This article was significantly expanded and updated on February 28, 2013.
Foodservice in B&I is slowly recovering after suffering through the corporate downsizing and personal spending cutbacks of the recession years. With 3.9 percent growth in 2012, the segment performed better last year than most observers expected and is poised for 4 percent growth in 2013, according to Technomic, the Chicago-based consulting organization.
"Consumers are slowly going back to work and the potential dining populations are becoming more available," says Technomic Vice President Joe Pawlak, even as he notes "but they are still not where they were five or six years ago. In real terms, the business is definitely down from where it was in 2007."
Most of the growth that has occurred "has come from price increases,” offers Tom MacDermott, president of Clarion Group. “If you compare customer counts, you still find declines almost everywhere you go. In response, transaction averages are creeping up, but there is tremendous price resistance in this market and operators are cautious about the negative impact price increases will have on sales.”
It's also clear that most business dining operators see labors, cost, price and margin management as the most significant challenges they face (see chart below).
At the same time, U.S. business and industry has always been resilient in the face of economic challenges. “In many ways, the corporate component of B&I caused dining to stabilize itself,” says Tom Newcomb, president of Corporate Dining, Inc.
“Companies are stabilizing in the new economy and difficult economic times drive innovation. You see results now, with companies that had their heads down in the recession investing in dining facilities again.
“As boomers retire, older facilities are being retrofitted to better match new workforce demographics and business models, whatever those are," Newcomb adds. "Technology is having an impact, with more emphasis on moving people through cafés quickly using scanners and debit systems."
Unmanned "mini-market' locations with scan-it-yourself food and beverage offerings and debit-card payment systems are also cropping up more frequently, especially at B&I locations with smaller and 3rd shift building populations, he says. "All of the major contract service providers have programs for this."
Mini-markets are one of several so-called "small site solutions" that have evolved as contract operators seek to service smaller population workplaces. To make them work, however, "maintaining freshness is critical," says MacDermott. "A customer who gets a stale product is not likely to return it since there is no one onsite to address the problem. But one bad experience is enough to curtail repeat business."
Providers sometimes try to address this with the so-called "commissary model" used in vending, with central production of wrapped sandwiches and other offerings and route service that keeps inventory rotated. This can help them trim production and prep costs as long as logistics to permit frequent deliveries of prepared product to these kinds of operations (and assuming the locations have adequate refrigerated storage for inventory). (See related story on Compass' Simply Puur"  model.)
Profitably servicing the smaller populations that are increasingly common in the B&I sector is a huge challenge for contract providers and employers are finding it harder to outsource services at such locations without subsidies.
“Contract providers are more selective in targeting corporate accounts they want,” Newcomb says. “They’re devoting more attention to opportunities in healthcare, campus dining and the military.” This is good for the industry, he believes. "It means they are not doing 'broadcast bids.'"
Looking for new jobs?
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The slow economic recovery has worked to discourage job changing, and that, too has added some stability. But as the economy improves, there are signs employees are getting restless. A recent survey by Harris Interactive for Glassdoor.com  found that one in three employees say they will look for a new job this year.
Such trends could put more corporate focus on retention strategies, which often entail various employee perks and usually bodes well for onsite benefits like corporate dining.
A big trend in recent years has been an increased willingness of corporations to allow employees to work remotely and to have more discretion in terms of choosing flextime hours and other forms of work flexibility . This has tended to create big challenge for onsite dining operations). But some companies appear to be re-thinking this policy.
Yahoo made headlines last month when it issued controversial new guidelines that significantly curtail employees' ability to work from home . While the company will not comment on its employee policies, a copy of an internal memo announcing the change was posted on AllThingsD , a widely-read technology blog.
In the memo, one of the observations made by Yahoo Director of Human Resources Jackie Reses was that "Some of the best decisions and insights come from hallway and cafeteria discussions, [emphasis ours] meeting new people, and impromptu team meetings. Speed and quality are often sacrificed when we work from home."
(For an interesting commentary on the pros and cons of the new Yahoo policy, read this column ).
The widespread use of open offices is old news, but companies are increasingly looking to add "community-building" collaboration space into office floor layouts, sometimes offering snacking options as they seek to replicate the kinds of work environments found in silicon valley operations like Google. As noted in Sodexo's recently issued Workplace Trends Report , there is a growing recognition that Milennials expect employers to offer more "human-faced" environments and are more willing than preceding generations to look for new employment if they don't feel such needs are being recognized.
Even then, good faith efforts to satisfy such demands can come under criticism, as they did recently in the New York Times when a columnist called out Bloomberg headquarters for the nutritional quality  of free snack foods available in the free snack bars in Bloomberg Tower. While not all employees would trade the available chips and candy bars for his suggested fresh fruit, yogurt and nuts, it underscores the complexity of meeting a broad mix of employee wants in the foodservice arena.
Corporate Wellness Programs are Spreading
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It's partly due to the aging of the workforce, partly to the growing cost of medical insurance subsidized by employers, partly because of the just plain frightening projections of what increasing adult obesity will mean employers and employees in coming years. And, as noted above, it's also partly due to the interest many people are taking in their own health, expecting workplace environments to provide choices and services that support more healthful lifestyles.
New research from the Robert Wood Johnson Foundation is projecting soaring adult obesity rates over the next 25 years (see Our Big Fat American Future ), warning that e the number of new cases of Type 2 diabetes to increase ten times in the next ten years, then double again by 2030. It also estimates the lost economic productivity that will result might reach as high as $580 billion annually.
The result: corporate commitment to workplace wellness is becoming de rigeur at many companies. One recent look at companies with more than 5,000 employees  found that 91 percent offer Web-based wellness resources; 81 percent offer smoking cessation programs; 71 percent maintain gym membership programs or on-site exercise facilities; and 70 percent offer weight-loss programs. When onsite dining is offered at these companies, it almost always is tied in to such programs in some way, especially with various kinds of loyalty programs to encourage more healthful snacking and dining choices.
There are also some incentives for wellness programs included in parts of the federal Health Insurance Portability and Accountability Act (HIPAA) as well as the Accountable Care Act that goes into effect at the end of this year. HIPAA already allows companies to require participation in such plans for employees who want the lowest heatlh insurance rate at a company and allows them to charge employees more  if they do not meet the company's wellness criteria. The goal is to encourage employees to share the responsibility for long term health care costs covered by workplace insurance plans. While the differential amount non-compliant employees can be charged is regulated, it could increase to 30%  or more in 2014.
As Sodexo noted last year in a company blog , "the ability to match outcomes in terms of reduced health care costs, increased productiviy, and higher rates of presenteeism will be the new standard in measuring the effectiveness of such programs. Focus will shift awar from traditional "ROI" calculations to "VOI," or "Value on Investment" as different organizations emphasize the importance of different outcomes."
What’s Trending: Business Dining
✓ Unmanned "Micro Markets" using employee ID card access, security cameras and debit accounts are being promoted as solutions for small population sites and times of day.
✓ Using offsite commissaries to service B&I cafés may come back into vogue as another way to service those with under-500 populations.
✓ Decentralized kiosks with free snacks in office gathering spaces are appearing in places like NYC’s Bloomberg offices.
✓ Contract providers are increasing their alliances and preferred vendor relationships  with real estate management firms.