Of the “core four” onsite foodservice segments, B&I is clearly the one most affected by the business cycle. The 2010 Industry Standards and Benchmarking Comparisons Report of the Society for Foodservice Management (SFM) shows definite participation declines at both breakfast and lunch, combined with steep drops in per-day profit (or average loss, in subsidized locations). Yes, the numbers are from 2009, but few believe 2010 was much different.
On the other hand, the SFM report produced some interesting spin-off stats, notes Tom MacDermott, president of the Clarion Group industry consultancy.
There's a rise in lunchtime check averages and breakfast participation. McDermott attributes the former to disproportionate reductions in lower-level staff who traditionally dragged down check averages and the latter to flex-time policies. “Given the opportunity, people prefer to come in earlier and leave earlier, so they take their big meal at breakfast,” he theorizes.
There seems to be a general acceptance by clients of the need for onsite foodservice. Tom Newcomb, who studies B&I specifically as president of the Corporate Dining, Inc., consulting firm (and compiles SFM's annual Industry Standards report), finds that in-house foodservice may actually have benefited from the recent downturn.
“For many years starting at the beginning of the last decade and fueled by the dot-com bomb and 9-11, there was a shift from seeing dining services as a benefit to seeing it as a convenience or service,” he says. “A pleasant surprise of the recent economic climate is that businesses are beginning to see new value in onsite dining. The dining of today is very different than it was in the 1980s and 1990s, but so are the customers, and businesses are seeing that.”
Cultural transformations like decentralization, home offices and flex time are changing population patterns. “We have suppliers absolutely shocked that on a Monday or Friday, a third of the population is not there,” says Kent Bain, principal of industry consultant Wood Bain Associates LLC. “This can be managed, but contractors have to work with clients so they know what they have to deal with.”
Food costs are under pressure from rising energy prices and customer demands for pricy ingredients (organic, local, authentic, etc.). Bain notes that changing demographics — younger workers used to diverse menus, convenience and nontraditional delivery points, as well as those coming from different cultures — offers challenges and opportunities.
Onsite operators are starting to partner with local restaurateurs to provide variety and authenticity to their menu mix. “If you can't do Indian food well, for example, find someone to partner with who can,” Bain says.
Onsite catering remains depressed. Don't look for a major bailout from catering, the traditional deus ex machina of the B&I financial model, says Newcomb. “Catering took a very large hit in the recent economy. Companies dramatically reduced their catering, which resulted in higher subsidies. And it's still down.”
The competition for meal dollars has broadened to include new and nontraditional sources. its not just the brown bag and the QSR value meal any more, but also the packaged meal from a retail store, upscale takeout from outfits like Chipotle and even something from a food truck.
Through it all, B&I remains attractive. Management companies continue to compete aggressively for B&I business, says Bain. “You can still be successful in this segment as long as you manage costs well and build a relationship with the client that protects the interests of both parties.”
Design efficiency, flexibility are key. Bain says one of the keys to success is facility design, to produce operations that are not only energy, logistics and operations efficient, but highly flexible. “That means being able to switch out equipment as needed but also flexibility in places like the seating area, so it can be readily adapted for other uses like meetings,” he says.
Staff must be more flexible. They must learn how to get the most out of equipment applications to maximize and operation's full potential. MacDermott suggests that downsized operations re-evaluate as if they were starting from scratch rather than reducing one-for-one with the population reductions.
“If you just cut 20% of your staff to match a 20% reduction in the client population, you may still have more people than you need. It's not strictly proportionate.”