Name Change

As you know, it was my intent to scale back my consulting work and to move toward total retirement this summer.  However, the new  program regulations and continued "cries" for help from across the country have caused me to rethink full retirement.  Nonetheless, I cannot keep up the pace of travel that is required in the "consulting business".  Yet, I want to continue to help, so what do I do?

I decided to change the name of my consulting business from SLANT Consultants to Rinaldi Associates and to change the way that "I do business". 

My plan is to recruit associates who want to learn what I do, how I do it, my approach to operating a financially solvent program, and how I consult on the preparation of Management Company bid specifications, etc.  Once "on board" I would spend time training the individual and then he/she would become the associate for Rinaldi Associates in his/her state. 

My approach will be that of a Real Estate Agency, whereby my associates would work under my umbrella, soliciting their own business, scheduling their visits, writing their reports, etc.  Rinaldi Associates would provide membership in state Business Officer Associations (our potential clients), place ads in Business Manager Journals, conduct follow up training and generally provide overview of the associate's consultations.

A fee structure would be provided that would allow (just thinking here, details to be worked out later), the associate to retain 60% of the fee with the remainder going to Rinaldi Associates to cover the cost of advertising, etc.  The associate would work with a 1099 and be responsible for his/her tax liability, travel costs, etc.

Initially I plan to seek associates in NYS, Pa, Ma, Ct, and Vt.  If you are interested please contact me to discuss this concept.  Please note, some of these thoughts are only that initial thoughts, I still need to work the legalities and tax issues out with an attorney.

Food Service Management Companies (FSMC)

Some of what follows has been written by me previously in this blog, and on Mealtalk, and discussed in my training sessions.  However, the topic is so important, that I am again visiting this issue.  Hope this helps.

Whenever, I do a workshop or presentation on the topic of a Food Service Management Company operating in a school cafeteria, I almost always get the following questions:

What does a management company do differently to make money?

Does the Contract and bid process really protect the school/district and the taxpayer from an unscrupulous company?

Can bid specifications really make a difference?

To what extent should a school business administrator be involved once a bid is issued and awarded?

Should our school contract out its program?

What can the school/district do to protect itself and maximize its financial benefit while minimizing that of the FSMC?

  

These are all very good questions and ones that cannot be adequately answered in one or two sentences via this blog. They are questions that very few have the background, experience, or willingness to fully and candidly answer. Therefore, I make each a separate topic to be explored and discussed in detail on this blog.

Why would a FSMC want to operate the program in my district?

That's easy - Money. School Lunch and Breakfast Programs are big business. Many school cafeterias (even those operating in the red) generate Millions of Dollars in Revenue each year. You don’t have to be a financial genius to know that when any business venture has the ability to generate considerable revenue, there is a profit to be made and someone will attempt to capitalize on that. Moreover, most State Agencies either do not have an adequate “bid process” established, or they lack staff who are adequately trained, and do not know how these companies really make their money in a school cafeteria bids. When I worked for New York State’ Office of Child Nutrition (which was a very progressive State Agency, with a model FSMC contract process), I thought we knew it all and that I was as competent an auditor as I could be. Wow was I ever wrong. As I look back at that time, I really did not “have a clue”. The same holds true for the Staff of many State Agencies today (with respect to Management Companies), they simply don’t have a clue. Having worked on both sides of the fence I know first hand that even in a very large progressive State Agency like New York the staff will never fully audit a FSMC school district with respect to anything other than the requirements of the program regulations. Why?

1.  Their experience is normally from outside school food service.

2.  Few of them have ever worked for a FSMC

3.  They do not have the time to spend on an in depth audit of a FSMC’s billings/invoices

4.  They believe it is the school’s responsibility to audit the company’s billings.

5.  They really do not know where to look, or how to find the way some of these companies make their money. 

When it comes to larger school districts, those with multiple buildings and growing enrollments, a FSMC can and often does guarantee a return to the school. Often this can be a substantial amount of money ranging from a few thousand dollars to tens of thousands. And despite this “guaranteed return”, the FSMC will still make an extremely large profit.

