Manask

food & beverage services & facility rentals
Planning a Restaurant, Cafe and/or Foodservice Operation

How large do we have to be to support a restaurant operation or, how many annual museum visitors are required to operate a profitable restaurant?

There are many factors that make a museum restaurant profitable besides annual visitor count.

--- Is admission required to be paid to access the restaurant?
--- Where is the restaurant located in the museum (near the entrance where visitors will likely pass it twice, on the way in and the way out or some interior area where it is hard to find)?
--- Is there good/adequate directional signage within the museum?
--- Is the restaurant actively promoted in the museum's collateral material and on their website?
--- What is the likelihood your restaurant can and will develop a reputation to "be part of the visitor experience", that is, be "top of mind" when planning a visit ("let's go to the museum and have lunch while we are there")?
--- Does your restaurant have "direct access" from the street without having to go through the museum entrance?
--- Will the restaurant be providing any catering services? If yes, will catering services be exclusive to the restaurant (operator) or non-exclusive?

Depending on the type of cultural institution you are (art museum, children's museum, science or natural history museum, aquarium, botanic garden, or zoo) a very general rule-of-thumb would be that you need 300,000 to 500,000 annual visitors to operate a profitable restaurant/visitor foodservice (not counting catering sales). However, this number can go up or down dramatically depending on your answers to the questions we have asked above.

Some of my associates want a fine dining restaurant but I think our customers would like fast food. How do I determine which would be best for my institution?

--- Market research (surveys and focus groups) with your visitors and members will give you excellent insight into what kind of restaurant (visitor foodservice) would best serve the various needs of your institution (visitors, members and staff).
--- In general, a 'destination restaurant' is very difficult to establish and maintain.
--- A casual, café concept in a cultural institution is typically the best solution.

See the article in The Manask Report, Spring 2004 issue, for more information about destination restaurants.

Will food service (restaurant) operators provide capital investment to build a new restaurant or expand an existing one?

--- Most operators will provide capital investment depending upon the size, scope and profitability of your foodservice operations (restaurant and catering services). An operator's capital contribution should be looked upon as a "loan" that will have to be paid back through a lower return to your institution.
--- It is always recommended to consider it both ways, with operator capital contribution as well as providing the capital through your own resources, including borrowing the capital if necessary, to determine which method has the greatest financial benefit for you.

1. An RFP is a process where you first clearly identify your institution's goals and mission as it relates to foodservice (restaurant, café and/or catering and special events).

2. The next step is to identify a list of prospective operators that have the experience and resources (financial and operational) to accomplish these goals.

3. The prospective operators are then asked to prepare a proposal covering the scope of (food) services in a uniform and comparable way.

4. Very importantly, identify an evaluating team from your institution, usually made up of senior staff/department heads, CEO/director and selected board members, to be sure you can get input and consensus from all parties.

5. Proposals are received, reviewed, evaluated and compared.

6. Client/landlord reference, unannounced site visits by your evaluating committee, and financial background are checked and a short-list of operators that come closest to meeting your financial and operational goals is identified.

7. Presentation and negotiating meetings are held with these finalist operators.

8. A selection is made, letter of intent issued, and contract negotiated, finalized and executed.

How long does it take to complete a Request for Proposal process?

--- An RFP can be fast-tracked and completed in 8-10 weeks if you limit responses to a short-list of preselected, experienced and qualified operators.
--- The normal RFP process, depending on the size and complexity of your foodservice operations and services, is about 25 to 50 weeks.

Never, ever rush an RFP process. Foodservice (visitor and catering) is the only activity in your institution that touches 100% of your visitors, members, donors, sponsors, volunteers and staff, and it is most important to have a careful, thoughtful and considerate process, the result of which will more than likely mean a successful long-term relationship.

We don't want to operate our own food service. How can we find a qualified company to run our restaurant and catering services?

--- Engaging a consultant such as Manask & Associates that specializes in working with cultural institutions and knows the local, regional and national operators/caterers very well in most markets is the best way to find a food service operator that will fit into your culture and provide the services that best match your goals and mission.
--- Another resource is your board members, many of which have contacts and relationships with local and regional operator/caterers

Why not find the operator on your own?

