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R&IEditorial Archives2002 — September 15 — Special Report

Institutional Giants: Best Practices
Noncommercial leaders meet challenges of tough times by maximizing talent, technology

Tough economic times bring out the best in seasoned foodservice operators. For the industry’s noncommercial segments, as for commercial-foodservice counterparts, corporate downsizing, institutional budget cuts and leaner staffing have put a premium on innovative thinking to maintain growth. Noncommercial feeders have risen to the challenges.

School, college, healthcare and corporate-feeding operations last year generated $56.8 billion in business (approaching $100 billion with the addition of military, vending, corrections and other noncommercial sectors), Chicago consultancy Technomic Inc. estimates. That represents a thin 2.3% increase over estimated 2000 revenues, and real growth may be even more difficult this year.

Most noncommercial foodservice operators have met tough times with an even tougher resolve to maintain quality and service levels by maximizing talent, upgrading training and tapping technologies.

For many foodservice contractors, however, a sluggish economy provides a torrent of opportunities as previously self-operated school, business and military facilities opt to outsource foodservice. The four largest contract-management companies’ combined revenues have increased 40% in the past two years, a growth rate no commercial segment of the $411 billion foodservice industry can approach.

Restaurants and Institutions’ annual Institutional Giants spotlight on the major noncommercial foodservice segments examines how smart management, creative thinking and unfailing commitment to quality can combine to tackle whatever operations and economic challenges arise. —Margaret Sheridan

The pie may not be much larger, but keep an eye on the sizes of the wedges.

Noncommercial foodservice’s retail-equivalent sales increased 3.1% from 2000 to 2001 according to estimates from Chicago consultants Technomic Inc., a deceleration from the 4% gain registered from 1999 to 2000.

During the two years from 1999 to 2001, however, sales by the four largest foodservice contract-management companies (Sodexho USA, Aramark, Compass Group North America and Delaware North Companies) jumped 40% to more than $16.5 billion last year.

Contract foodservice has been a buyer’s market as the top companies have binged on acquisitions during the past two years, rushing to snap up independents in an effort to gain access to new business segments, geographic areas or demographic groups.

None has been more acquisitive than Charlotte, N.C.-based Compass Group North America, which in 2001 alone increased revenues 38% to $4 billion. It immediately gained a major presence in the healthcare segment through its acquisition of Smyrna, Ga.-based Morrison Management Specialists, the largest independent foodservice contractor in the market. It continued its move into entertainment- and sports-venue foodservice through Chicago’s Levy Restaurants, in which it owns a minority stake.

Other Compass acquisitions include the Food Works foodservice unit of Schaumburg, Ill.-based Motorola Inc., at the time the largest self-operated employee-feeding operation in the nation, and, earlier this year, Palo Alto, Calif.-based contractor Bon Appétit Management Co., which had 2001 sales of $279 million. Michael J. Bailey, CEO of Compass Group PLC, recently told shareholders he expects a reduction in acquisition activity and increased focus on building existing subsidiaries.

Gaithersburg, Md.-based Sodexho USA, the largest North American foodservice contractor, has made its share of acquisitions too, most dramatically the addition of Allentown, Pa.-based Wood Dining Services, a top-10 contractor with corporate, campus and healthcare foodservice accounts. Alliances with restaurant brands such as Oklahoma City-based Sonic Drive-Ins and San Francisco-based Jamba Juice are broadening Sodexho’s options for campus and healthcare clients.

This year, Sodexho’s Schools Services Division has added $355 million in managed volume, including 66,000-student Guilford County School District, North Carolina’s third largest (it includes Greensboro and High Point). Guilford County’s school foodservice previously had been self-operated.

Philadelphia-based Aramark last year absorbed the food-and-facilities management operations of another top-10 contractor, Downers Grove, Ill.-based ServiceMaster Management Services. This year it acquired from Hilton Hotels Corp. the Harrison Conference Centers hotel/meeting centers.

As if that level of activity wasn’t enough, all three contract giants have been aggressively seeking—and securing—business in military feeding, a noncommercial segment that previously had been almost totally self-operated.

For many contractors, outsourcing of previously self-operated programs by schools, colleges and businesses has balanced spending cuts brought on by the economic slowdown.

Additionally, the events of September 11 exacted a toll on contractors operating in airports. The long closure of Ronald Reagan Washington National Airport posed a challenge for its food contractor, Washington, D.C.-based Anton Airfood Inc., necessitating staff cutbacks. But that spurred the company to re-evaluate staffing at all locations. Ultimately, “it forced us to become more cost-effective in everything we do,” says Treasurer Sharyn Post. “The results of these tough decisions have increased the bottom line substantially.” With new or expanded airport contracts offsetting reductions due to slowdowns, Anton’s 2001 sales increased 28% to $54 million.