As for small one building schools or non-public schools, the company I worked for would always submit a bid to operate the program even when other companies were not interested. Why, because, once again, there was money to be made and making less on a small account is not so bad when (because of the lack of competition) you can bid much higher, and “get it all” - that is all the program revenue generated each month. And although they were making a lesser amount on each school, if you have 8 or 10 small schools under contract, in a year’s time that lesser amount can easily equate to a hundred thousand dollar profit, or more.

What makes it even better is that the smaller school will be grateful for the presence of the management company and take comfort in the knowledge that contracting out the program would not cost them anything. That was and is (to them) the best thing they could hope for. All the benefits of a school lunch or breakfast program at no cost to them. Think about that for a moment. The school gets the program at no risk or cost whatsoever, guaranteed – that’s pretty good. But the company gets all the revenue. A win, win?

A case in point

When the FSMC that I worked for was “acquired”, I sat listening to the President of the new company (one of the big 3) conduct an orientation session for our staff, and I was amazed at the things I heard. Nothing he said surprised me, but I was amazed that they were spoken aloud. I immediately knew the corporate sharks were in town, and could only correlate what I was witnessing to the movie “Pretty Woman”, and the Richard Geer character that “acquired” small companies. These companies use the word “acquired” not “purchased”, or “merged with”. To me that says a lot about their philosophy, vision and true goal.


At any rate, I listened as this individual explained that his company only operated schools in the K-12 category. Imagine one company to operate only K-12 school cafeterias in this country. That is amazing. He explained that their corporation owned another company to manage colleges, another for business and industrial accounts, and so on. He boasted that his K-12 company had a huge operating budget; I forget the number but it was something in excess of one hundred Million dollars, and that he could do things that schools could not do, and it was obvious that he wanted to grow the company much larger. He then went on to say that they would be focusing on school breakfast because of the huge available market. He actually had a “hit list” of schools/districts that he wanted the company to target. Nothing wrong or illegal with any of this but hearing it said aloud can have quite an impact. At least it did with me. 


As he continued to speak, he explained the difficulty his company had in “bidding contracts” in New York State because “the process” was so difficult. He said they had repeatedly tried to submit winning bids, but they, “just didn’t’ know how to bid those “Per Meal Bids” in New York State”. I liked hearing that because as a former NYS Child Nutrition Program professional, I contributed to establishing that process years before. Anyway, he said that the number of contracted programs was increasing in New York State (as well as the rest of the country) and the potential was so huge that he decided to “acquire” our small company to “get a foot in the New York State door”. As I said, all this was nothing I didn’t already know, but I was shocked to hear a corporate giant say aloud that there was huge profits to be made in the K-12 school lunch community.

Aside, that was 10 years ago.  That company is now one of the largest contractors of school food service in the country. 

Through the years, I have conducted an extraordinary number of Financial Assistance visits to schools and Financial Management Training Seminars all intended to help school cafeterias operate on a “self-supporting” basis. School cafeterias (even small ones) have the ability to generate huge amounts of revenue each year. In my opinion they all should operate “in the black” and can generate a profit. I know we are not supposed to use the word “profit” in school feeding – after all we are non-profit but let’s face it, profit is what we are discussing and profit is what the FSMC sees in school cafeterias. And it is time School Food Service Directors across this country started talking about “making a profit”.

For most school’s Food Service Directors in this country operating at a profit is a challenge. He/she will encounter many obstacles and must clear many hurdles before a profit can be made. These hurdles, and obstacles include employee contracts, unions that may refuse to concede or compromise on benefits, the politics of the school/district, the need to keep everyone happy, the occasional lack of administrative support, limited budgets, the lack of the acceptance of “change” by staff, and of course there are individual philosophies on nutrition, and making a profit. Often the School Food Service Director has a background in nutrition, health care, was promoted from a “head cook” position or was just an active member of the school community who “can cook”. The problem is that most of these individuals do not have the business experience to operate a "big business" in a “profitable” manner. Conversely if a person has the business experience they normally lack the food and nutrition experience.

