Sadly, worrying about meal equity, participation, compliance, food cost, labor cost, meal reimbursements, and the myriad of other school lunch issues, has resulted in some school food operators feeling this way. Many operations we have assessed this year have this problem and don’t even realize what is happening. They know all of their important numbers, labor cost, cost of goods (food cost), participation percentage, plate cost, and required price increase, but fail to realize what is their “Optimum Per Student Spend”.
Optimum Per Student Spend (OPSS) is what must be received daily from every student for the operation to break even. This information is obtained by adding labor cost per day, with benefits, and total food cost per day and dividing the sum by enrollment. This is the total amount needed per student per day to cover costs of operations. Knowing this number breaks total operational costs and needs down to a more immediate level of understanding. I call this “the hundred penny theory of operations.” The theory goes, if food and labor per student per day cost one hundred pennies, then spend per student per day must equal one hundred pennies to achieve breakeven. Knowing all other numbers but this one many times leaves operators wondering why they are losing so much money by the end of a week, month, or year.
Several areas that affect OPSS are participation, cost of goods, and impulse purchases. Lower costs of goods or improved pricing strategies proportionally lower OPSS. Costing at 40% instead of 50% will lower OPSS by 10%. Many operators lose sight of best practice pricing strategies and set food costs above the national average of 40-42%. This causes higher breakeven points and lowers chances for program self-sustainability. Add on buys or impulse purchases increase student spend and facilitate breakeven. Too many times this strategy, of increasing ala carte’ sales, takes away from meals participation by making meals look less desirable. True add on buys are second entrees or ala carte items purchased with a reimbursable meal. These are purchases that add to student spend without detracting from it in anyway. When setting meal and ala carte pricing operators should set prices to encourage reimbursable meal sales and provide accessory items, with perceived value, that add on to the meal purchase. A few operators chafe at the thought of enticing students to spend more, but let’s face it, this is a business and if they don’t spend it with you they’ll spend it on less healthy items at the local convenience store.
Increased participation hides a multitude of sins. It also lowers OPSS rates. Once you have costs in line and OPSS is equal to or greater than cost/student/day, target students who currently are not dining with you and bring them into the fold. Participation insures sustainability. Keep this in the front of your mind at all times. It may never reach 100%, but it should always be in the upper 80%’s.
Breaking operations down to the hundred penny theory and understanding that daily student spend rates must be equal to or greater than daily cost/student rates, is crucial to maintaining a successful school food operation. Not knowing what your OPSS is and efficiently managing it, can lead to catastrophic losses to your program. Without knowing these numbers, it could be you saying, “Please don’t come through my lunch line, you are costing us money.”
Milt Miller is VP of K-12 Operations at Food Service Solutions, Inc. Throughout his 32 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.