Barry Skown, Joseph Sorgent
May 21, 2018
The Virtual Cafeteria
The Virtual Cafeteria

What happens when a company wants to offer foodservice to their employees but their bottom line doesn’t allow for it?  What about the company that wants to bring cutting edge, local food offerings to staff to satisfy their desire for the latest food trend but can’t afford to bankroll a complete overhaul of infrastructure?  How can you fill the demand for all sorts of food offerings but on a temporary basis?

Enter foodservice delivery service companies.  Like Fooda… and Grubhub for Work.  And many others in cities throughout the country.  These companies contract with various local restaurants to deliver different menus and food programs to your facility so that you can offer the latest and greatest without dedicating dollars to operations and brick and mortar facilities.  Sounds good but what are the pros and cons?

Recently, two of our senior Management Advisory Services consultants, Barry Skown and Joe Sorgent, got together to tackle this very question.  But first, let’s understand how the process works.

The delivery company works with local and regional restaurants to supply food to a specific site daily or a certain number of times per month.  The service finds the locations, coordinates the days of operation, and sets the demand levels with the restaurants for each site.  The restaurant companies like to participate as it provides them with an excellent marketing opportunity for their brick and mortar restaurants.  The service model is that the restaurants then bring prepared foods to the employer’s site and do either finishing cooking cafeteria (called a “legacy” model facility), or just dish-up food that is prepared off-site to employees (called the “pop-up” model).  The restaurants pay the coordinator company a fee for the service.

It seems to be a perfect fit for companies who do not have, want, or can’t afford a traditional dining facility with a servery area and dedicated production kitchen.  Is this true?

Barry:  It is a possible solution for smaller companies who may not be able to afford the traditional café facility.    It fills a gap in the industry where a smaller employer does not want to spend half-a–million dollars or more on a foodservice facility; or, the major foodservice contractors either don’t want to, or aren’t able to, service smaller accounts who cannot afford an annual subsidy paid to a contractor, but who still want to offer foodservice amenities for their staff.  But it can also come with a lot of logistical coordination.  It really needs a comparative analysis on total costs.  The key question that must be answered is why would an employer do this versus a traditional employee dining facility?

It seems like it’s just outside catering on steroids done by a third-party delivery company.  What do you see as the advantages to using this service versus having your employees just walk down the street to get food themselves?

Joe:  Employees or visitors at the facility receive a daily, revolving sampling of the hottest trends in food from interesting, local restaurant menus. It provides some level of staff dining at sites that do not want to, or cannot, financially support a full cafeteria.  Or in locations where building owners or companies cannot attract a management operator or cannot get a commercial tenant.  This concept satisfies the goal of many employers to keep staff from wandering off from site, and for building owners to offer amenities to justify higher rent levels.

Are there savings for the company with this type of model?

Joe:  The main savings is the elimination of a large investment in terms of building the infrastructure needed to put in a full-service dining facility complete with foodservice equipment.  It also saves on utility costs, the purchase of foodservice equipment upfront, and maintenance costs.  It can also save the company from having to pay a subsidy or experience an unprofitable operation in a self-op model.  Also, think of the savings in labor for the employer.  The labor cost is absorbed by the food delivery company and not passed on to the employer.  The restaurant delivery service claims that overall, the client savings can be as much as 30—40%.  Also, pop-up restaurants would work well for short-term solutions where full restaurants are being renovated or constructed.

Are there any hidden costs?

Barry:  Companies using this service usually must commit about 50% of a full-time staff member as a daily logistical coordinator to coordinate menu choices for the work staff and to order the food.  In addition, this type of operation might only provide lunch for a specified time period, so what do staff do for the other dayparts?  You need to factor these points into your comparative analysis.

Is the concept really as simple and easy as it seems?

Barry:  Like I said earlier, it is an option for some applications and, at first glance, it seems to be simple and cost-effective; but it is important to think through a number of concerns, weighing the options to see if the concept works for your company’s foodservice goals.

For starters, these companies can only operate in larger markets where there is a massing of individual restaurants willing to participate.  Granted, smaller markets may get there in time, but they are not there now.  So, depending on where you are located, you might need to investigate other alternatives.

It’s also important to understand that customers do not get to choose from the entire menu of each restaurant, especially in the “pop-up” service model.  They only get a few menu offerings from which to pick.  So, how are specialty diets, or dietary restrictions, accommodated?

The average check is quite high, around $8 to $12.  I would consider that to be on the high end…even for a profit-and-loss “traditional” café facility.  Will your staff pay this amount for a meal or will you need to, and are you willing to, fully or partially subsidize the meal?

You need to make sure you understand how the food is transported safely from the restaurant to the site to ensure food safety.  Long holding times don’t do well for food temperature or quality.  Questions to ask include who is held responsible if a foodborne illness outbreak occurs, and who is liable if an accident occurs where someone has a bad fall, for example, or cuts their hand?

You need to make sure you understand health department permitting requirements as jurisdictions differ.

What if the amount of food that is brought to the site for a catered “pop-up” model runs out before everyone is served who wants lunch?  Are there solutions in place to accommodate this type of situation?

It’s important to ask the delivery service about potential delivery charges on pre-ordered meals.  For example, if you have 300 employees who order food per day, that’s a cost of $285 per day, which needs to be paid by either the employer or by the employees.  Multiply that by 250 operating weekdays per year and that’s an annual cost of $71,250 that someone’s paying.  Not exactly “petty cash.”

Is there really an equal value to employee benefits and/or any savings to the employer to go this route rather than just building out a full-service cafeteria?

Joe:  I agree there are extra costs that must be covered somewhere; no one gets a “free lunch.”  And I agree that if it’s a reasonable staff population, a well-managed P&L account would be the best alternative. But, again, for certain populations, certain businesses that may need or want the menu variety AND where higher checks are acceptable, and where it’s acceptable for service to be only at certain times of the day, and in certain volumes, I think “certainly” it is a viable option.

The final analysis…

Barry:  While I have played “devil’s advocate” in terms of pointing out questions and concerns about this concept, I can see how a small company who wants to provide fully, or partially-subsidized foodservice to their employees, while spending very little to no money on facilities, could look at these foodservice models as a solution to their needs.

Joe:  It’s a niche alternative for some situations. The fact remains that it is important to weigh the alternatives, keeping in mind the company’s financial goals as well as its foodservice goals and staff needs.  The optimist in me says this is a concept that you can try on for size.  See if it works for your specific needs.

By:  Barry Skown
Director of Management Advisory Services | San Diego

And:  Joe Sorgent, Senior Associate | MAS
Los Angeles

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