Woodbury, N.Y.-based Lackmann Culinary Services lost corporate-foodservice contracts worth $7 million on September 11, working hard since to replace that business. While still mourning the tragedy and conceding that the economic slowdown has hurt the B&I segment, Andrew Lackmann, vice president of development and marketing, is upbeat about contract-management’s future. He sees more opportunities for growth—by mid-size contractors as well as global players—than he has in years.

“People are looking at their businesses differently. Where they may have just accepted some things in the past, they’re now asking, ‘What could we do?’” he says. More outsourced foodservice has been one result, Lackmann observes. But even for existing business, contractors are following their clients’ lead in re-examining operations to maximize cost-efficiency.

“Let’s face it. We all provide good food,” Lackmann says. “It’s what you can offer in addition that sets you apart. That’s good for the industry, and I’m very confident about the value of the personalized service we offer.” —Scott Hume

Running campus foodservice takes a businessperson’s experience and a freshman’s enthusiasm. Rising enrollments bring more students but also can result in housing shortages that push more students off campus. The challenge for college and university foodservice—a $9.3 billion slice of the approximately $100 billion noncommercial market—is to make campus dining options inviting, flexible and convenient.

Innovations that boost sales and maximize operations never are in short supply. University of Maryland opened a new kosher dining facility on its College Park campus and introduced a “gift-of-the-month program” for parents. University of Notre Dame enriches dining choices by adding three national quick-service outlets. Culinary services at Virginia Polytechnic Institute and State University in Blacksburg will cater a new club lounge and 15 private suites at the stadium with upscale items such as smoked salmon and tenderloin of beef to crab cakes. To ease decision-making, catering clients can peruse menus and photos and then order, all on dining services’ Web site.

Despite ongoing renovations to residential dining facilities, Harvard University in Cambridge, Mass., continues to raise food-quality levels and increase efficiency by expanding its cook-chill capabilities. A slight drop in enrollment hasn’t hindered sales at 15 retail outlets at Provo, Utah’s Brigham Young University. It reports 22,000 transactions daily.

The merchandise mix at University of Chicago’s Maroon Market, the campus convenience store located in the newly renovated Bartlett Commons dining hall, reflects the diverse origins of the 16,000 students. Choices in fresh, prepared and frozen foods include Asian, kosher, vegan and organic. Extended c-store hours—from 7 a.m. to 2 a.m.—complement dining halls’ shorter hours.

To keep costs low, Ken Toong is a sleuth for details at University of Massachusetts in Amherst. “We benchmark everything,’’ says the director of dining services, who reports $8 million in sales from 12 retail units, a 5% increase from last year. “We track everything.’’

Such inspection helps Toong keep viable items on the menu and eliminate less popular ones. One item upgrade raised student satisfaction. After tracking sales of double burgers (only 20 per day), he eliminated them and refocused energies on quarter-pounders (1,000 per day). To raise value and respond to students’ requests for more grab-and-go foods, he switched from paper wrappers to foil. Though foil costs a few pennies more, Toong saw value outweighing cost. “Students really like foil. It retains heat and refolds more easily than paper after they add condiments.’’ Winter in Amherst was an acid test for the new packaging. “Students like having something warm to eat en route to class.’’

Another initiative was the creation of an all-you-can-eat sushi station. Food costs can be controlled, Toong says, and students take only four to six pieces. It’s very popular, fast and maximizes the skills of some of his Japanese staff.

About 100 of the 400 full-time employees are Asian; and some are former restaurant owners willing to teach part-time student employees about their cuisine. “It impacts our menus because we’re always adding new ethnic dishes,” Toong says. “Students appreciate the variety. It also boosts morale and spotlights the diversity and talents of the staff.” Items set to debut this fall include dishes from Thailand, Morocco, the Middle East, India, Korea, China and Vietnam.

Toong credits the success of UMass’s self-op foodservice department to high volume and the low cost of doing business.

Thinking big while preparing for change is a core strategy at Purdue University in West Lafayette, Ind. Its foodservice program is undergoing a substantial six-year makeover. The number of campus housing buildings with foodservice is being cut to five from 11. Two new market-style eating facilities will be added and five chefs hired to staff them.

Dealing with major changes begins by retraining full-time employees, says Sarah Johnson, director of foodservice. “These employees represent continuity. They stay. Students come and go.’’

