Hot potato in the school cafeteria: more districts outsource their food services, but some raise questions about personnel relations and savings.

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 Chartweils 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 midsize 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."

RELATED ARTICLE: Competencies for food service chiefs.

"Outsourcing" is such a buzzword these days that when a school district's food service department hits troubled waters, there's often talk of hiring an outside company to take over.

But food service experts, such as Deborah Carr of the National Food Service Management Institute at the University of Mississippi, say districts should take a look at the leadership of their food operation before discontinuing a self-operated program.

Congress authorized the institute in 1989 to provide information and services to help improve school nutrition programs. To that end, research scientists at the institute are studying what works and what doesn't. Over the last decade, the institute has gathered a list of competencies essential for school nutrition directors and managers. The competencies and skills are outlined in two research reports available on the institute's website.

Hiring a food service director with experience and skills can save money over time and ease the angst of worrying about whether to hire a proprietary management firm. "In today's world, with discussions of obesity and accountability, why would you not want the most competent individual you could get?" Carr says.

The institute's reports include 12 areas in which school administrators should be well-versed, ranging from customer service to food production and procurement to personnel management and marketing. Each area is broken down into competencies, and each competency includes detailed knowledge and skills that food service managers need under their belts.

For example, the report recommends that competent food service directors should understand customer service, including how to improve presentation of meal options.

On the issue of program accountability, competency means complying with state and federal regulations and providing technical assistance to food service staff and other support staff. Under financial management, the institute recommends directors be able to establish measurable financial goals for the food service program and be able to use efficient management techniques to ensure good record-keeping.

Without national standards for food service directors, it can be difficult for cop district executives to know what they should expect when they hire someone to run the food service program. Cart says.

"School officials should recognize the competencies as a foundation of knowledge to review, assess and interview the most competent job candidates." she adds.

The reports are available on the institute's website: www.nfsmi.org/ Information/Research.html.--Kate Beem

RELATED ARTICLE: Directory of food service firms.

In the world of school food service outsourcing, the field isn't crowded. More than 1,200 school districts across the country contract all or part of their food service programs to one of the top three food service management companies: Chartwells School Dining Services, Aramark and Sodexho School Services. But smaller companies enjoy a share of the pie, too.

This list includes 10 food service management companies that do business with school districts in more than one state. Following the big three, which are listed in order of the number of school district contracts they hold, the remaining firms appear alphabetically.

Most of the information was provided by company officials.

Chartwells School Dining Services

3 International Drive Rye Brook, NY 10573

Contact: David DeScenza

877-586-9631

www.chartwells-usa.com

Chartwells, a division of Compass Group North America, holds food service contracts with 519 school districts, running food service programs at 3,500 school sites in 34 states, with the highest concentration in Massachusetts, Michigan, New Jersey and Washington. Food Management estimated the company s annual sales at $5.8 billion in 2003.

Aramark School Support Services

1101 Market St. Philadelphia, PA 19107

Contact: Jeff Wheatley

215-238-3000

www.aramark.com

Aramark runs school food operations in 420 school districts in 20 states. Districts range in size from 2,000 to 40,000 students. In 2002, the company bought Fine Host, a competitor in the school food service field. An April 2004 report by Food Management magazine estimated the company s annual sales for all services, including school food operations, at $6.5 billion.

Sodexho School Services

7 Village Circle, Suite 120 Westlake, TX 76262

Contact: Rod Bond

817-541-3200

www.sodexhoUSA.com

Sodexho School Services provides lunch and breakfast programs to almost 330 public school districts in 38 states. The company says it was the first contractor to meet the new dietary guidelines for the USDA's National School Lunch Program during 1996-97. Annual sales for all services, including school food operations, was $5.8 billion in 2003, according to Food Management.

All Seasons Services

1265 Belmont St. Brockton, MA 02301

Contact: William Batchelor

508-559-9000

www.4allseason.com

With contracts in six school districts in Massachusetts. New York and Pennsylvania, All Sea sons Services is one of the smaller public school food service providers, serving 14,850 students. Gross sales in the dining division are $25 million with $3.2 million from K-12 public school food programs. They also provide services for business and industry, colleges and universities and private schools.

Ceres Food Group

5150 N. Northwest Highway Chicago, IL 60630

Contact: John Koubek

773-385-5109

www.ceresfood.com

Ceres Food Group, a for-profit arm of the Chicago Catholic Archdiocese, provides food service to 27 school districts in Indiana, Illinois and Wisconsin. The division's gross annual review is $12 million with $6 million generated from public school contracts. Ceres markets to school districts that lack facilities for on-site food preparation.

Fitz, Vogt & Associates

P.O. Box 819 Walpole, NH 03608

Contact: Bob Long

603-756-4578

www.fitzvogt.com

Operating revenue from four school districts enrolling 3,700 students in New Hampshire and Vermont and consultation in a fifth district accounts for 3 percent of Fitz, Vogt & Associates' total revenue of $38.2 million. The company also contracts with independent schools, colleges, camps, health care facilities and assisted living facilities.

