Canadian Vending

Features Business Operations
Investigating Onsite Foodservice

How to determine the realistic income potential


April 1, 2008
By Stacy Bradshaw


Topics

The key to running a successful business-to-business operation, such as
corporate vending and office coffee service (OCS), is to maximize the
opportunities. That might mean a full-line vending operator offering
OCS or an OCS operator dabbling in the bottled water sector.

24How to determine the realistic income potential before you invest

The key to running a successful business-to-business operation, such as corporate vending and office coffee service (OCS), is to maximize the opportunities. That might mean a full-line vending operator offering OCS or an OCS operator dabbling in the bottled water sector.

In most cases, these relatively safe crossover ventures make perfect business sense, especially if you have a, “well, I am already there,” type of attitude.

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But when it comes to the uncharted territory of onsite foodservice, operators should be aware – foodservice is an entirely different ball game. It’s a large undertaking that requires a lot of due diligence and careful consideration. Not to mention the capital.

Unfortunately for some operators, offering onsite foodservice is the only way to keep from losing a current account. Others may see it as a realistic crossover opportunity. Whether it’s a bid out of necessity or an optimistic leap into the unknown, consider these factors before taking the plunge:

The potential for profit
Jerry McVety of McVety & Associates presented, “Trendy Ideas for Onsite Foodservice” at the National Automatic Merchandising Association annual exposition in Orlando, Fla. According to McVety, there are some important questions a bidding operator can ask the client that will help them determine the potential for profits from onsite foodservice.

For example, when they say there are 400 people employed at the company … how many of them are actually in the office every day? And how much flex time are they given?

Also consider if the company has done any recent downsizing. Fewer employees and fewer hours worked means less time in the lunchroom. In short, don’t get sucked into a contract that doesn’t have the potential for profits.

Develop a dialogue
An open and ongoing dialogue with the client is critical, especially in the early stages, said McVety. Develop a dialogue and find out why they want to offer foodservice in the first place. This will help determine what type of foodservice model they will require.

If the company is merely offering foodservice as another “employee benefit,” and it isn’t necessarily required, then a full-scale cafeteria is not the answer. Perhaps a sandwich and wrap station, or a morning muffin cart will do the trick. Maybe fresh or frozen food vending machines will suffice. In this case, an open dialogue with the client, assessing the demand or lack of demand for foodservice, will avert any potential business disasters.

Know the customers
Developing a Food and Vending Committee made up of company representatives is a great way to find out what the employees really want – ask them to hand out surveys and gather demographic information.

Work with the committee to learn more about the customers. Are they health-conscious, urban dwellers willing to try new things? Or are they less adventurous, traditional eaters looking for comfort foods and hefty portions?

Consider a combination
As corporations downsize, so must the foodservice operator. The only way to compensate for lost sales is to reduce foodservice employee hours, reduce the levels of service, reduce the variety of food offered, and move towards more self-serve and convenience foods.

In smaller facilities and those that have seen recent downsizing, the most efficient foodservice model is usually a combination of services: carts, self-serve, OCS and vending. Offering the complete package is a sure fire way to land, and most importantly, maintain a corporate account.

The 10% Rule
According to McVety, operators should manage their businesses so pre-tax profit is at least 10 per cent. In other words, the costs: food, labour, supplies, and G&A (general and administrative expenses), should not total any more than 90 per cent of any operation. Therefore, on a $250,000 business, the operator should net $25,000 or more.

The only way to determine the realistic income potential of a new business is to perform all the required due diligence and uncover any potential problems before investing. Determine the potential for profits, know the customers and what they want, and offer the foodservice model that is right for the establishment … and for the operator.o