Hot Potato in the School Cafeteria

More districts outsource their food services, but some raise questions about personnel relations and savings by Kate Beem

It’s such a simple mandate: Prepare healthy, nutritious meals for the schoolchildren so they can go about the business of learning.

But operating a school district food service department is anything but simple. Even in the smallest districts, food service operations are businesses that must comply with many more rules than those in the private sector. School food service departments must operate as nonprofits, yet they need to make enough money to be self-sufficient. There are federal nutritional guidelines to follow, and the meals have to be attractive to hard-to-please consumers who are inclined to complain about “mystery meat.”

In fact, most people take the school food service department for granted, says Donna Wittrock, president of the American School Food Service Association and executive director of food and nutrition services for the 73,000-student Denver Public Schools. Few outside the food service operation understand the difficulty of balancing government regulations and nutritional worries against marketing and customer service.

“Most people in a school district don’t have a clue how food service operates,’’ Wittrock says.

Outsourcing Options

It’s no wonder an increasing number of school districts across the nation are turning to food service contract management companies to take over some or all of the responsibility. It’s a trend not without controversy. At stake are the reputations of the districts’ own food service departments and the welfare of longtime employees, who fear they will get dismissed in the struggle to save money.

The K-12 school food service market is wide open today as far as contract management companies are concerned. Although the actual number of school districts using outside contractors to manage their food operations is sketchy because no agency tracks the practice, the figure pales in comparison with the saturated higher-education market. According to a 2000 study by the Centers for Disease Control and Prevention, food service management companies operate in almost 17 percent of U.S. schools.

Outsourcing food services comes in all shapes and sizes. Some districts completely turn over their operations, including hiring and firing employees, to contract management companies. Others might limit the arrangement to purchasing. Sometimes the management company can play only a consulting role.

“There may be some cost efficiencies associated with doing it one way or the other, but it is really a function of what’s going on in the district,” says David DeScenza, regional vice president of sales for Compass Group’s Chartwells Division, which contracts with 519 school districts around the country.

The practice is more prevalent in some states than others. Figures from Chartwells show that 70 percent of New Jersey school districts outsource food services, and more than 20 percent of Michigan’s districts do. Florida encourages school districts to investigate outsourcing opportunities as cost-savings measures, but other states are neutral about the practice.

Contract management companies expect their market share to expand as fiscal pressures on school districts increase. Those pressures are forcing school system leaders and their governing boards to examine every budget item for cost savings.

Purchasing Efficiency

Food service management companies say they can save school districts money through their purchasing power and other efficiencies, freeing up funds for the classroom.

“Food is what we do,’’ says Jeff Wheatley, president of the schools division of Aramark Corp., which ranks as the nation’s largest food management company in the K-12 market with 420 school district contracts in 20 states. “We’re going to bring a better product to the table, allowing a district to focus on what it does best — educate kids.”

That’s what Kent Barnes, superintendent of the 4,300-student Holly Area School District in Michigan, finds attractive about his district’s relationship with a food service management company.

On a typical day, Barnes has a lot on his plate. He spends much of his time dealing with test scores, the school board, employee relations and an ever-tightening budget. His district’s school cafeteria operation is the last thing he wants to worry about.

And most of the time he doesn’t, owing to the district’s seven-year relationship with Chartwells. The Holly district’s food service manager, a Chartwells employee, plans the menus, ensures the district complies with federal food service regulations and keeps tabs on whether the service breaks even.

Barnes is so pleased with how things are going that he’s wondering whether the district should expand its partnership with Chartwells by allowing the company to assume control over the entire food service operation, including payroll and personnel relations. “It’s a wonderful team effort,” Barnes says. “Quite frankly, with [Chartwells] here, I don’t worry about food service.”

District Initiative

Critics of private-sector involvement in food operations don’t dispute that large companies can offer school districts economies of scale. But their bulk purchasing deals aren’t the only way to save money, and profit is always a factor when the public sector deals with proprietary businesses for contractual services, says Jodi Mackey, director of child nutrition and wellness for the Kansas Department of Education.

“I personally think there’s no more work involved in hiring a qualified food service director to manage the program,’’ says Mackey, who estimates that only five of the 303 school districts in her state employ proprietary firms. “A qualified, capable food service director can do everything for a school district that a management company can.”

That argument worked in Ohio’s 7,200-student Brunswick City Schools, a suburban district 25 miles south of Cleveland. More than a decade ago, the school board there hired ARA, now Aramark, to run the district’s ailing food service program. After three years, the program still operated in the red, says Mary Grace Kenny, the district’s food service coordinator.

In 1994, the school board considered switching to another company and possibly closing the kitchens in some schools. Some veteran food service staff feared that a new company would eliminate full-time positions and cut benefits to slash costs. So they devised a plan. The employees asked the school board to give them a year to run the food service department. If it wasn’t in the black by then, they would agree to step aside and let the outsiders run the show.