The FSMC does not have to contend with any of these obstacles and so the “playing field” is not level. The FSMC is at a distinct advantage. However with proper training and administrative support, the school’s Food Service Director can succeed. When a school business official, the board of education, and purchasing agent know how to write bid specifications, know what restrictions must be placed on the bidder, and know how to “control” the FSMC once the bid is awarded, they will succeed in maximizing their return while minimizing the FSMC profit.

The FSMC is at a distinct advantage when they “target” a program and they know it. Their sales staff is professional, they can promise a “guaranteed return” or a “no cost” to the taxpayer program. Both options are very attractive to a school business official, or a Board of Education who is struggling with an increasing budget, loss of revenue, and the potential for an increase in local taxes. A FSMC can guarantee a return to the school/district because it knows the amount of revenue that the program can generate. And more importantly they know exactly what its operational costs will be, so calculation of the potential profit or the amount that can be “guaranteed” becomes a "no-brainer".

As for a “no cost to you” program, that promise doesn’t give the school/district anything; it only allows the FSMC to take all the profit. Nothing is ever at “no cost”.

So, why does a FSMC want to operate your cafeteria? Money, large amounts of money, with little or no risk for them.

Next week, I will begin to answer some specific questions.

Vending Machines

The presence of a vending machine(s) in a school dining area can be a very controversial topic for some school food service programs.  We call them Child Nutrition Programs, and the words "vending machine" can seem contradictory at times.  Unfortunately in these days of "wellness", many districts have removed vending machines from the cafeteria dining area, but have allowed them to remain in teacher lounges, near the gymnasium, or out side in the area of the sport fields.  Often vending machines that are located outside the cafeteria are justified because the "team" needs the money, or the senior class needs the money to fund their class trip.  In one district, the justification was that the money goes to a principal's fund that is used to treat well behaved students to a "pizza lunch" or it's put toward the senior class trip.

Essentially vending machines are money makers.  They will always be pushed by a management company, and most companies will want the revenue from the vending machines to be outside their contract with the district to provide meals.  Districts cannot and should not allow this to happen.

With all that said, vending machines make money, and all of my clients and most self supporting programs need the revenues that vending generates.  Consider that even if you program serves 60% or 70% of a building's enrollment, there remains 1/3 of the enrollment that doesn't eat your lunch.  Each of these students will have money to spend and without vending, where will they spend it?  At the convenient mart on the way home from school?

I think that when program revenues are dropping, and expenses are increasing, or participation is declining, you have no choice but to seek new sources of revenue.  In these instances, I recommend a snack vending machine, a beverage/water vending machine, and a milk vending machine.  Remember we can have a healthy line of snack foods, and beverages that are allowed by program regulations.  In some instances your wellness plan may have to be modified, but that may be better than putting staff out of  work or cutting their hours.  

I must point out here that there is a contradiction in a district, and its wellness plan, when a program is asked to operate on a self-supporting basis then has large “arrears” attached to its “bottom line”, or asked to pay for their share of indirect costs.  then to make matters worse, the ability to generate vending revenue is curtailed because others (athletic teams, teacher lounges, student clubs) want the revenue.  The district cannot “have it both ways”.  If the food services program is to operate without a General Fund Subsidy, then it cannot have its “hands tied” by limiting its access to food and beverage revenue sources.  

Now if you do have a vending machine or plan on getting one or more -- never, never allow a local distributor to place the machine and pay you a percentage.  There is a lot of money in these machines and why settle for 10% and allow the distributor to take 90%?  That is insane, especially if you have had to cut hours or are planning to cut hours.  Put these "extra" hours to work filling and servicing your machine.

