in theresort, hotel, commercial restaurant, and B&I i*dustries. He has worked for both self-operated B&I foodservices (Motorola, Inc.) and contract foodservices (ARAMARK) in a variety of client organizations, including rural, metro, central-city, professional office, manufactur- ing, and light industrial environments. In his current position as district manager with ARAMARK, he is responsible for over $18 miltion in sales at over 15 client locations in the Houston area.

A very challenging situation was intro- duced at the beginning of this chapter. A variety of foodservice alternatives wds available to office and factory workers. Participation was decreasing because of previous layoffs, fears of additional labor force reductions, and a general downturn in the economy. Employees were look- ing for ways to find increased value in their din- ing purchases. At the same time, foodservice costs were increasing and no internal-organiza- tional funds were available for its support.

What, if anlrthing, can you do to better mErnage the operation (to reduce costs without sacrificing quality standards) and to develop mor€ effective marketing (to increase guest counts, check averages, and revenues)?

First, the situation described is a real-world challenge that,confronts operators regularly. Change is very prevalent in the business world, and foodservice operations' must continually flex to meet the changing needs of the client (sponsoring organization) and the customer (employees). Typically, foodservice contracts are written and based on very specific popula- tion and/or revenue levels. When these change, this often triggers specific clauses in the con- tract that may affect financial agreements or even require contract renegotiations.

In any event, foodservice operators must continually track, monito4 and evaluate sales trends, buyrng habits, and feedback of their customer base. Demographic changes, the economy, the financial health of the client, and local competition (for example, commercial restaurants and trends in the marketplace) af- fect customers' spending habits in the daily foodservice operation.

The goal of all foodservice managers in a situation like this should be to provide fact- based data along with options to the client that will allow the two-Jfoodservice operator and client) to make smart and financially sound de- cisions. The foadservica operator must provide fact-based data, .including financial information, and must suggest options for the client. If this is not done, the foodservice operator is not operat- ing in the spirit-of a'true partnership and is not helping the client to learn about.all possible op- tions that might offer solutions to the challenge.

Two special notes: First, as the challenge implies, clients and customers do not want to

{""1t{APl-iiR :* Business and Industry Foodservices 373

be affected negatively from quality and service goals. Howevef when populations and/or rev- enue levels cfrange, often the end result for the operation is some type of change or impact on, at least, service levels (for example, reduced food offerings). Quality should not be affected, but customer perceptions might suggest other- wise. BoJtom line: the foodservice manager has a tremendous challenge to manage perceptions and to drive value (special events and menus, vendor promotions, theme weeks, combo and value meals, for example) during challenging economic times. Second, when it comes to marketirrg, one of the first things most clients point to when revenue drops is a concern about marketing and what the management team is doing to increase participation and/or check average. It is critical that, before going to clients to look for financial relief or renegotia- tions, marketing activities must have already been implemented.

Here are a few options to present to the client in our situation:

. Consolidate operations. If possible, combine restaurant operations so that one or more of the satellite operations can be closed.

. Reduce food station offerings within the restaurant(s) to lower food waste and labor costs.

. Engineer menus. Introduce new food sta- tions and menu offerings. Drive new and higher participation and check averages by introducing new items (with greater sales than current items and with larger profit margins).

r Promote the restaurant operation to nonusers. Target nonusers and look for ways to capture sales from them. (What can we sell to a brown-bagger? Every new dollar generated is helpful!)

. Market the operation outside the four walls. Can the operation be opened to the public?

f-Promote external and off-site catering. A few additional catering events (especially large events like company picnics) can help to significantly reduce operating costs.

. Look for additional services and prod- ucts that can be offered to the clients and customers. (Could the foodservice opera- tion add a specialty coffee cart? Concierge services? Retail store? Office coffee ser- v i c e ? )

(continued)

3 7 4 Fi\$?'[' 4 Noncommercial Foodservices Operations

Change the concept of the food outlet. Can a satellite restaurant be changed into a cold-food grab-and-go bistro? What about enhanced vending? Dare to compare. Embrace the local com- petition and demonstrate (with a dare-to- compare campaign) the value of the on-site restaurant. Are customers eating off-site comparing similar quality and poi tions? (Usually, the perception of "getting greater value" at a local quick-service restaurant is incorrect. The problem: the

customer is not comparing like items and quality. What is the pricing comparison to the market?)

These suggestions are only-.a few of the many options available. The key is to present many ideas. Remember that these options will vary by site and by client. Over time, experienced managers are more skilled at presenting effec- tive options that can be great solutions to the challenge.

Discuss the following questions.

1. Assume that vou are the business manager of a large companv. Horv would you determine r,r,hether foodser-vices should be offered? If a B&I program was judged necessary how would you determine whether it should be self-operated or managed bv a contract man- agement company?

If you were a unit manager of a B&I foodser- vice operation, what would you do to retain consumer interest in the program? Horv would you assess what, if any, changes in the menu would be helpful? What is the likely impact of organizational downsizing on a foodseruice pro_qram? What can be done to minimize resultin_e problems?

2.

a J .

1. Check out the home pages of the following contract management companies: o Compass Group (Americas Division):

www.cgnad.com

o ARAMARK: www.aramark.com . Sodexho: www.sodexhoUSA.com

When you arrive at the site, click on "Markets Served" and then "corporate dining" site.

What, if any, information do they provide to business managers potentially interested in contracting foodservices to an external sup- plier? What cross references, if any, do thev provide to other types of contracted services offered brz the ors.anization?

2. Check out the websites for several foodservice- related trade magazines: o Restaurqnt Business: wu,,.restaurantbiz.com.

Enter "customer" into the rvebsite's search box.

o Restaurants & Institutions: www.rimag.com. Enter "customer" into the website's search l €

D O X .

o Food Management Magazine: www.food-management.com. Click on "ar- ticles," then click on "archive search," and then enter "customer" into the search box.

Review inforrnation applicable to B&I foodser- vice managers interested in reducing guest com- plaints and increasing the number of employees utilizing the foodservice operation.

il F{.\PT'fllt :{} Business and Industry Foodservice s 37 5

The following terms were explained in this chapter. Review the definitions of any words with which you are unfamiliar. Begin to utilize them as you expand your vocabulary as a hospitality professional.

scramble cafeteria system food court concierge (contract management companies) home meal replacement branded food self-brands batch cookins

subsidy business and industry foodservices captive market three-martini lunch rebate commission cost plus straight-line serving line