Saturday, June 09, 2007

Factors to be considered while bidding for office canteen

You’ve been eating in office canteen…Have you ever bothered to think what it takes to run an office canteen?

Probably you were involved in writing business proposals or responding to request for proposals, ever thought what it takes to bid for an office canteen? For a change, this post is a quick listing of facts one should keep in mind while bidding for an office canteen, from the perspective of a catering service vendor or hotel operator.

Below are the facts an operator considers while competing with other vendors to win a contract to run office canteen for a specific period of time.

1.Number of staff/Seating capacity of the building. (Obviously this will give an estimate of business volume)

2. Distance from nearest alternative for an employee.
If there’s a hotel/mess across the street or within few kms of radius, chances are that a sizable no. of staff will go there instead of heading towards office canteen. This will affect revenue recognition. (External operators can always give same food at reduced process due to low overhead explained later)

3. No. of fully operational days
A normal hotel usually runs throughout the year, but office canteens (when office operates 5 days a week) run in full capacity on only 240 weekdays (minus holidays) and not 365 days. My annual ROI (Return on Investment) has to come from only these days and this also means that fixed changes need to be apportioned more aggressively.

4. Non billable overheads
In a conventional hotel/restaurant, people who come inside usually buy something. But in office canteens many people bring food from home but use office infrastructure, utensils, consumables (drinking water, tissue papers, plates, spoons (some people forget to return the spoons and take them home along with empty lunch box). These expenses are written off under goodwill and can’t be billed. The expense may be quite negligible but when hundreds of people do this, it amounts to considerable overhead and opportunity cost and needs to be apportioned to others who pay and eat.

5. Extra hygiene:
Office canteens demand extra investments to ensure that all possible precautions have been taken to ensure hygiene and quality in all phases of food production and distribution life cycle. Non compliance will result in anything from instant escalations to addition of extra clauses during agreement renewals to termination of contract.

6. VIP orders
In any office, there’ll be periodic VIP visits/conferences/meetings during with high quality snacks and drinks are sourced from canteen. In most government offices such supplies are taken for granted as complementary while some private companies allow billing.
Weekend operations
Though number of people who come to office on weekend are less, some companies insist that canteens should function on weekend. If the sales volume is not adequate, running on weekend means loss.

7. Restrictions on price hike
A roadside hotelier can hike the price of foods served at his restaurant at his own whims and fancy (concept of floating interest). In office canteen, once you commit on certain quality and price, compromising on quality/quantity or increasing the price in the middle of contract term will be met with stiff resistance (Concept of fixed interest, which is always higher than floating interest due to risk factor).

8. Distance
Some offices are located at the heart of city while others are miles away. Canteen operator needs to ship his daily groceries and every extra km the cargo truck has to travel will add to cost.

A catering operator considers all these factors during bidding and pricing decisions. Unless the Host Company or office subsidizes the expenses, above mentioned reasons are why we always feel canteen food is very expensive.

But they do make profit despite all these odds. (That's the sole purpose of running the business anyway)

Disclaimer: Contents are sourced from personal observation/analysis of the author. No offense is meant towards canteen operators or at those who eat there. Feel free to correct me if I’m wrong anywhere.
March 2009: A relevant photograph added.


Sandesh said...

People takin office spoons n stuffs??

I always take food from home n never use any part of the office canteen.

Good analysis of things related to office canteen.

Inspite of all this, i hear ppl complaining abt the quality of food they provide!

Shrinidhi Hande said...

Not everyone takes spoons home. I meant accidentally that happens once a while by mistake. While other hotels strictly prohibit outside food, office canteens can't do so.

People still complain because for the price they pay they feel they deserve better (Natural and reasonable). But because of the reasons mentioned in the post, canteen operators' pricing will be expensive than outside.