Purchasing a machine can be expensive, but most companies Coke, Pepsi, Frito Lay, etc will place a machine for free if you fill it with their product, and service it yourself.  Now all these companies have products that will meet your nutritional goals, if you seek them out.  Obviously you need storage for the product, but if you can overcome that problem and find healthy items, juices, water, pretzels, etc. to put in the machines there is money to be made.

Points of information if you have your own machines:

1.  Ensure that they are filled each morning.  No exception.

2.  Ensure that the glass is always cleaned each morning.  No exception

3.  Never allow a spiral or slot to be empty.  These are the favorite items and must always be available.

4.  Always take a deposit 1X a week, have the staff member taking the deposit complete a cash report, date, and sign it.  Then have the vending sale amount "rung" into your register or POS system.

5.  Ensure that every delivery of product is thoroughly checked in before it is signed for and placed in a secure location.  These items are favorites for "walking out" the back door.

Points of Information if you (have to) use a distributor:

1.  Negotiate a 1 year contract, not one that is longer.  Keep your options open to move your business each year.

2.  Negotiate at least a 20% return.

3.  Insist on a commission check once a month.

4.  Insist the the monthly statement provides ALL of the following:  date the machine was filled, the amount of money removed, AND (IMPORTANT) the digital read out when the money was removed.  Every machine has a non resettable counter that the driver must provide to the company.  That is what keeps them honest.  You need the same information, so you can subtract this week's reading from last week's, and know how many transactions have taken place, times the sell price, and you can audit their statement.  DO NOT ACCEPT A "We can't provide that information".  If they tell you that "RUN" to another company, they are ripping you off.

5.  Insist that your distributor give you the best machines.  The ones with the full glass front, lots of color, etc.  They will try to keep them for their "best customers", insist on the newer "glitzy" machines.

6.  Do not allow them to not send you a monthly statement or commission check.

Contact me privately if you need more information.

My Consulting Business

This week, I  unexpectedly received 4 emails from "Mealtalkers" asking me if I would be willing to sell my consulting business, or franchise it out.  I never thought about this. But when I retire fully, I am gone, no more involvement.  I have done this for almost 40 years, and need to move on soon.

I guess I would be willing to sell it, if I could train the buyer to do things my way.  I don't have much experience with selling a small business.  If you have any information, advice, or an interest in my business, email me privately.

frank@slantconsultants.com

Photos from my travels #2

The quality of this lunch was wonderful, but it does need some color.

 Fresh and canned fruit

Not the way that I want my pasta served.  Note the hand in the pasta

Elementary school breakfast.  Participation in this building was very high (60%) for Breakfast.

Where is the food? Two fruits of the same color (applesauce & pears). 

Compare to others that I have posted.

Hot foods hot, cold foods cold?  Not here.

Can you say Yuck?  At what cost, saving money on this product?

Eye Appeal?

Small elementary school.  Proves that it doesn't have to be "fancy" 

to be nice and have  eye appeal

More Photos from my travels

I was asked to post more photos, and I will do so below.  I do want to say that I have hundreds, maybe thousands of photos taken in programs that I have visited.  For me, I put about 100 of them in a Power Point Presentation that I call "Go For The Gold".  It is intended for the food service team.  Since you cannot take your staff out to visit other programs, a PP Presentation is one way of taking other programs to them.  I have tried to offer my presentation to some (who offered to pay), but I refused because each photo has a story and is not always as it appears.  Although some speak for themselves.  If I have some time this Spring I will try to include "speaker notes" with my presentation that tell "the story" of the photo.  If I do get it completed I will make it available at a cost that will cover duplicating and shipping.  If I forget, someone remind me in April.

Breakfast in an Elementary School.  Note 5 different entrees.  Forget the Bacon

 Pizza, burgers, and chicken sandwiches wrapped for self-service

 Yogurt Parfait in an elementary school 

 Pasta, garlic bread, done correctly

This and next two photos = Sample entree set out on the line with description

Colorful assortment of fruit choices in an elementary school

Are any words necessary?

Salad plates, and sandwich choices in a Middle/High School

 Cambro cart turned into deli bar with sandwiches to order.  Located in dining room.