“We felt that since all of us lived and worked and had children and grandchildren in the Brunswick school system that we could do a much better job than an outside company,” says Kenny, who at that time was managing an elementary school cafeteria.

Employees made concessions to effect the change, including giving up paid holidays and snow days. But the self-operated program broke even in the 1994-95 school year and has operated in the black ever since.

Now a committee of food service employees runs the department. Kenny oversees it, filing state reports and centralizing orders. The department makes enough money to purchase its own equipment and pay salaries and retirement benefits.

A Hot Button

Any way you slice it, outsourcing can be a sticky prospect for school districts.

The monthly magazine School Foodservice and Nutrition, published by the American School Food Service Association, addressed the simmering debate in its December 2003 issue. Angry letters to the editor appearing a few months later left no doubt about the controversial nature of the subject. One reader called the articles “inflammatory” and “biased” and said she wondered whether she should renew her membership.

With membership from self-operated food service operations and those that hire contract management companies, ASFSA sits squarely in the middle of the fray. The association takes no official position on the subject, however.

“What we’re concerned about, no matter who’s running it, is that the program is providing nutritious meals for kids,” Wittrock says.

That’s the primary concern of food service management companies, too, adds DeScenza. His company has been in the K-12 food service market for 30 years, working mostly in small to mid-size districts. But the company of late has won some contracts with larger districts. Chartwells currently provides food services in one-third of Chicago Public Schools.

Marketing Meals

The ability to purchase food at lower prices is a big part of contract management companies’ appeal, DeScenza says, but it’s not the only plus. Outside management offers more than just buying power. These companies have at their fingertips marketing resources and products that are out of the reach of most self-operated school food service programs, DeScenza says, adding the companies also can offer training and education for food service workers.

Contract management companies can tap into a wealth of interesting recipes and the experience of food service experts to revamp cafeteria offerings and increase student participation. That, in turn, increases revenue for the food program, freeing up money in school districts’ general funds for educational needs, contract management executives contend.

When participation rates in school lunch buying increase, school districts profit in other ways, too, says Bill Gerichter, a senior vice president with Sodexho School Services, which manages food operations in almost 470 school districts nationwide. Title I funding and E-rate funding are awarded based on the numbers of students on free and reduced-price lunches. In districts where the firm runs the school cafeteria, Sodexho aims its marketing at parents, encouraging eligible families to apply for free or reduced-price breakfasts and lunches.

Marketing school meals is an important part of what contract management companies can offer. Karl Sprague, food service director for the 3,300-student Great Bend School District in west-central Kansas, has worked for both self-operated food service departments and those run by proprietary management companies. When he worked for the latter, he had access to appealing giveaway items such as Frisbees to lure students to the lunch line.

In Brunswick, Ohio, Kenny has no doubt that the school food service staff benefited from the marketing techniques employees learned during the time Aramark managed the operation. Cafeteria workers learned how to make meals more appealing to students. Those ideas, gleaned a decade ago, still work, Kenny says.

It’s amazing what a little salesmanship can do for, say, spinach. In the Holly, Mich., school district, where a Chartwells employee plans the lunch menu, spinach dip with vegetables is a popular offering.

“It’s the way it’s marketed,” says Barnes, the superintendent. “It’s the way it’s packaged. It’s the way it’s delivered.”

There’s hardly a limit to what contract management companies can do for the school lunch, even turning the lunchroom into a facsimile of a shopping mall food court, says Carolina Lobo, vice president of marketing for Aramark’s school support services. “Breakfast in the classroom, on the school bus, anything to deliver food in an unconventional way,” she says.

At Texas’ largest school district, the 211,000-student Houston Independent School District, school lunch participation has increased 37 percent since the district hired Aramark to run its food service department, says Adriana Villarreal, a district spokesperson. The district serves 245,000 breakfasts and lunches a day, and the food service program has been commended by the state’s Department of Agriculture for its focus on nutritional offerings, Villarreal says.

Students have more choices with Aramark, which has introduced healthier versions of kid favorites such as pizza, tacos and spaghetti, as well as 53 “Heart Healthy” menu items that contain fewer than 3 grams of fat and 40 milligrams of cholesterol per serving, she says.

The Atlanta Public Schools have outsourced food services for five years, first with Aramark and now with Sodexho. With 85 schools and 55,000 students, the district’s food service program has operated in the red for the last 20 years, says Marilyn Hughes, director of school nutrition services. The district has used money earmarked for classrooms to prop up the cafeteria operation. District administrators are hopeful that an outside company with expertise in finding cost efficiencies in inner-city districts eventually will help bring the department into the black.

Although 70 percent of the department’s employees are paid directly by the school district, Sodexho is able to replace employees who resign or retire with part-time staff. However, food service managers remain employees of the school district.

“It does give you some options for being able to lower your labor costs,” Hughes says.

A Human Toll

But that savings comes at the cost of human capital, and that’s a political price some school boards don’t want to pay until they’re pushed against a wall by budget constraints, says Gerichter, Sodexho’s senior vice president.

