“Should we be managing our catering in house or contract out to a third party?”, is a question we are regularly asked to provide guidance on across a number of sectors including catering operations within the workplace, universities, visitor attractions and museums.
Within each of these environments there are a number of different types of outsourcing options, from short term management contracts through to longer term fully commercial leases. Executive Leases, whereby a management professional with a specific expertise is seconded to the organisation for a period of time, provides a further alternative which could be seen to sit between an in-house and outsourced operation.
Each sector and organisation typically has different requirements and there really is no standard right or wrong approach for the many organisations that reach this juncture. What is important is to be aware of the risks and benefits of each option, which will need considering in the context of organisational competencies, the external landscape and wider business objectives.
As a starting point to the decision process, we have set out below some of the broader benefits and limitations of managing the catering in-house or contracting out to a third party catering operator.
Benefits to Operating Catering In-House:
- Greater integration within the organisation
- Role sharing/flexibility; although this rarely happens in reality
- Ability for faster response to organisational change
- Retained profit
Limitations to Operating Catering In-House:
- Potential for greater risk if costs not managed effectively
- Non core business/lack of expertise
- Increased senior management time required from organisation
- Potential for greater liabilities in terms of employee costs, pensions etc
- Lack of central support resources – potentially impacting upon profitability, innovation and purchasing economies
- Higher salary costs likely for management within smaller operations due to lack of specialist central support
Benefits to Outsourcing Catering:
- Potentially greater opportunity to optimise revenue and control costs, resulting in higher profit/lower subsidy potential, however this is not always the case
- Financial guarantee/ known or capped cost potential
- Specialist central support expertise across a number of disciplines
- A number of legal responsibilities can pass to the third-party
- ‘Equity’ from third-party’s name or brand, even if a subtle association
Limitations to Outsourcing Catering:
- Lack of cultural fit with operator or divergence of objectives
- Potentially reduced controls, although this can be managed to some extent, with service level agreements
- Increased senior management time monitoring contract performance
- Not all cost savings and economies passed on to client organisation
- Profit shared/management fee paid to third party
There are of course exceptions to the above and they should be considered in the wider context.
If you would like further specific advice to determine whether your catering should be outsourced or run in-house and subsequent implementation support, please contact us.
Montfort Consultants – Catering Consultants
Posted on December 1st, 2011