At a time when most onsite operators are looking for new ways to build revenue or cover overhead costs, many consider whether one solution may be leveraging their extra kitchen capacity. After all, your equipment is already in place and you may have available labor and production capacity.
If you can find a suitable outlet for that additional production, you can use it to generate extra revenue or subsidize the operation you already have. Many are doing so successfully. Consider the Meals on Wheels program that has a contract to make 500 trays for a hospital every day. Or the hospital that provides bulk prepared food to another hospital. Or the college that ships meals over to a daycare center regularly. When you find customers for your excess capacity, you're providing a service that can spell real savings for both parties.
“The savings can be tremendous,” says Carol Sherman, a principal at CS Services, a consulting firm that specializes in healthcare foodservice. “If facility A has a big kitchen and an executive chef and a pastry chef, and they're shipping to facility B, think of all the costs: labor, power, equipment. The second facility takes advantage of the economics of scale that the first has already achieved, and the first facility can offset some of the costs of its own operation.”
That said, it doesn't mean this approach is without its challenges. Labor, logistics, taxes, sales and marketing, safety, town and gown or other “political” concerns — all can create roadbumps along the way. This article will look at some of these issues and professionals who've confronted them.
A real juggling act
Picture this: You have to deliver to more than a dozen different sites, trying to keep track of delivery windows, daily production orders, and transportation. Things really get hectic between 9 and 10:30 a.m. because that's when everyone is scrambling — preparing to serve lunch at your own operation, the residential dining halls on a 2,800-student campus. But — you're also trying to ensure your kitchen is ready to ship out a couple hundred trays for a senior home service and a hundred more congregate meals for a senior center.
Meanwhile, three hundred pounds of peas are staring you in the face, and have to be divvied up among the different orders. (You've got to achieve economy of scale to make this work.) But that's not all. You've got specialized daycare meals needs that have to go out today, too. Everything must be accurately labeled, and you have to make sure the right meals go to the right places. Oh, and don't forget to manage your HACCP procedures. Yikes!
While this description may seem a bit dramatic, it accurately describes a typical day for Janet Paul Rice, associate director of dining services, Concordia College, Moorehead, MN. “Nothing is reheated or re-thermed,” she says. “Everything is prepped on a daily basis in our central production kitchen. Seniors get a cold sack with milk and a pat of butter and then a hot tray. We have staff that preps the cold food and our chefs prep the hot. Then, the two come together and are loaded onto a truck. There are actually not many errors.” The staff use customized labeling and many checklists as tools to keep things in order, she says.
One of the first lessons to keep in mind is that you may end up with clients whose needs are very different than your own operation. Concordia has five different contracts, including a daycare center and a Meals-On-Wheels program. The first contract — the county jail — came in 1998.
“We learned a lot and we were a little more sheltered than we had thought,” Rice remembers.
As is always the case in a corrections environment, desserts had to be cut into exactly the same size, or run the risk of a fight — or worse. All the meals had to be prepared so they could be eaten with a spoon or by hand.
“We started off each day sending a cold breakfast the night before,” Rice says. “That meant about 120 breakfasts, unless there had been a bust — then they'd need a few more.” That fluctuating population factor was challenging, Rice says, but not unmanageable, as long as there was good communication.
The jail, and another early customer, a psychiatric hospital, are no longer clients, but communication still rates high in helping Concordia keep its program running smoothly. Currently, Concordia communicates with its Meals on Wheels client with periodic meetings. “They tell us what they like, what didn't work so well, and what they'd like to see,” Rice says.
Finding menu items that will appeal to all of those served is like catching lightning in a bottle for an operation like Concordia's.
“There is a lot of menu engineering that goes on,” she says. “We'll identify items from our residential dining area that could work elsewhere. For example, Salisbury Steak is popular with students, seniors and children. It's like striking gold to find something like that.”
Strict HACCP-or Else
One of the biggest things to worry about is transporting the food and keeping it at a safe temperature until it is served, cautions Beth Torin, RD, associate executive director, Bureau of Food Safety and Community Sanitation, New York City Department of Health and Mental Hygiene.
“People think, ‘This is easy,’” she says. “But if something goes wrong, they'll blame you.”
“You must take the time to plan it out and do it right, not just assume you can start loading meals in the back of a truck.”
Regulations for transporting food and other functions vary from state-to-state, so you should investigate them carefully.
For example, when equipment is installed in San Diego, CA, it has to have seismic connections in anticipation of the possibility of an earthquake. That's one consideration consultant Carol Sherman has to keep in mind in one of a current client's projects, building a large healthcare central production system that will serve many other locations. It's easier, Sherman, says, “if you're all under the same corporate umbrella.” Otherwise, you must know the standards and regulations for whomever you deal with in addition to your own.
Among other best practices, refrigerated trucks should have the proper air-flow and temperature monitoring, and proper containers must be used for hot foods. A clean vehicle should be used only for food transport and have the right hot and cold holding equipment. Torin says that while such concerns are basic, she has seen them overlooked fairly often.
