Understanding the Food Service Income Statement How to Properly Analyze, Plan and Improve Your Bottom Line

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1 Understanding the Food Service Income Statement How to Properly Analyze, Plan and Improve Your Bottom Line Louis J. Pepe, RSBA Business Administrator of Summit City School District Mark Vidovich, President Pomptonian Food Service Management Company

2 Summit In Summit High School, the sales increased 25% with the implementation of Pomptonian service standards. The middle school sales increased over 70%. During the previous year under Chartwells, the District had a loss of $50,000 through the end of January (despite a guaranteed break-even). The first year s result was a profit of $35,000 for the same period of time.

3 Program Agenda Working with Incomes Statements Proposals and Profits 09:00am 09:45am 10:30am Discussion Item One How to Interpret and Analyze your Income Statement Discussion Item Two The RFP process and How to Prove Out and compare RFP s received Mid-Morning Break 10:45am 12:00pm Discussion Item Three How to Effectively Utilize the Profits from your Food Service Program Lunch 3 NJASBO March Louis J. Pepe, RSBA Summit

4 Protecting the District s Interests Every day, the federal government pays for meals for soldiers, veterans, and school children McCaskill targets widespread waste in sprawling food service contracts10/5/2011

5 Protecting the District s Interests Every day, the federal government pays for meals for soldiers, veterans, and school children McCaskill targets widespread waste in sprawling food service contracts10/5/2011

6 6 NJASBO March Louis J. Pepe, RSBA Summit

7 How to Interpret and Analyze your Income Statement By PresenterMedia.com

8 How to Interpret and Analyze your Income Statement The importance of understanding the reports and their impact. What s standard: Revenues: Daily Sales Chartwells June 2009 Summit Public Schools Federal & State Reimbursements Catering Expenditures: Pomptonian June 2009 Summit Public Schools Cost of Goods Sold (Food & Paper/Supplies) Labor (Wages, Benefits, Payroll Taxes, Worker s Comp) Other (Management Fee, etc.) Net Income: Profit or Loss Aramark December 2003 Oakland Public Schools 8 NJASBO March Louis J. Pepe, RSBA Summit

9 How to Interpret and Analyze your Income Statement A Review of actual statements Revenues: Daily Sales Federal & State Reimbursements Catering Expenditures: Make Chartwells up of June Make 2009 up up of of Summit Cash Public Sales Schools Reimbursements Other Sales (What about POS) (State (Catering) Make up of & Federal Vending Sales Reimbursement) Cost of Goods Sold (Food & Paper/Supplies) Labor (Wages, Benefits, Payroll Taxes, Worker s Comp) Other (Management Fee, etc.) Net Income: Profit or Loss 9 NJASBO March Louis J. Pepe, RSBA Summit

10 How to Interpret and Analyze your Income Statement COGS % Inventory Who owns it? Joint Inventory Why? Important to understand industry avg. (42% - 45%) Make up up of of Chartwells Food June Paper Costs 2009 Summit Public Schools (What s (Food & in it?) Beverages) Food Cost Percentage Calculation $470,308 Total Product Cost / $1,036,676 Total Revenue = 45% What about fluctuations 10 NJASBO March Louis J. Pepe, RSBA Summit

11 How to Interpret and Analyze your Income Statement Make up of Direct Labor Fringe Benefits (Hourly, Chefs and (Accrued vs. Supervision) Paid) Pomptonian June 2010 Summit Public Schools 11 NJASBO March Louis J. Pepe, RSBA Summit

12 How to Interpret and Analyze your Income Statement Armark December 2003 Oakland Public Schools Management & Administrative Fee (Normally one figure) Look at Guarantee Wow Expenses $ in one month? 12 NJASBO March Louis J. Pepe, RSBA Summit