Each of these photos say one thing to me, "someone cares".  Someone cared about the "eye appeal", and the student as a customer.  My point here is that you may not be able to do what another program or manager does, but you should not limit your thinking.  It's all about eye appeal, and the student as a customer.  Sometimes we have to spend a little to make money.  Do what you can, try new things, and encourage your staff to offer ideas.

From time to time take a photo of your lines and then look at them from your customer's view point.  You may be surprised at what you see.

I will post some more photos next week.

The Cost of Wellness in Schools

For the last seven years, I have watched nutritionists, politicians, and local state agencies walk a politically correct line, in which they push and promote over zealous nutrition programs, with reduced snack sales for schools.  After all, to these folks, not supporting or pushing forward a nutrition, or health issue for children would be political suicide.  So, they push the politically correct agenda in the name of wellness.  State Agency CN Offices have done the same - Everyone protective of their job, but none speaking of the financial pitfalls.   And so, many directors/managers, and school boards "climbed aboard" the wellness wagon, with very stringent wellness plans, blaming the school cafeteria for obese and overweight children.  God forbid that they would hold the (voting) parent responsible.

I have watched as many of these  programs, began to lose much needed revenue, all while the cost of food labor, and labor benefits was and continues to increase at an alarming rate.  As a result, these programs begin a downward financial spiral, using up cash reserve balances that accumulated years ago.   At the same time, I have seen this economy generate an increase in the number of students eligible for free and reduced price meals.  Add to this the number of schools and directors/managers who have no idea what it is costing them to prepare and serve a school lunch or breakfast.  For many of these programs, the cost of preparing and serving that lunch now exceeds the revenue that is generates from free and reduced price rates of reimbursement.  The end result is a road map to failure.  To make matters even worse, many of these same schools have virtually eliminated snack, Ala Carte, and vending revenues that previously helped close the disparity between operational costs and revenue.

Eventually they call me asking for help to keep the Food Service Management Company (FSMC) out.  Only a few months ago, I received a phone call from a director in the mid-West who said her Board was voting to turn the program over to a Management Company, asking me what she should do.  My reply, "you should have called me a year ago".  Her response, "I had no idea the program was in financial trouble".  As incredible as that may be, I receive those calls and emails all the time.  "I didn't know we were losing money; no one in the business office told me".

There is no magic here.  Like government, we cannot afford to spend more than we "take in".  Success today, means that we can no longer simply plan nutritious menus.  We must know the cost per serving of every item, utilize a food budget, take an accurate monthly inventory, ensure that every delivery is carefully checked in, and run a fully accrued P&L every month.  That P&L must, must, must be compared to a monthly operational budget and every item (revenue or expense).  Then every item that is off budget for the month, must become the subject of a plan of corrective action.  Today, we cannot afford to rely on the business office for an accurate P&L - you have to prepare your own every month.  I have seen to many that are not correct, misrepresent (unintentionally) the bottom line, or are simply non existent.

My concern is that there are few out there who do what I do, who know how the FSMC operates, and who are not afraid to tell it like it is.  Like it or not, the cost of wellness, and labor contracts is turning more and more programs over to a FSMC.  And that should not be happening.

We need to know where we stand every month financially - fully accrued, no nonsense, no value of commodities included, with an accurate cost of food used (not purchased) presented in a P&L.  Then we need to evaluate whether we have a revenue problem, or a spending problem.  We then need to put together a realistic action plan, with goals and time lines, submit it to the Board for approval, and "get it done".  If this means cutting labor, reduce it, if it means food costs must be lowered to account for no more than 35% of revenue, do it.  If you need to fight to negotiate your food service contract separate from the other non-instructional employees do it.  And, if you need help get someone who knows, in there.  Don't  be afraid of what a consultant (like me) might say.  We are there to help and to save you staff and program from the FSMC.

Good luck and never hesitate to contact me for help.  Although this is my last school year as a consultant, I will continue to take on selected programs, if I know that it really needs my help.