A 720-seat dining facility debuts in March 2003 while an 800-seat marketplace will open in 2004. By 2006, when reduction of dorm foodservice facilities is completed, Johnson’s full-time staff will be reduced from 175 to 150. To ensure a smooth transition, Johnson last January hired a culinary consultant who is instituting changes in stages.

The first is cosmetic, with improvements to the appearances of the serving and dining areas. In addition, the consultant is raising the standards of plate presentation. As each kitchen opens, the consultant will conduct training sessions for food production, cooking and serving.

So far, the changes have instilled energy and enthusiasm among employees, Johnson says. Everyone participates in weekly meetings. Each employee is asked to assess his or her own performance and set goals. “Morale is up. There’s more communication and friendly competition among units,” Johnson says. “Students even notice a difference. Some ask how much we’re spending and why. Others just say ‘Wow.’’’—M.S.

Self-operated healthcare foodservice operations—with retail-equivalent sales of $22.4 billion in 2001—are rising to the challenge of widespread staffing and budget cuts, cooking up clever ways to keep costs down and employee morale up.

From a new model of service standards at Mount Sinai NYU Health in New York City to a focus on customer satisfaction at Hartford Hospital in Hartford, Conn., to centralized cook-chill tray-line production at MetroHealth System in Cleveland, these operations not only get creative in their solutions, they find success in the results.

“We’ve drastically reduced costs while increasing patient satisfaction levels,” says Todd Foutty, director of foodservice operations for MetroHealth System, where centralized cook-chill production yields more than $1 million in annual savings.

The idea for the program was born when MetroHealth challenged each of its departments to reduce costs. Under threat of outsourcing, Foutty realized his foodservice processes needed an overhaul.

Traditionally, each of MetroHealth’s three facilities employed its own tray production line, each fully staffed 12 hours a day. Foutty’s implementation of a single cook-chill tray line staffed eight hours per day drastically reduced personnel and food costs. Working in a refrigerated environment to maintain food safety, production staffers stay one daypart ahead with each meal, plating lunch first, then dinner and finishing with breakfast for the next day. A refrigerated truck transports meals to each location.

“Hot food doesn’t get any better as it sits. At the end of each meal period there was a tremendous amount of waste,” Foutty says of the old method. “Since we’re now preparing at one location and it’s cold food, there’s no deterioration. We either use what’s left for the next meal period or send it to the cafeteria.”

As in healthcare operations across the country, staffing cutbacks are a fact of life at Via Christi Health System in Wichita, Kan. Maintaining a high-quality work life for remaining employees is now a key focus of the organization.

“A happy workforce equals happy patients, which is our goal,” says Patti Dollarhide, director of nutrition services.

To stay in tune with its employees and allow a forum for feedback, Via Christi instituted regular one-on-one meetings between staff and managers in which current projects, issues and needs are discussed. The idea initially met with some resistance, as staffing cuts created high employee-to-manager ratios.

“Managers’ first reactions were, ‘We don’t have time for this,’” Dollarhide says. “But we’ve learned that we don’t have time not to do it.” In the 18 months since the program began, turnover has dropped from about 30% to less than 18%.

Following the success of these personal interviews, management looked for additional ways to create a more enjoyable environment for employees. Managers now are encouraged to write personal thank-you notes to staffers for jobs well done, and the department plans events to keep staff interested and involved.

One recent example was a department-wide salsa contest, in which foodservice staff brought in their own recipes and allowed customers to cast votes for the best by contributing a dollar. Proceeds went to charity.

“There was so much enthusiasm in the kitchen. Some people came in on their day off. I think it will be a revenue opportunity for us as well,” Dollarhide says, adding that many customers purchased salsa to take home.

Via Christi also has invited vendors from a local farmers market to sell fruit, vegetables and other products in its cafeterias. Although not a moneymaking venture, the event was so popular with staff and customers that six more are planned for the year.

“Our reputation has changed because now we’re a department that has fun,” Dollarhide says. “It’s a change in our culture.”

At Continuum Health Partners in New York City, budget constraints have spurred foodservice to go on the offensive. Rather than buckling in the face of reductions, the department seeks new ways to raise revenue to offset budget cuts. Several such efforts have been successful in the past year, says Barry Schlossberg, corporate director of food and nutrition services.

At one of its seven sites, Continuum completed a $40,000 cosmetic renovation to the cafeteria, adding new chairs, lights, flooring and pictures. Revenue has jumped 61% year to date since, “just because we provided a comfortable dining environment,” Schlossberg says.

