Rising costs, greater demands for resources and a general shift toward outsourcing are making self-operated foodservice a rarity in the corporate arena.
If you want a job done right, do it yourself” is a tough maxim to sell in the corporate foodservice world. With subsidies dwindling and employee downsizing a perpetual reality, self-operated dining facilities in the business-and-industry (B&I) segment now are rare islands in a sea of contract-run operations.
The handful of self-operated employee feeders that remain cite a familiar litany of motives: control, flexibility, consistency and perhaps most importantly, relationships with long-term, internal foodservice employees. A resistance to shifting from a formula that works often is a factor as well.
|The self-operated eateries at Corning Inc. serve an average of 3,000 meals per day with a staff of about 90.
“Nine years ago when I started with the organization they had an outstanding management team here, so why mess with success?” says Paul Antony, director of human resources at QVC Inc. in West Chester, Pa.
CAN B&I SELF-OPS RESIST THE OUTSOURCE URGE?
Antony, overseer of eight QVC foodservice sites in five states, has a valuable perspective on the topic: His operations in the West Chester headquarters are self-operated, but those off site are contractor-managed.
“The issue can be transparent as long as you ultimately meet customers’ expectations,” he says. “If you’re not managing it yourself, the challenge is to ensure you have a vendor partner who can be your equal out in the field.”
Ultimately, QVC turned to contractors for the same reason the majority of once-self-operated programs have: It is not in the foodservice business.
This desire to focus on core competencies helps explain why the B&I market is almost fully saturated by contractors, much more than school and healthcare foodservice segments. A general trend toward outsourcing of nonprincipal company functions is another significant factor.
“In the ’70s and ’80s, most companies wouldn’t have thought of going outside,” says Wayne Kulawiak, vice president at Chicago-based Northern Trust, which made the self-op-to-contractor switch nearly two decades ago. “Now companies outsource pretty much everything that is not core business.”
Percent of B&I operators who say they expect budget cuts by 2005; 36% also expect to face corporate downsizing by 2005. (Reed Research Group/R&I 2003 Trends in Institutions Study)
Practical matters weigh in the equation as well: the cost and effort of maintaining an internal foodservice staff, the higher costs small companies pay for food and equipment relative to larger companies with greater product purchasing power, and a lack of resources in such areas as marketing, technology and culinary innovation.
Should I Stay or Should I Go?
The considerable challenges self-ops face beg an obvious question: With all the obstacles, why do some operators continue to fight for self-managed status?
Sally Luck, director of corporate services at Kansas City, Mo.-based Hallmark Cards Inc., asked this question of her self-operated program about a year ago. The company examined how partnering with a contractor might lower costs in employee salaries and benefits and, on a smaller scale, through greater purchasing power. The potential savings turned out to be negligible.
Reluctance among manufacturing plant managers to bring in outside entities and Hallmark’s desire to continue providing foodservice as an employee benefit also influenced the decision. And while Luck cites staff recruitment and management as her greatest challenges, the desire to hold on to internal foodservice workers who not only understand the company’s corporate culture but are a part of it as well also played a role.
Reflecting on the decision, Luck says, “It wasn’t worth the turmoil [to change].”
The value of long-term, internal employees led Blue Cross Blue Shield of Texas in Richardson to the same conclusion. While Blue Cross’ Illinois branch works with a contractor, self-operation is a better fit for the company’s other sites, says Manager of Foodservice and Corporate Dining Michael Hoptay.
In Texas, the majority of the staff are 12- to 15-year veterans who know customers and have high levels of corporate morale. Such a long-tenured staff doesn’t come cheaply, Hoptay says, as salaries and benefits increase over time, but experienced workers have greater abilities to multitask and handle varied responsibilities. Lower turnover also means less time spent on training and even less wear and tear on equipment by inexperienced employees, he adds.
In addition to staffing benefits, Hoptay values the direct contact with company management (many contractors work with liaisons) as well as overall flexibility.