13 How to Interpret and Analyze your Income Statement Q & A By PresenterMedia.com

14 The RFP process By PresenterMedia.com

An overview of the RFP Process Request for Proposal Why

Development of Bid Specifications Advertisement and

15 An overview of the RFP Process Request for Proposal Why an RFP vs. a bid? (Hybrid) Goals & Objectives of the Board of Education and greater community in preparation Customization and Development of Bid Specifications Advertisement and Solicitation of Proposals Selection Criteria for award 15 NJASBO March Louis J. Pepe, RSBA Summit

Goals & Objectives in preparation of specifications for Proposals The

USDA Choice, Selection of Products, Nutrition Limiting the amount fats and

vegetables Financial Cost Neutral (Self sustainable) or better yet: Profitable

16 Goals & Objectives in preparation of specifications for Proposals The importance of understanding your community and the competing interests Quality USDA Choice, Selection of Products, Nutrition Limiting the amount fats and saturated fats, eliminating trans fats, local grown, meals promoting fruits and vegetables Financial Cost Neutral (Self sustainable) or better yet: Profitable Staffing Existing Staff Minimum Staffing Levels 16 NJASBO March Louis J. Pepe, RSBA Summit

Elements contained in Specifications Designing a proposal spec that works for you

willing to sign) Communication of District s Expectations in various areas

17 Elements contained in Specifications Designing a proposal spec that works for you and your community Locking in Key Elements for comparison (Operating Days, Lunch Prices, etc.) Equipment (Should not be part of the RFP) Executable Contract (What are they willing to sign) Communication of District s Expectations in various areas (Nutrition, Presence, Student Input) Experience (Similar Size/Challenges, meeting expectations Selection Criteria - Beyond Price 17 NJASBO March Louis J. Pepe, RSBA Summit

18 How to Prove Out and compare RFP s received By PresenterMedia.com

on May 1, 2009 It should be clearly understood that a low price proposal is not the sole criteria upon which the Board of Education will predicate its selection to make an award.

19 Criteria for Evaluation of the overall RFP These are the areas we need to compare Proposals are due in the Board Secretary's office no later than 10:00 a.m. on May 1, 2009 It should be clearly understood that a low price proposal is not the sole criteria upon which the Board of Education will predicate its selection to make an award. The board reserves the right to accept or reject any or all proposals or parts thereof, or to waive any informality if in the best interest of the board. Overall Submission - 1 Holistic approach to review proposal (total package) Reputation - 2 Experience and proven track record Quality of Service - 3 Quality Quality is Job One! Make random visits from entire client list Guaranteed Profit - 4 Many factors call into question the accuracy of forecasts and ability to deliver 19 NJASBO March Louis J. Pepe, RSBA Summit

Financial Comparison of Proposals Side by Side comparisons for basis of recommendation As

Documents You want to make sure that recommendation is well supported and data driven

20 Financial Comparison of Proposals Side by Side comparisons for basis of recommendation As the BA, you are going to make a recommendation to the Superintendent and Board of Education. Labor Forecast & Employee Benefits Executive Summary Marketing Initiatives Key Financial Documents You want to make sure that recommendation is well supported and data driven through a thorough analysis of the projections contained in the proposal. Menus & Nutritional Targets References and Background 20 NJASBO March Louis J. Pepe, RSBA Summit

21 Side by Side Comparison Form 23 vs. Form 24 for detailed proposal comparison Once the proposals are accepted you need to provide a clear comparative of each proposal in order to discern the total financial impact and other factors that make up the bottom line. Form 23 Response and Projected Operating Statement (Should be a derivative of the Income Statement, forecasting the future) While profit is certainly important with all aspects of enterprise programs, the chief concern remains the quality of the program and the customer service - Louis J. Pepe, RSBA Form 24 FSMC Proposal Comparison Form This is the State Model (Very brief) 21 NJASBO March Louis J. Pepe, RSBA Summit

other factors that make up the bottom line.

