For 2004, to boost sales, reel in costs, operators must find segment-specific solutions

For 2004, to boost sales, reel in costs, operators must find segment-specific solutions – On-site restaurants: bridging foodservice communities

Paul King

Although the on-site-foodservice industry is expected to post respectable growth in 2004, several segment-specific challenges continue to keep operators from breathing easy.

According to the National Restaurant Association, the on-site foodservice industry will see sales in 2004 grow 3.4 percent to $75 billion. But operators note that stagnant check averages, flat customer counts and increasing costs remain their biggest hurdles in the coming year.

“We’re beginning to turn the comer, but I wouldn’t say corporate dining is back yet,” said Ron Ehrhardt, president of the Society for Foodservice Management, which represents corporate dining programs as well as retail operators in other on-site segments.

“Employees may be more comfortable spending money, which could push up check averages, but I don’t think we’re going to see a lot of companies bringing back laid-off workers,” added Ehrhardt, who also is director of foodservice for Prudential Insurance Co. in Newark, N.J.

According to the NRA forecast, employee-dining revenue is expected to increase by 3.7 percent to about $9.2 billion. The change will stem three years of sales declines in the market segment, which has been hit hard by employee layoffs and office consolidations. But it will not bring corporate dining back to 2000 levels, when sales approached $9.5 billion.

The challenge, according to Ehrhardt and his colleagues, is to continue to offer a wide variety of menu items and programs that meet the needs and desires of employees in a cost-effective way. At the same time, operators must find a way to attract employees who either don’t see cafeterias as a good value or don’t have the time even to think about eating, he said.

A similar problem faces college and university foodservice operators, said Peter Napolitano, president of the National Association of College and University Food Services

“I think everyone is trying to figure out what the magic solution is for reaching out to customers,” said Napolitano, foodservice director for the California State University at San Bernardino. “It is becoming more critical for us to increase sales and either reduce or maintain expenses”

The NRA projected foodservice sales on college campuses would climb 4.5 percent this year to $13 million. But much of that increase, according to the NRA, would come from foodservice management companies making more inroads into the college market. The NRA estimated that self-operated college foodservices would grow their businesses by less than 1 percent in 2004.

A similar story will be played out at the elementary-and secondary-school level, as contract companies increase their market share here as well. Although the entire market is expected to grow by 2.9 percent this year to $8.7 billion, the amount of business done by food management firms will rise by 8.7 percent, while independently operated school foodservice programs actually will shrink by 1 percent, the third year of decline in a row.

But whether a school district manages its own foodservice or outsources it to a management company, the major challenge will be the same–attending to nutritional concerns, according to Donna Wittrock, president of the American School Food Service Association. “Foodservice professionals will all have to deal with the issue of sodas and junk foods on their campuses,” said Wittrock, who is also foodservice director for Denver Public Schools. “We have to satisfy kids’ tastes in ways that are healthful for them.

For foodservice directors in hospitals, where the market is expected to grow by 2.8 percent to $11.5 billion, the continuing challenge will be to generate more revenue while holding the line on costs, often by using fewer employees.

“Retail is an ever-growing part of our business,” said Donald Marsh, foodservice director for Morrison Management Specialists for the Baltimore ACC in Maryland. “Our members want to learn ways to capture new business and to grow the business they have.”

After two years of sales declines as financially strapped airlines continue to weather fallout from Sept. 11, 2001, in-flight caterers have found a way to grow their business. Their solution, endorsed by some airlines, is to sell food directly to passengers. LSG Sky Chefs and Gate Gourmet, the nation’s two largest airline feeders, have developed programs that offer packaged meals on board flights at a cost of $7 to $10.

This “pay-as-you-eat” plan should help grow the transportation segment of the industry, which also includes railroads and cruise ships, by 8.3 percent this year, to $3.5 billion.

Sports and recreation venues should approach $13.4 billion, a sales increase of 4.8 percent over the 2003 figure, the NRA estimated. But much will depend on such factors as the weather and the threat of terrorism. For instance, attendance at amusement parks grew minimally last year, in part because of a wetter-than-normal summer and partly because vacationers still seemed to be less willing to stray far from home.

Projected sales increases

for 2004, by percent

Corporate 3.7%

foodservice

School 2.9%

Colleges 4.5%

Health care 3.5%

Military 5.1%

Recreation 4.8%

Transportation 8.3%

Source: National Restaurant Association

COPYRIGHT 2004 Reproduced with permission of the copyright holder. Further reproduction or distribution is prohibited without permission.

COPYRIGHT 2004 Gale Group