Percent of B&I respondents predicting that 2004 profits would be up versus 2003, compared to 44% among the rest of the noncommercial sector. (Reed Research Group/FE&S 2004 Industry Forecast)
Michael Sweet, manager of corporate food services at Corning Inc. in Corning, N.Y., is convinced that self-op status allows his department to be more agile. Foodservice can be more responsive to management’s needs when communication is direct, he says, while flexibility allows him to offset spikes in business volume with temporary contract employees.
“We’re always reacting to the economic climate, and that’s what makes us successful,” Sweet says. “We don’t sit back and wait for the company to say you need to reduce costs here or increase sales. Facilities with contractors are not necessarily proactive. They will wait for the company to come to them.”
Sweet counts the lack of marketing resources as his greatest difficulty since the company switched from contract to self-operation in 1997.
Time for Change
Despite the convictions of steadfast self-ops, the many benefits contractors can offer have lured the majority of B&I operations. Even Schaumburg, Ill.-based Motorola Inc., whose Food Works division once was the country’s largest self-operated corporate foodservice program, made the switch.
In September 2001, Motorola divested Food Works operations to Charlotte, N.C.-based Compass Group North America. Richard Ysmael, the former Motorola vice president and Food Works director who now consults for the operation, says a lack of resources in marketing, information technology and other areas drove the decision, as did a need to cut costs.
“No pun intended, but we were obviously at the bottom of the food chain inside a global electronics company. Foodservice just doesn’t carry a lot of weight in terms of [devoting] capital,” Ysmael says.
|Companies lacking the resources to stay self-operated turn to contractors such as Sodexho, which serves more than 1,300 B&I accounts.
The transition was relatively seamless, with most changes coming in back-of-house functions such as operating systems, paperwork and data reporting. Food preparation and presentation saw little change, as did the operation’s work force, about 90% of which stayed on board per the agreement between the two companies. Not only did these employees keep their jobs, Compass ownership provided Food Works’ management team career opportunities that didn’t exist for Motorola employees.
Foodservice staff at Kenilworth, N.J.-based pharmaceutical firm Schering-Plough Corp. faced a bumpier path when the company signed on with contractor Wood Dining Services (now part of Gaithersburg, Md.-based Sodexho USA) about five years ago. Initially, Schering-Plough kept all foodservice employees who wanted to remain on its own payroll. Working alongside new contractor staff, the original employees faced a steep learning curve to become acquainted with Wood policies and procedures, says Robert Wolkom, manager, dining and hospitality services. Eventually, Schering-Plough did cut ties with its own remaining foodservice employees as part of a company-wide reduction in force and a drive to reduce subsidies, but all were offered positions with Sodexho.
The move to bring in a contractor— fueled more by the company’s desire to focus on its core business than to save money—was a good business decision despite early difficulties, Wolkom says.
“The quality was probably similar, but the ingenuity, creativity, marketing—all those things we couldn’t really offer—were certainly a big, big change for us and a big plus for the program,” he says, pointing out that Schering-Plough has been able to maintain a high level of involvement and control over its operation. “Customers responded to it very favorably.”
Tips on Staying Self-Operated
- Remain in contact with those at the top of your company and show what you can do to be of value. Catering services can be important when it comes to the ability to satisfy those who have the power to say if you stay or go. —Michael Hoptay, Blue Cross Blue Shield of Texas
- Demand clear expectations from management so you can operate in an efficient and understanding manner. —Michael Sweet, Corning Inc.
- Be able to quantify the value of your service and be a partner to top management by having the ability to make changes as necessary to reflect the corporate culture and its priorities. —Sally Luck, Hallmark Cards Inc.
- Look not just at costs but also customer service, operating efficiency and other details when considering whether self-op or contract-run facilities are right for your company. Evaluate your performance as a self-op against what vendors indicate they can provide. —Paul Antony, QVC Inc.