Winning the Food Fight
How Tulsa Community College turned the tables on a losing food service venture.
By Gary Crooms
Despite these drawbacks for the vendor, our lack of experience with and understanding of fee-based contracting meant that the brunt of any financial loss rested squarely on the college. From 2000 to 2004, our contract was based on a management fee guaranteed to the vendor regardless of sales revenue. The vendor was also allowed to select food, equipment, and supplies and then pass along those costs to the college as expenses. Whenever sales figures were presented, vendor expenses always exceeded revenue, and the college always lost money.
While the finance committee of our board of regents recognized the need to provide food service on each campus, it did not feel the college should continue to swallow such hefty losses. To minimize those losses for the duration of the contract, we limited food service hours of operation during the week and closed operations on Fridays, during summer breaks, and at other times when students weren’t on campus. Needless to say, faculty and staff were unhappy with this arrangement.
With the contract nearing an end, we set out to develop a food service plan that would garner student support, satisfy faculty and staff, and result in zero net losses to our food service operations. One thing we knew for sure: A management fee arrangement of any type was no longer an option. While we were open to operations that would vary from campus to campus (e.g., grill items versus entrées), we felt strongly that all campuses must be included under one contract. Student input revealed that a soup, salad, and sandwich scheme would work well for all campuses.
Changing the Service Menu
Our next step entailed outlining what we wanted to incorporate in our RFP:
- The contract would involve food service only. Vending and catering would not be included.
- The college would not invest in any costly remodeling since we had already spent several hundred thousand dollars rebuilding and remodeling existing facilities within the past several years.
- The college would not provide any operating cash or supplemental income to the vendor. Instead, the vendor would have to conduct all food service operations on its own income and expense statement and would need an adequate cash flow to operate until sales revenue covered expenses.
- The college would not support large external signage that might disrupt the campus facade. TCC would assist with marketing food services on all campuses, but advertising would be a vendor expense.
- Campus student services personnel, student activities directors, the administration, and the vendor would jointly agree on operating hours.
- Monthly meetings would be held with student services personnel and the vendor to discuss how operations were progressing. A quarterly review of the vendor’s income and expense statements would be conducted by the administration.
In turn, the college would provide:
- excellent food service facilities in good working order and move-in condition;
- facilities, utilities, and equipment at no cost to the vendor for at least the first fiscal year;
- custodial service for serving and seating areas, excluding the kitchen;
- computer network space for marketing purposes such as advertising menus; and
- help developing communication to advertise food service menus and promotions.
Once we settled on general aspects of the RFP, our next challenge was finding interested parties.
Shopping for a Partner
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Our review committee consisted of the administrative director of purchasing, director of college business services, provost for student services, dean of students, activities director, food services assistant, and students. From the outset, we knew we did not want to pursue a large national chain because of franchising costs and less flexibility with menu selections. Several prominent, well-established local vendors had expressed interest in our campus operations. Our attraction to pursuing a local vendor grew in part from a number of assumptions:
- We would likely get strong support from a local commitment.
- Local vendors would bring established clientele.
- It would be easy to obtain references and check the quality of vendor products.
Our selection process included initial interviews during which we made sure vendors understood the terms that the college had outlined in the RFP. We also considered the results of financial analysis of participating vendors, unannounced visits to vendor businesses to sample menu selections, vendor reputation, vendor commitment to meeting all aspects of the RFP, and interviews with student activity personnel. The review committee selected Bill & Ruth’s Submarine Shop, Inc., in operation in Tulsa since 1980 and recipient of numerous “best” accolades from various city publications.
A Positive Start
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Our first full year of operation with Bill & Ruth’s has proven positive for all parties. The vendor upheld its commitment to engage in monthly meetings to monitor progress and is developing good relations with student services personnel. Students, faculty, and staff have voiced overall satisfaction with the food and service. All parties agreed on operating hours, and the cafes have stayed open during summer breaks. While there have been times when the cafes have closed for short breaks and holidays, these closures were previously agreed upon with the student services personnel and administration.
Perhaps the best news for our finance committee is that our 2004-05 fiscal year ended with no loss of revenue for the college. The vendor met its expenses and earned a small profit. While the cost of allowing the vendor to use our space rent free for the first year on all campuses resulted in a loss of approximately $60,000, most of these associated costs were ongoing expenses to the college regardless of whether the space was occupied. We are still determining our strategic initiatives for this next fiscal year, including whether to require that a percentage of vendor income be given to the college. In the meantime, because of the overwhelming success in reducing our losses during our first year of operation with this new vendor, the college decided to continue the same rent-free arrangement for the next fiscal year.
Author Bio Gary Crooms is executive vice president of business and chief finance officer for Tulsa Community College, Oklahoma.
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