Another location opened a coffee cart in the lobby to capture customers entering and leaving the building, generating $150,000 year to date. Weekly outdoor barbecues also draw regular crowds.

Looking ahead, Continuum plans to open an outpatient nutrition center that will offer counseling services and provide yet another source of revenue.

“When it comes to the word ‘reduction,’ you have to think the opposite and imagine revenue enhancement,” Schlossberg says. —Allison Perlik

Elementary and secondary school foodservice operations—with $12.9 billion in sales last year—are evolving to keep pace with students’ demanding schedules and increasingly sophisticated palates. Adapting to changing pupil needs while running efficient, cost-effective operations that adhere to nutritional regulations remains a school foodservice operator’s most demanding challenge.

To better serve customers seeking greater menu variety as well as retail convenience beyond school cafeterias, many districts have updated computer networks and software systems to manage inventory, track participation and audit sales. Specialized software installed across a school district’s computer network lets foodservice directors juggle budgets and sourcing for thousands of students among dozens of campuses. At the school level, such technology provides managers with inventory numbers, sales reports and bank deposits on a daily basis, allowing problems to be quickly addressed.

By connecting each of its 230 schools to a centralized computer system, Kentucky’s Jefferson County School District (includes Louisville) reduced end-of-the-year inventory by $500,000 for the 2001-to-2002 school year. Back-of-the-house software connects each campus to the district’s central operations facility, where food preparation and distribution are handled.

“We now have accurate, real-time inventory,” says Cheryl Sturgeon, director of Jefferson County School and Community Nutritional Services. “Our managers provide us with constantly updated inventories so we can adjust if one school runs low on an item. We know immediately if another school has an excess of that item and can coordinate redistribution between schools.”

For Dan McPartlin, foodservice director of the Clark County School District in Nevada (includes Las Vegas), networking all his schools’ computers will increase efficiency throughout the district. “We add an average of 11 schools a year to our district. We won’t keep pace with that kind of growth if we don’t make our foodservice operations as efficient as possible,” he says. “When all kitchens are connected to the main office, we’ll be able to check for inventory abnormalities right away. Supervisors will correct problems the same or next day instead of at the end of the month.”

Technology upgrades also help districts better serve students. In Jefferson County, applications for free or reduced-cost lunch programs are processed and downloaded nightly to each school, Sturgeon says. “The advantage is the speed with which children are approved.” With 64% of students participating in free or reduced-cost lunch programs, this is a large customer base to maintain.

Many schools find breakfast a growing part of their food program. According to the U.S. Department of Agriculture, the National School Breakfast Program has grown 115% since 1980, with an estimated 1.3 billion meals served in 2001. In contrast, the National School Lunch Program grew imperceptibly during the same time period, serving 4.5 billion meals in 2001.

An experimental breakfast program started in 1999 at Hillsborough County School District in Florida (includes Tampa-St. Petersburg) last fall won school board approval for all 212 district schools. Foodservice Director Mary Kate Harrison initiated the pilot at 30 schools whose students had the highest participation in the National School Lunch Program. In 2001 the program expanded to include 60 additional schools, serving a total of 41,917 breakfasts.

Harrison encouraged kitchen managers at participating schools to find creative ways to distribute breakfasts. “One big challenge has been to get cafeteria staff to think outside the box on how to get meals to students,” she says. “The staff thought breakfast should be served the traditional way, in the cafeteria.” Harrison and her managers visited neighboring school districts to see alternative ways of food distribution.

Hillsborough’s breakfasts are served before school starts, except to kindergarten students, who eat during first period. Food is distributed in a variety of locations: Carts at school drop-off zones dispense prepared breakfasts that include sausage and biscuits, cereal bars, fruit, juices, yogurt and milk; school cafeterias offer hot breakfasts, traditional and Southern-style, and cold breakfasts including cereal, yogurt and fruit. Some meals are pre-ordered and delivered to classes, a system Harrison compares to catering. These breakfasts are prepared by kitchen employees, packed by custodial staff and delivered by students. Vegetarian meals, offered at lunch, now are available for breakfast as well.

According to Harrison, the district’s breakfast program has 62% participation. “We know that many students do not eat breakfast at home and this affects their work in the classroom,” she says. “We hope the program will grow and its value is seen by parents, teachers, staff and the students. Kids who eat breakfast are more attentive in class and participate more often.” Harrison says faculty at schools participating in the breakfast program have commented on the positive change in their students. “Breakfast is about preparing students for the classroom.” —Brian Spinner

Foodservice professionals in the B&I sector are doing more with less. Despite staff reductions, facility closings and downsizing, they are finding new sources of revenue and maximizing labor.