Metz & Associates

Two Woodland Drive Dallas, PA 18612

Contact: Toby Homer

570-675-8100

www.metzltd.com

Metz & Associates serves approximately 115,000 students in 38 school districts in New Jersey, Ohio and Pennsylvania. Of the $60 million generated in corporate revenue, approximately 50 percent is from school food service business. The company also contracts with higher education, health care, business and industry and senior citizen programs.

Nutrition

202 South Third St. West Newton, PA 15089

Contact: Jerry Moore 

800-442-2138

www.nutritionent.com

Nutrition contracts with 81 public school districts in Ohio and Pennsylvania and serves 215,000 meals per day. The company has gross revenues of $60 million annually, 80 percent of which comes from school food services.

Taher

5570 Smetana Drive Minnetonka, MN 55343

Contact: Bruce Taher

952-945-0505

www.taher.com

Operating in eight Midwestern states, Taher serves 150 school districts and 275,000 students. The largest district is 8,000 students; the smallest is 1,000 students. School food service represents about 50 percent of Taher's business.

Whitsons

379 Oakwood Road Huntington Station, NY 11746

Contact: Paul Whitcomb

800-813-5833

www.whitsons.com

Whitsons provides food service to 20 school districts enrolling more than 100,000 students in Connecticut and New York Total annual revenue is $58 million, of which 51 percent is from school food service.

RELATED ARTICLE: A menu for success in the school cafeteria.

BY RAYMOND YEAGLEY

The decision to outsource management positions of our district's food service program wasn't a hard one for our school board. The program was maintaining a positive financial balance by reducing the quality of meals. Employee morale was at an all-time low, and student participation was in steady decline.

Even so, some opposed our move to privatize the food operation. I smiled as a couple of board members reminded us of a "failed" custodial outsourcing venture a few years earlier that in my view had been a rousing success. Admittedly, the contractor is no longer in the district, primarily because of its occasional "not quite in time" delivery system for cleaning supplies, which became the catalyst for a successful union campaign to return to local management.

As a direct result of that venture into outsourcing and the subsequent hiring of an outstanding manager who understood what not to jettison from the contractor's operation, we now have better procedures, better equipment, better spending priorities and, most importantly, cleaner buildings than ever.

Multiple Success

Our board will be much less likely to abandon its contract for food service management. Meal quality and nutritional value have improved, particularly in the a la carte line where students no longer can purchase a bag of french fries and call it a meal.

While some might suggest that food quality is subjective, there also is the undeniable fact that student participation rose in the first year by 40 percent, from 350,999 to 491,748 meals served. Participation continued to grow in year two, even after the novelty had worn off.

Finally, there is the financial picture. Meal prices haven't gone down, but they are no higher than they would have been without the private contractor, and our program is on better financial footing than at any time since 1989.

The new program is not without challenges. Offering five meal choices every day and feeding so many children have combined to create more work. Food service employees are concerned that the increased workload has left them with less time to clean and has created stress in the workplace. A campaign in some buildings to return to a single-option menu has spawned cries from a few teachers that having so many choices is stressing 1st graders, although we have noted that most young children handle the broader array of choices on most restaurant menus with confidence and alacrity.

A New Challenge

Our next question was much tougher: Would benefits to children and the school district be sufficient to warrant moving the production side of our operation, primarily cooks and cashiers, to the contractor? Language that would give the board the right to expand the outsourcing initiative was the sole source of a standoff at the bargaining table for more than a year. The dispute brought faculty, staff and parents to school board meetings to plead with the board not to take any food service employees off the school district payroll.

Our district relies heavily on data to inform decisions. Board members wanted hard facts for this one before making a commitment.

Initially, our search of literature found little information on the topic of outsourcing beyond the propaganda of organizations on two extremes of the issue--those claiming outsourcing is one of the greatest evils in our society and those believing privatization to be the solution to all government inefficiencies.

To address the lack of objective information, we created a survey to look at outsourcing issues, from food quality and price to employee morale and comparative wage/benefit packages for outsourced and district-operated programs. Although the online survey was quick and easy, any survey is an inconvenience. Ultimately, we received too few responses to make the survey results useful.

Fortunately, we later found some objective literature that identified pros and cons of outsourcing. I prepared a report for our school board, relating what we had learned to the board's program and negotiation objectives. Ultimately, the board determined that, while outsourcing the full operation could be beneficial to the district, we could achieve the major objectives in further outsourcing by negotiating some new flexibility into the contract. The bargaining unit found the concessions to be much more palatable than the prospect of outsourcing, and we reached a tentative agreement in June.

Not surprisingly, this process reaffirmed that most people's reality in such a volatile issue, and whether a decision will ultimately be supported, often may be influenced more by emotional perceptions than by objective information. We are pleased that, in this case, objectivity and reason prevailed on both sides of the issue.

Raymond Yeagley is the superintendent of the Rochester School Deportment, 150 Wakefield St., Suite 8, Rochester, NH 03867. E-mail: [e-mail]

Kate Beem is a free-lance education writer in Independence, Mo. E-mail: [e-mail]