And yes, with 30 years in foodservice and two years with the health department, Torin has horror stories. “On a routine visit, we once saw a restaurant with an outside contract that was putting Styrofoam containers of food in the back of a car, just sitting out,” she says.
It's vital to communicate the right temperatures and the shelf lives clearly for employees at every step of the way, she adds. “You may have it at the right temperature when you start out, but if it's not handled properly, your product can degrade quickly.”
“If you have a cook-chill operation and you're sending something with a 28-day shelf life, be certain the recipients know that shelf life is only reliable if the product is stored at the right temperature.”
When you enter a contract, it's your job to be aware of what's happening, Torin says, and, if necessary, to train people on the receiving end.
It's also a good idea to execute a pilot project before you operate at full scale, Sherman says, monitoring temperatures every step of the way and leaving breathing room for heavy traffic, pileups on the freeway, natural disasters, and anything else that may delay delivery of food for even a couple of hours.
Also, some regulations will change depending on what type of food you're providing, and how much of it there is.
“If you're producing a small volume of baked goods, that might not have the same oversight as doing a large volume of meat, fish or poultry,” Sherman says, adding that the USDA must be involved in some instances.
That's one of the reasons some, like Cheryl Sturgeon, director of community and nutrition services for Jefferson County Public Schools, have decided that marketing excess capacity just isn't in the cards for them.
By taking production outside of her own school system, a USDA inspector would be required by law to be onsite every day. “He or she would have their own office and parking space, and we'd have to pay this person's salary,” Sturgeon says. Also, “if we were to sell product to a commercial entity, they would have to pay tax on it,” she adds. “Taxes aren't necessarily a problem, but they do create added complications.”
Impacts on the Community
Another reason some operators don't want become clients of the school district has to do with a decreased need for workers when you bring prepared meals into your operation. “They could save money, but they don't want to cut jobs,” Sturgeon says. “It can become a political situation.”
The public school's capacity for huge volume — meals in the 60,000 range — is also a drawback when considering contracts with smaller entities. “It's a cost to me to set up a line and set up the labor to do 100 meals, and it's not worth it,” Sturgeon says. “We're the largest restaurant in the state!” (The Jefferson County Public School District is 40 miles across and has 100,000 students.)
The district does do outside business with one entity, the Metropolitan Government, which requires 8,000 to 11,000 box lunches a day for summer programs. That entity is another government agency, so taxes are not a problem, Sturgeon says.
Although a significant capacity to add more non-university clients is there, University of Notre Dame's Food Services limits itself to only those closely affiliated with the university, says Dave Prentkowski, director, Notre Dame Food Services.
The clients are one childcare center and four religious entities, which include two residences for priests, a seminary and a nursing home. About 140 meals are provided daily, with that number climbing to 180 during the summer, when young school age children are added to the program.
Many operators — especially in a college setting — are reluctant to be seen actively looking for business. Town and gown problems can quickly arise when any college or university appears to infringe on the business of local for-profit entities. “We do not want to be considered a competitor to commercial operators,” Prentkowski says.
Revenue and a mission
Concordia College's senior and children-feeding contracts complement the Christian mission of the institution. “Obviously, this is a revenue generator,” Rice says. “But also, we're pretty steeped in mission, as a Christian college.”
Another entity with a mission that contracts to those who fit it is the Loaves & Fishes Centers Meals-On-Wheels program in Portland, OR, whose foodservice operation is headed by Tom Maier. Loaves & Fishes has a contract with Sunnyside Kaiser Hospital to help it offset the rising costs of feeding seniors.
Loaves & Fishes produces 5,000 meals daily for a three-county area. About 40 percent of those meals are served at 35 different neighborhood dining sites, and the rest are delivered to homebound seniors by volunteers. Government funding covers 35 percent of the budget; the contract program accounts for 16 percent, and the rest is fundraised.
The board had recommended that the kitchen cover some of its operating costs through outside contracts — with the caveat that the contracts should not jeopardize the mission: “Our goal is to feed seniors who are in need and hungry,” Maier says.
Next year, 1.6 million meals are forecasted, Maier says. The organization was running under a $7 million-a-year operating cost five years ago when the partnership started — it's up to $9 million now, finding a way to offset the costs was important.
Back when it was opened, the facility was dedicated to Meals-On-Wheels production, but soon, 450-500 additional trays were leaving the kitchen to go to Sunnyside Kaiser, where a majority of trays go to seniors, in keeping with the mission at his organization's core.
Right now, the kitchen is at 63 percent capacity: full capacity would be 8,000 meals in an eight-hour shift. By 2012, Maier expects to be near that full capacity.
The bottom line?
“In the 21 years I've worked in this position,” he says, “I've found it's not just a matter of finding a customer, it's finding how you can have a partnership with that organization.”