In fact, employee costs and labor relations are the biggest obstacles to privatizing food services, says Michael LaFaive, director of fiscal policy for the Mackinac Center, a Michigan-based think tank that advocates privatizing public services. When it’s done correctly, outsourcing saves school districts money, LaFaive contends, arguing that the biggest savings result when districts completely relinquish control of their food service departments. Outside management can better stem the rising expense of benefits packages, he says.

LaFaive concedes some school communities can’t make that leap, usually for personal reasons. “Superintendents have to see spouses and employees that have been laid off at the store and the bank. While the savings are good in theory, they cost the superintendent relationship capital.”

Employee unions usually resist privatization moves. The Michigan Education Association filed suit in 2000 against the tiny Arvon Township School District in the Upper Peninsula over that district’s bid to outsource food services and other non-instructional services, which would have freed up more than $30,000 for instructional purposes. The school board eventually tabled the plan.

Concern for his employees has Barnes, the Holly, Mich., superintendent, moving cautiously. In recent years, the Michigan state legislature has decreased allocations to school districts as the economy has wobbled, and many districts subsequently have been forced to cut their budgets. Barnes is looking for ways to save money. Completely outsourcing the district’s food service department likely would yield savings, but he isn’t certain how such a change would affect food service employees, many of whom have worked there more than 20 years and are vested in the retirement system.

“Could we do it? Yes,” Barnes says. “Should we do it? And how will it impact our employees? We don’t want any of our employees feeling displaced.”

Sprague, the food service director in Great Bend, Kan., rarely has seen a school district move to contract management without causing some employee upheaval during his 30 years in the field. Longtime employees at the top of the pay scale contribute to the high cost of a self-operated food service. Generally, when contract management companies run the show, labor costs must be contained, often by turning full-time positions into part-time ones and reducing benefits. Lowering salaries and benefits makes it more difficult to attract reliable employees because “they drive off the good, old-time help,” Sprague says.

Cost Issues

Districts with struggling food service programs have many places to turn to besides contract management companies, said Wittrock, the American School Food Service Association president. The ASFSA and state school food service associations can help evaluate programs, as can state departments of education and the Association of School Business Officials. Sometimes districts need stronger leadership in the food service department, and outside consultants may pick up on the weakness.

Still, Wittrock recommends that districts considering outsourcing thoroughly research their options before abandoning self-operated programs.

Requests for proposals from proprietary firms should be specific and detailed, and proffered contracts should be studied carefully, she says. District administrators should check with their state’s department of education to make sure special rules don’t govern such arrangements, too. Before making a decision, school boards should ask their district’s current food service department to offer a proposal, keeping in mind it likely won’t be as smooth as a for-profit company’s pitch.

And if districts decide contract management is the right move, a district administrator still must audit the food service program to ensure that USDA guidelines are followed and that food quality is maintained, Wittrock says.

The Janesville, Wis., School District struck up a partnership in 1995 with Marriott Food Services, now owned by Sodexho. At the time, the 10,400-student district offered hot meals at its middle and high schools, but the kitchenless elementary schools served only prepackaged meals. The school board wanted to offer a better lunch option and turned to outside management.

As part of the district’s agreement with Marriott, the company installed new equipment in the schools and offered employee training. The district agreed to pay back the company over time. The Janesville administration was satisfied overall with the services Marriott offered. “It could have been a long-term arrangement,” says Doug Bunton, the district’s finance director. “It just didn’t work that way financially.”

The arrangement cost the district more than it anticipated. Although Marriott paid service workers, union contracts stipulated employees be paid union wages, which drove up costs. The food service program operated in the red under Marriott’s management, and the school board underwrote it with monies from the general fund, Bunton said.

Because self-sufficiency had been a primary goal of the contractual arrangement, Bunton said the school board opted to revert to self-operation after four years. The district bought out its contract with Marriott, and the department has operated in the black for the last several years, even setting aside some money to replace older equipment.

Business Acumen

Certain costs related to running a food service program are fixed, and conscientious food service directors can exercise as much purchasing power as large companies by looking for the best deals, says Diane Smith, manager of food services in the Shawnee Mission School District in Overland Park, Kan. Her self-run department serves 24,500 meals daily, and she oversees 54 kitchens and 340 employees.

“It’s basically running a business,” she says. “It’s a huge business. To me, whether you’re making widgets or doing this, a lot of it is the same concept.”

Like any businessperson, Smith regularly monitors her department’s expenditures. She tracks how much food is prepared and how much is consumed. She checks portion sizes and looks for waste. When food service positions become vacant, she evaluates whether that position should be filled. And she constantly assesses her department’s marketing and customer service techniques, looking for areas of improvement.

“In my district, I just try to run the program,” Smith says. “I feel that we’re there to serve the children.”

Kate Beem is a free-lance education writer in Independence, Mo. E-mail: ksbeem@comcast.net