22 Side by Side Comparison Form 23 vs. Form 24 for detailed proposal comparison Once the proposals are excepted you need to provide a clear comparative of each proposal in order to discern the total financial impact and other factors that make up the bottom line. Form 23 Response and Projected Operating Statement (Should be a derivative of the Income Statement, forecasting the future) While profit is certainly important with all aspects of enterprise programs, the chief concern remains the quality of the program and the customer service - Louis J. Pepe, RSBA Form 24 FSMC Proposal Comparison Form This is the State Model (Very brief) 22 NJASBO March Louis J. Pepe, RSBA Summit

Financial Comparison of Proposals Ask follow up

Menus & Nutritional Targets References and

23 Financial Comparison of Proposals Ask follow up questions of Submitters Get the facts Labor Forecast & Employee Benefits Executive Summary Marketing Initiatives Key Financial Documents Menus & Nutritional Targets References and Background 23 NJASBO March Louis J. Pepe, RSBA Summit

24 Financial Comparison of Proposals A side by side allows you to key in on inconsistencies and non-compliance 24 NJASBO March Louis J. Pepe, RSBA Summit

25 Financial Comparison of Proposals A side by side allows you to key in on inconsistencies and non-compliance 25 NJASBO March Louis J. Pepe, RSBA Summit

26 Financial Comparison of Proposals A side by side allows you to key in on inconsistencies and non-compliance 26 NJASBO March Louis J. Pepe, RSBA Summit

27 Financial Comparison of Proposals A side by side allows you to key in on inconsistencies and non-compliance 27 NJASBO March Louis J. Pepe, RSBA Summit

28 Financial Comparison of Proposals A side by side allows you to key in on inconsistencies and non-compliance 28 NJASBO March Louis J. Pepe, RSBA Summit

29 Financial Comparison of Proposals A side by side allows you to key in on inconsistencies and non-compliance INSURANCE Successful contractor cannot commence work under the terms of the specifications until he/she has furnished certificate of insurance The minimum limits of bodily injury are $1,000,000. Property damage limit is $1,000,000 per occurrence - $2,000,000 aggregate. Additional $9,000,000 liability "umbrella coverage" must be provided for a total of $10,000,000 in coverage The City of Summit Board of Education must be named additional insured on all required insurance policies. 29 NJASBO March Louis J. Pepe, RSBA Summit

Group Total $20M Required $10 M Pomptonian Total $10M

Cost to Summit = Cost to Summit = bottom $22,061 line

30 Financial Comparison of Proposals A side by side allows you to key in on inconsistencies and non-compliance Compas Group Total $20M Required $10 M Pomptonian Total $10M Required $10 M This represents $17,391 that can be on your Cost to Summit = Cost to Summit = bottom $22,061 line towards Profit! $4, NJASBO March Louis J. Pepe, RSBA Summit

31 How to Prove Out and compare RFP s received Q & A By PresenterMedia.com

32 Understanding the Guarantee Requirements for any FSMC By PresenterMedia.com

33 The Guarantee Not all guarantee s are created equal Is the Guarantee limited or unlimited Conditions affecting the FSMC s ability to deliver 33 NJASBO March Louis J. Pepe, RSBA Summit

s Reimbursement Rates Labor Submitted Value of Commodities No Competitive Sales

34 The Guarantee Reasonable Guarantee Requirements Number of Days Served No Significant Change in School Policy Adoption of Price List No Significant Change in Federal Reg s Reimbursement Rates Labor Submitted Value of Commodities No Competitive Sales Enrollment Significant Change in Costs 34 NJASBO March Louis J. Pepe, RSBA Summit

Dept. of Agriculture Handout #270 FSMC s forecast must

35 The Guarantee Questionable Guarantee Requirements No Increase in Food Costs LEA Shall Fully Cooperate NJ Dept. of Agriculture Handout #270 FSMC s forecast must be correct 35 NJASBO March Louis J. Pepe, RSBA Summit

