Counting the Cost

Michael Buzalka

Ayear or so ago, Ohio University faced what most foodservice providers faced as food prices rose rapidly, driven by poor weather and escalating fuel costs. For OU, this was the companion piece to a double whammy, pairing with a labor cost escalation brought about by the state's mandated rise in minimum wage, which increased student labor costs by an annual rate of almost six percent in three years since the law's inception in January 2007.

Over the past year, the rise was a more modest 1.4% in that category, but at the same time food prices were again on the rise, led by meat (up 8.9%), dairy (11%) and shortenings/oils (15%).

Yet, OU Dining has managed to keep its fiscals solid through a combination of strategies ranging from more effective procurement and more efficient labor allocation to investments in operational infrastructure and an almost obsessive attention to customer feedback.

One way is through purchasing and the maximizing of rebates from OU's prime vendor agreement with Gordon Food Service. “Our rebate amount is up $17,000 over last year, a 13% increase,” notes Dining Services Director Rich Neumann.

The prime vendor agreements include not just Gordon, but a dedicated c-store distributor that is part of a cooperative purchase alliance with Miami University, the University of Akron and, most recently, Ohio State University.

“We also take advantage of opportunity buys,” Neumann adds. “For example, say a vendor produced a cut of meat for a restaurant chain but the production run wound up not meeting their particular specs. We could get up to forty percent off the price.”

Another strategy is using alternative products that cost less but don't compromise quality. For example, several years ago, OU changed brands on the beef strips it uses in its Asian station, saving a dollar a pound.

How labor is used is another area of cost saving. “We now centrally slice all our deli meat,” Neumann says. “One cook would spend four to six hours a day on it. Now it's done centrally by two people in a couple of hours, cutting labor costs 75 percent.”

All salad dressings, pizza dough and most bakery is now done from scratch. “It's cheaper for us to buy the ingredients and pay the labor,” Neumann says.

Those savings will further increase once a new cook-chill central kitchen is completed next January and begins to produce bulk items.

“It will also let us purchase more locally,” Neumann predicts. “There are tons of tomatoes on the market here in August that we can't use now. With the facility, we will and be able to turn it into pasta sauce or salsa.”

Neumann estimates the project's $6 million cost should be recouped in four years, or sooner, if potential new revenues from using the kitchen to supply outside clients (the local school district, a nearby hospital, a two-year technical college a couple miles away) materialize.

Another key cost-control factor is engagement with the customers. Surveys are used to adjust menus and feedback is constantly solicited and acted upon to meet student expectations.

That kind of data was used to design the menu mix at the renovated Shively Dining Hall, opened last year (a second hall is slated for renovation next year). Participation has been up almost 40% from the old Shively ever since, goosed by the new environment and a menu that emphasizes favorites like mac and cheese, deep dish pizza and a vegetarian/vegan station.

Student engagement includes “tweeting,” says Carlos Samano, assistant director of sales, promotions and research. “We get maybe 10 comments a day and we reply to every one. Since March 2010, we've come to have 763 followers.”

Samano says he prefers Twitter to Facebook (which OU Dining also is on) because it's “not as mobile. Twitter is immediate and we really want to be conversational. His Tweets include information about the day's menu at the different outlets, and select promotions (“We have to be careful not to sound self-serving with the Tweets,” Samano explains.)

Shively helped boost meal plan purchases, but Neumann says another key factor is flexibility. “Students and parents want plans that don't ‘waste’ meals. So 63% of our students are on our two premium meal plans, both flex plans.”

In fact, sales of these plans have doubled in the past five years. This year, 75% of incoming freshmen chose one of the premium plans.