Machines for hire

In a big facility with many points of sale, outsourcing may be the best approach to delivering quality vending services.

Sometimes, self-operating vending just isn’t viable. For smaller locations, experts say, controlling vending isn’t a big operational issue. But for some foodservice directors who find their facilities and needs expanding, outsourcing can be the way to go.

Switching to a contractor can help vending operators in a number of areas: adding machines without laying out large sums of cash; labor savings; reducing stress both in the kitchen and accounting; and freeing up precious storage space.

Consider the case of North Kansas City (MO) Hospital, a 451-bed, acute-care facility that outsourced vending for many of these reasons last September. The hospital has grown tremendously in the last 16 years, going from 300 beds to its current 451. In addition, the facility added floors and an outpatient building, which after two years also added more floors. More vending stations were added throughout all the new areas.

“Originally, we had half a full-time worker to take care of the vending machines, but eventually we got up to one-and-a-half employees,” says Steven Grant, foodservice supervisor. “Keeping all the machines filled started to be a problem, because the vending person had cafeteria duties, too. When the cafeteria was short, we’d pull in the vending person to help downstairs. Usually I’d end up doing some of the vending.”

Constant repairs: Old equipment didn’t help the situation, either. Most of the hospital’s machines were 12 to 15 years old. Because of their age, machines were constantly breaking down and the hospital was spending a lot of money on repairs.

“The hospital was not ready to spend $50,000-$60,000 on new machines, which we definitely needed to do,” Grant explains. “Also, storage space for vending products was becoming a problem because vending was becoming so busy. So, switching to a contractor [in this case, Canteen Vending Services] freed up space, freed up a person and freed up money. It’s just a lot easier now. They take care of everything, even the refunds.”

Canteen now handles all machine maintenance. The contractor also brought in state-of-the-art, visually attractive machines.

“The machines have pretty fronts to them,” Grant says. “They all blend in together nicely with three or four machines in a row. The selections are great, too—they have good regular food as well as Balanced Choice meals and other healthy products.” [Balanced Choices is Canteen’s proprietary healthy vending program.]

Another benefit Grant cites: no more money collection. “It helps a lot because we had to take care of the money twice a week and send it up to accounting,” he says. “Now they do it all. They collect money from the machines; we get a monthly sheet on what was sold. They also keep track of what products are popular and make sure to put those items in.”

Pricing redux: So far, the only negative feedback he has heard is about pricing; selections did increase a little bit when Canteen took over. “But we hadn’t raised prices in a long time,” Grant says. “The prices weren’t what they should have been, anyway. Now customers are used to it, so it’s not a problem.”

The hospital gets monthly commissions from Canteen. He predicts sales are going to be a lot higher because of the newer, more attractive vending units. Grant is also planning to add even more machines throughout the facility. “It’s a little early to see how much change we’re experiencing right now in sales,” he states. “We’ll have to wait and look at it as gradually we add more and more machines. Then I think we’ll see a significant change in monthly commissions,” he states.

When it was time to review the vending program at the University of Kentucky, Lexington, it became clear to dining services executive director Jeff DeMoss that using six to seven full-time employees to service snack and sandwich vending machines was a big stretch to his labor budget.

Losing proposition: “I saw how much labor we were putting out versus return on investment and it looked like to me from the figures that we were losing money, although our service record was very good,” DeMoss says. “So we put out an RFP and we received bids.” Canteen won the business in May 2005.

DeMoss says that his vending employees were excellent cooks, so he was able to absorb them into campus foodservice operations, either in the centralized bakery operation or as cooks for dining services, so no one lost their jobs. Dining services remains an independent operation, which it has been since 1867.

Beverage vending for the 26,000-student campus had already been contracted out to Pepsi, which had won that bid before DeMoss came to the university. The snack program had around 180 snack machines; the campus now has about 280.

In addition to labor savings, outsourcing has proven to be beneficial in other ways: Canteen purchased the university’s vending machines, replaced older or unsightly equipment, and also purchased all replacement parts inventory.

More revenue: “They purchased our parts as well as food and snacks,” DeMoss notes. “It was very lucrative for us, and a very positive move. I also see where this Canteen program will generate more gross sales, which will give us more revenue, another benefit. Net revenues today are much more positive than they were.”

DeMoss warns, however, that as in any new undertaking, there’s always a necessary adjustment time. “The downside is that you have to be here a long time to realize how large an operation the university is,” he comments, “so there was some learning curve for Canteen.”

“Now vending is at the quality that we had when we left it. There is nothing negative about the program today. It’s all fallen into place. Now we’re looking at programming with healthy choices, so we’re taking it to the next level.”

Keywords: 
business, revenue