First published in FSM Magazine in July 2012
There is no doubt that business is booming. I am not talking about the whole country, but I am being specific about our sector and our business in particular. There seems to be a real appetite for change AND improvement, all at the same time. I do believe that we are at a “Tipping Point” for our industry as the long awaited, and much discussed, collision between Business and Industry foodservice and the High Street, hots up. What I am not sure about, as I have written on several occasions in the past, is that people are really ready for this. However I am sure that Clients are paying good fees and committing substantial resources to looking at this new business model.
So what am I talking about? In simple terms our Clients are now considering in a number of locations around the UK taking out a single Contract Catering partner and replacing them with a range of commercial offers, carefully tailored for the Business and Industry market. I will no doubt hear many of you say that you have “seen this all before” with the introduction of branded fast food and Coffee Bars into business and industry sites, Hospitals and Campuses. The main difference between what is happening now and what happened 10 years ago is that 1 or 2 operators like Compass Group and Aramark brought in brand relationships and fitted them into existing sites, but still operated as the sole provider of foodservice. The end result was no competition, underperforming brand units and “day part management” to try and control costs. Not a great success, but then that is not surprising given that there was no commercial, competitive reason for one brand or operation to outperform another.
So here we are in the middle of 2012, nearing the end, we hope, of the longest recession that I can remember and Clients are spending serious budgets on looking at the “New Way” for foodservice in the workplace. It certainly cannot work for all locations and requires a scale and size of operation that would support a number of operations not a small single outlet, but magically the financial model changes for a number of key reasons.
Firstly, consumers are prepared to pay more for a branded, specified, quality product. This has been proved time and time again and moves the consumer away from a “Subsidised Canteen” mentality. I am not talking about a massive price hike, but a small premium over a generic, bland product.
Secondly, competition is good. When your existence relies on selling something rather than your competitor selling it, it does bring into focus the quality needed in all areas of your business. This competition removes complacency, laziness, apathy and ultimately poor operators from the scene. This is the world that many operators know as the “High Street”, where you live or die by how many customers you serve each day.
Thirdly, we need in our industry to offer the consumer the choice, variety and authenticity of products that they can get elsewhere, around the corner, in town, or around the world. Our guests in Staff Restaurants around the country have travelled around the world and have experienced authentic cuisine and cooking styles. It is highly unlikely that a single business can economically provide this choice of food with this level of authenticity at an affordable price. So the answer must be to take mini versions of the High Street and deliver them in a controlled, but commercially competitive environment.
So why are site owners doing this?
I think it is quite easy to understand how some of these owners are now feeling about the future, and their immediate past, with their Contract Catering partners. Many of them have spent considerable sums in subsidy watching a large proportion of their consumer base leave their sites each day, and choose not to buy the food on offer in the Staff Restaurants and Cafes that they are paying for, through that subsidy. Too many clients are also spending too much time managing their Contract Catering partner, repeating themselves often and still not getting the quality and service delivery that they had been promised or hoped for. Many have changed providers and seen improvement, but the real test is whether or not the Contract Caterer can compete with the High Street operator and NOT another contract caterer.
We have been carrying out exercises for a major broadcasting business, a financial institution and a major retail store on the feasibility of switching to a “Multiple Concession” model rather than a traditional Contract Caterer model. The mathematics are quite simple, as the operators would live out of the till, paying no rent or utilities, but also requiring no subsidy. The commercial certainty exists and if one concession partner fails they are replaced without having to change the whole offer and partner.
I am sure that the more traditional amongst you will give plenty of reasons why this just cannot work, because it will require more space, more storage, the management of more operators and more paperwork. All of these are very good reasons, but are focused on the wrong things. None of them help drive the quality of output or create a competitive environment which will deliver the best for the Guest, the person who puts their hand in their pocket every day.
We are shortly to announce to the market the first of these sites and I can tell you now that the response from operators on the High Street has been astonishing.
In return for not paying to be there they are being asked to sell goods at roughly two-thirds of the High Street price, bringing the affordability of these products to well within the normal scope of business and industry pricing, as it exists today. As brands wish to extend their coverage and reach into the semi-captive environment it is no surprise to me whatsoever that the response has been so positive.
A lot of time and a lot of effort is going into it right now and I am not expecting a wholesale switch to this new model, because it is simply not appropriate for everybody. However, the lines are drawn so let battle commence!