Employee-feeding operations accounted for $22.2 billion in retail-equivalent sales in 2001. Increasingly, as businesses re-evaluate spending, that money is going to contract-management companies. In the past year, four of the largest internally run B&I operations switched to contractors. Charlotte, N.C.-based Compass Group North America now handles corporate foodservice for Hartford, Conn., insurer Aetna; Zeeland, Mich.-based furniture maker Herman Miller, and Schaumburg, Ill.-based electronics manufacturer Motorola (buying Motorola Food Works, which two years ago was the nation’s largest self-operated B&I unit). Philadelphia-based Aramark, meanwhile, now handles foodservice for Bank of New York.

Many remaining self-op venues have been hard pressed by cutbacks but resolve to prove their value by providing high-quality food to employees and cost-conscious operating strategies to corporate overseerers. Brett Fairbanks says the economic downturn, layoffs and shrinking subsidies have only strengthened his skills as general manager of Café Limited, a foodservice outlet in the headquarters of Columbus, Ohio-based clothing retailer The Limited. “We’re committed to stay self-operated. Times are tough but not impossible.”

Staffing cutbacks resulting from The Limited’s divestiture of its Lane Bryant and Limited II divisions have cut into foodservice sales. “When you take traffic out of the facilities, it ramps up the subsidy. Now, we do more with less,’’ Fairbanks says.

Total business is down 15% for 2001, he adds. On-site catering for meetings and social events took the biggest hit, declining by 50%. A recent mandate from the company to reduce staff by 1% was met through attrition, and today a staff of 27 full-time employees serves 2,000 customers daily. To compensate for fewer hands, he reorganized job responsibilities.

Fairbanks revised menus to include larger portions, upgraded breads and new fillings for roll-up and wrap sandwiches.

Another trend he targets is personal indulgence, adding premium ice cream. “Last year we offered soft-serve yogurt when everyone was afraid of fat,’’ he jokes. “Customers now want personal luxuries.’’

To increase revenue, Fairbanks markets more take-home foods from the in-house bakery. Around Thanksgiving and Christmas last year, such foods produced $1,000 in daily revenues. Since a Friday bake sale was added a year ago, employees can take home fresh breads and desserts. The Friday event averages sales of $300 and does not significantly add to the bakers’ workload.

Getting fresh baked goods on the shelves before the lunch rush is critical. So too is positioning items to catch customers’ eyes. “Seeing hot-dog rolls or hamburger buns reminds you to pick some up for weekend cookouts,’’ Fairbanks says. Packaging items for at-home, family consumption also boosts sales. Mini-cupcakes are especially popular with kids. So are cookies, bundled three to a pack.

More cuts in foodservice personnel loom at The Limited. “We’ll cope. We’ll all pitch in a little more,’’ Fairbanks says.

More downsizing also is on the agenda for Tom Brown, manager of food, meeting and housekeeping services at Kimberly-Clark Corp. in Neenah, Wis., where he and 32 full-time staffers serve 2,600 employees at five sites. By the end of 2003, the company will eliminate its 50% foodservice subsidy. Prices will increase, and Brown expects sales to decline. “People start bringing their lunch [whenever prices rise],” he says. “It usually lasts a few weeks.’’

Lunch tabs average $3. Two years ago, the average was $2.50. That increase was coupled with a temporary 10% sales drop.

Breakfast business has remained constant, however. Employees want good coffee and a decent bagel or toast, he says. Offering freshly baked muffins and coffeecake boosts sales. Brown recently stopped buying fresh bread from a local bakery, choosing to bake on premise a frozen dough that provides more consistent quality.

Strategies that helped streamline operations include reducing the number of hot lunch entrées from two to one while introducing alternating stir-fry and carving stations. Seeing meals freshly prepared counters the stereotypical cafeteria ambience.

Brown intends to promote services at Kimberly-Clark’s conference center, which accounts for 65% of total foodservice sales. Recent improvements include remodeling a 250-seat cafeteria into a marketplace. Though the renovation did not greatly improve sales, Brown says it boosted morale among customers.

Menus at employee dining facilities will be expanded to include more grab-and-go options—such as salads and sandwiches—for the 40% who eat at their desks. Inspiration for menu innovation comes from watching younger customers. Employees in their 20s comprise about one-third of K-C employees and are some of Brown’s best customers. “They’re single and eat their main meal at work. They also are willing to spend a little more.” Every bit helps. —M.S.

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