Compliant and Self-Sustaining Are Not Synonymous

Written by Milt Miller – Working with many School Food Programs across the country this year, we found that while most are compliant with the regulations for school lunch and pass their audits with flying colors, most of them are in trouble financially. This might amaze you, but sadly this is true. Some of the healthiest and most compliant programs are drowning in red ink. After further examination of this fact, I found an answer as to why that amazes me.

While the directors and administrators, of these programs serve the healthiest, most balanced, and most colorful meals, that meet all of the HHFKA and NSLP requirements, they have a poor if any grasp on the principles of operating a fiscally healthy program. They all can quote the requirements and show how calories and fats must be kept at the proper levels. They know what is required to pass their every three-year audit and are up on what must be submitted to pass with flying colors. Their students are treated to healthy, balanced meals, with diverse choices of fresh fruits and vegetables and salad bars, yet they are operating at a huge loss. Many can’t tell you why they are losing money when asked. “We have done everything required, I don’t know why we are losing money.”

For the past fifteen years School Food, has been in the throes of a major change. All attention has been placed on making food more nutritious and more readily available to all students. All training and staff development has been focused on how this will be accomplished and reported to the appropriate government agencies for reimbursement. Little if any thought has been given to cost, profitability, or the financial success of the program. Government reimbursements have been far below what is necessary for what is being asked of programs across the country. Product costs have risen for healthier offerings required and salaries and benefits have far exceeded the cost of a school meal.

New programs, such as CEP and Universal Breakfasts programs have been developed to increase meal participation all in hopes of feeding more children in need. Again, reimbursement for these programs has lagged behind what is really necessary. What policy makers fail to realize is that if a product is sold at a loss, increasing participation only causes a greater loss. School food directors are not taught proper costing, purchasing and marketing strategies to help bolster profitability. In many cases profit, has become a socially unacceptable word. One director told me she wasn’t supposed to make money as they were a non-profit operation. I assured her that “Non-Profit” is a tax status not a business plan. Without some sort of profit there can be no growth. Most Major non-profits make money they just reinvest it into program growth.

When looking at a school food operation’s fiscal instability it comes down to three major areas that no real training has been provided for, costing, purchasing, and marketing strategies. Most directors do not have a firm grasp on what food and labor costs them daily and how this relates to daily revenues. Food cost and labor cost in most cases far exceeds daily revenues by as much as $1.50 per student per day. This scenario can create a sizeable deficit if not corrected. Most directors purchase based on what the guidelines require, not what compliant products they can afford based on current meal prices and daily revenue. They do look for the lowest price but not necessarily what fits their pocket book. Proper usage of USDA commodities is not something that is stressed. Many commodities are diverted to manufacturers to be turned into commercial products that are easy to use, when using brown box commodities would be more suitable to their budgets. Knowing your numbers and purchasing accordingly are the two major reasons food programs fail.

The final reason is marketing effectively to your customers. Because of all the changes in the guidelines and the speed at which the changes took place, student customers have been required to completely change to foods with textures and tastes foreign to them. This has resulted in drops in participation nationwide. No one was taught how to handle these changes so most directors did what they had always done in the past. In some cases, I have seen programs that only feed 45% of their students eligible for free meals. How much faith do customers have in this program if they can’t give the food away? Meals and marketing must be shifted to meet student expectations and to restore trust in the products served. Again no one thought to teach directors how to handle this.

In the schools we have worked with, we changed our focus to accommodate the needs at hand. We started teaching and assisting with developing stronger business models, purchasing procedures and marketing strategies. In most, in a period of weeks, we saw an increase in profitability, decrease in waste, and increases of up to 15% in participation. As directors took control of their fiscal responsibilities through better understanding, bottom lines started to improve. In some programs labor issues, have been left to compound to a point where profitability can never be attained without a major shift in salaries and benefits, but in most at least a break-even can be reached within the first year.

If your program is compliant but in the red, seek help. In many cases, all of your training has been on compliance and not business principles. It is not too late to turn things around and to treat school lunch like the business that it is. Take the first step by contacting us now!

Milt Miller is Director of K-12 Operations at Food Service Solutions, Inc. Throughout his 33 years in the food service industry he has managed, operated and assisted food service programs to become successful. For more information on this and other topics, contact Milt at www.foodserve.com/school-food-program-assessment.html.

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