36 RFP A look at the content Changes from the State are mandatory for those in NSLP Requirements CAN NOT be overly restrictive (e.g., can not require operating in NJ) Scoring must put all FSMCs on level playing field 36 NJASBO March Louis J. Pepe, RSBA Summit

37 RFP A look at the content Changes-Equipment FSMCs can only purchase equipment as specified by the BOE RFP specifications MUST be detailed 37 NJASBO March Louis J. Pepe, RSBA Summit

38 RFP A look at the content Must be publicized Must use Form 23 FSMC cannot offer Goods/Services not requested in specs 38 NJASBO March Louis J. Pepe, RSBA Summit

39 How to Effectively Utilize the Profits from your Food Service Program According to the NJ DOE Audit Program: Page II Net cash resources may not exceed three months average expenditures. By PresenterMedia.com

District Sales District Enrollment Approx: 4,075 in district students Total Sales 2010-11 Elementary Middle High Catering 320-2 Primary Centers 1,643 5 Elementary Schools 1,024 1 Middle School 1,088

40 District Sales District Enrollment Approx: 4,075 in district students Total Sales Elementary Middle High Catering Primary Centers 1,643 5 Elementary Schools 1,024 1 Middle School 1,088 1 High School Closed Campus Middle School Closed Campus High School Satellite Elementary Program 24% 3% 34% 39% Active Nutrition Committee There is a direct correlation between Quality and Sales - Louis J. Pepe, RSBA 40 NJASBO March Louis J. Pepe, RSBA Summit

41 District Participation based on Sales $3,500 Program Growth based on Daily Sales Total Growth 50% over 2 years! $3,000 $2,500 $2,000 $1,500 $1,000 $500 $0 FY 2009 FY 2010 FY 2011 FY 2012 Elementary Middle High As of January 41 NJASBO March Louis J. Pepe, RSBA Summit

$120,000 $100,000 $80,000 $60,000 $56,924 $40,000 $20,000 $0 2008-2009

42 Looking at Profit Performance based profit allows for re-investment in the program Represent Outlook based on Jan 2012 Statement $140,000 $120,000 $100,000 $80,000 $60,000 $56,924 $40,000 $20,000 $ NJASBO March Louis J. Pepe, RSBA Summit

43 Targeted Purchase Plan as a result of Food Service Profits $239,000 in the first two years Through utilization of Enterprise fund profits, we were able to invest in school and district wide program improvements, while at the same time reducing demands on limited resources in our annual operating budgets. - Louis J. Pepe, RSBA During this time the district also achieved a number of Nutrition Awards and Recognition: NFL Eat Right, Move More NJASBO Above & Beyond Award for Pomptonian as a result of Farm stand Initiative featuring Local Grown Produce when available. Purchase by Location FY10 FY11 FY12 POS Terminals at LCJ SMS $43,485 Cafeteria LCJ SMS & Millwork District Wide Food Distribution Truck Cafeteria Equipment (New Line at SMS & HS) $36,000 $14,400 $29,663 Cafeteria SHS $36,998 Cafeteria Washington ES $13,869 $20,938 $15,620 INVESTMENT $210,973 $109,148 $66,487 $35, NJASBO March Louis J. Pepe, RSBA Summit

Equipment Salad Bar s Sneeze Guards Deli Bars Countertops Replacement of aging equipment New Equipment

44 What other things can you do with the profits? Any Suggestions? What has worked in your district(s) EQUIPMENT POS - Computerized Register System Upgrading Serving Equipment Salad Bar s Sneeze Guards Deli Bars Countertops Replacement of aging equipment New Equipment Steamers Char broiler PERSONNEL Custodial Lunch Support Additional Servers Utilities OTHER OPERATIONAL COSTS 44 NJASBO March Louis J. Pepe, RSBA Summit

45 How to Effectively Utilize the Profits from your Food Service Program Q & A By PresenterMedia.com

46 Thanks! 46 NJASBO March Louis J. Pepe, RSBA Summit

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