Food, labor budgets up—for most

In a period of rising costs, it’s perhaps not surprising to learn that, according to The Big Picture, foodservice budgets have also been increasing during the last couple of years. Overall, 73% of operators say their food budgets have increased in the last two years, 55% say their labor budgets have increased and 43% say their equipment/technology budgets have risen.

This isn’t true for the industry as a whole. In one group—hospitals—a sizable percentage of operators say their budgets have shrunk within the last 24 months. A total of 23% of hospital directors say their food budgets have decreased, and 30% say their equipment budgets have shrunk.

Most startlingly, the largest percentage of operators—39% from hospitals—report that their labor budgets have decreased in the last two years. By contrast, 36% of hospitals say labor budgets have increased and 25% report they remained static.

“We have been asked to operate more efficiently, resulting in reduced expenses,” says Cheryl Shimmin, network director of nutrition services at Kettering Medical Center, in Ohio. “Over the last three years we have standardized operations at eight acute care facilities and three long-term care units, which resulted in approximately 20% savings to the bottom line in purchasing and labor expenses. In addition, our labor budget is 100% flex-based on census.”

Even hospital directors who report budget increases note that they are seeing less than what they’d hoped for.

“We have been asked to do more with less this year,” says Joy Cantrell, production manager and executive chef for the Food & Nutrition department at Providence St. Joseph Medical Center, in Burbank, Calif. “[Last year] I asked  for a 12% budget increase; we received only 7%. I expect something similar this year, as well. We have gone to Meatless Monday options to lower costs and are serving a lot of lower end food with high-end garnish twists.”

Mount Sinai Medical Center, in Miami Beach, is one hospital where the foodservice budget is growing, according to Mia Hess, director of Food & Nutrition Services. But even in this case, it is only after several years of cuts.

“In the last two years my budgets have been increasing,” Hess says. “The previous three years we had seen some sharp decreases in all areas, as the hospital was positioning itself to improve our financial rating.”
Several school foodservice directors indicate that their food and labor budgets are on the rise, with new USDA school meal regulations contributing to higher food costs.

“We have increased our food budget due to the Healthy, Hunger-Free Kids Act requirements,” says Kathy Christopher, child nutrition director for Williamsville Central School District, in East Amherst, N.Y. “Whole grains, additional fruits and vegetables have ramped up our cost per student meal. In addition, employee retirement and healthcare costs have risen dramatically in the last two to three years.”

Amy Harkey, director of Child Nutrition Operations for Charlotte-Mecklenburg Schools, in North Carolina, agrees. “Food costs are up due to the new regs, [especially] the ‘must’ of having fruit or vegetable on the plate for a reimbursable lunch,” says, Harkey, adding that plate waste is also increasing. “There are no raises this year for state employees, but five bonus leave days for all does impact our budget.”

Robyn Wood, school meal program director for the Oregon School District, in Wisconsin, says rising benefit costs “have taken a toll on our department,” as has the cost of food. 

“The price of food keeps going up much faster than our reimbursement goes up,” Wood says, echoing the opinion of 91% of her colleagues in schools who believe their food budgets will continue to rise during the next two years. “The required amount of some foods [we must offer] has also increased. Little things, such as gloves, temperature probe wipes and dish machine temperature labels are used more often and are costly. We have to find creative ways to close the gap between expenses and revenue.” 

Crunching the Budget

Overall, labor and food and beverage are the two buckets that make up the majority of non-commercial foodservice budgets (45% and 44%). Hospitals and colleges have a larger percent of their budgets going to labor (50% and 47%, respectively) and a lower percentage going to food and beverage (39% and 42%, respectively) than the other major segments, which average about 43% for labor and 47% for food and beverage. 

Schools are devoting more of their dollars to food and beverage (47% of their budget). In the past two years, 85% of schools have increased  their food and beverage budgets and 91% expect them to increase in the next two years. On the flip side, hospitals were the most likely to have seen a decrease in their food and beverage budgets (23%) and 21% anticipate a decrease in the next two years. Hospitals are also significantly more likely to expect a decrease in labor budgets (34%) than the remainder of the non-commercial market, at 8%. Hospitals were also the most likely segment to have seen a decrease in their labor budgets in the past two years (39%).