Experience tells us that you will not have access to all qualified prospective operators, and, importantly, not know all the questions to ask or be able to prepare an Agreement/contract with the selected operator that is most favorable to your institution.

The primary issues are:

--- Does your institution want to be in the foodservice business including all the financial, human resources and operational responsibilities that go along with it?
--- Does your institution (and senior staff) have the necessary knowledge and experience to properly oversee all aspects of the foodservice operations? Does self-operation of foodservice fit with the mission of your institution, corporation or business entity?
--- Typically, the biggest 'con' of self-operation is the human resource issues, including, but not limited to, finding, training and keeping qualified help.
--- The 'pro' of self-operation is the seamless integration of the foodservice operations into the institution mission and operating goals.
--- The biggest 'con' of outsourcing is ensuring the operator a reasonable profit. This comes in the form of higher prices, lower commissions, or sometimes a subsidy.
--- The 'pro' of outsourcing is the experience, resources and systems the contracted operator brings.

Foodservice can work on either an outsourced or self-operation basis depending on your philosophy and goals. See Chapter 4 in our book, 'The Complete Guide to Foodservice in Cultural Institutions' for additional input in this regard.

If we outsource our food service operation what are our operator options?

Following is a listing of the likely food service operators depending on the size and scope of your food service (café, restaurant, cafeteria, catering, vending machine, etc.) needs:

--- Local Restaurant
--- Local Catering Company
--- Local Hotel
--- Local, Regional or National Foodservice Contractor

If you have a café/restaurant and catering services, keep in mind that restaurant operators are not always expert caterers and catering companies are not necessarily expert café/restaurant operators. And, if you are considering operators that have no experience working in a cultural institution, there will be a very big learning curve and education period for this type of operator. Assume an operator that has never worked in a cultural institution, depending on size and complexity of your foodservices, might need up to one year to fully understand:

--- how to work in a cultural institution;
--- get a sense of daily, weekly and seasonal visitor count fluctuations; and
--- understand the impact of special exhibitions.

Furthermore, all that they do must be subject to your prior review and approval.

We operate our own food service and it is mediocre at best. What can we do to improve it?

A comprehensive evaluation and assessment by an independent, third party consulting firm such as Manask & Associates would be the first step towards improving your operation and services. Oftentimes local restaurant operators and/or foodservice contractors will offer to provide such a review and assessment, sometimes at no cost to your institution or business. An evaluation by an independent consultant that has extensive experience with foodservice operations/services in many cultural institutions similar to yours is best. The consultant must have no conflict-of-interest or bias other than providing the best possible advice and objective recommendations. It is likely you will earn back whatever consulting fees are paid many times over in future years when consultant recommendations are implemented.

Jeffrey M. Hurwit, principal attorney in the law firm of Hurwit and Associates in Boston, wrote in an article on this subject in NEMA News (published by the New England Museum Association) "that restaurants, cafés, snack bars contribute to accomplishing tax-exemption because they:

--- allow visitors to devote more time to the museum's educational exhibits, and
--- enhance efficient museum operation by enabling staff to remain on-site throughout the day. Food sales like water coolers, restrooms and exhibit room benches facilitate and enhance the museum experience. Thus resulting revenues are not taxable. Revenue Ruling 74-399 (1974)."

Mr. Hurwit further explains: "At least that is the legal conclusion. For now. Usually. But, as an example of how small facts make big legal differences, if a dining facility is accessible not only through the museum but also through a door directly to the street, then it has been held by the IRS not to be primarily for visitor convenience but for general public use, and therefore taxable." Other factors that need to be considered are "whether your restaurant is advertised regularly in magazines and whether your restaurant can be accessed without paying admission to the museum."

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Catering & Special Events

Should we have a contract for our approved caterers and outside groups and organizations that have events at our institution?

Yes, all caterers that work at your location should be required to sign a contract that covers the institution's:

--- rules
--- regulations
--- policies and procedures
--- insurance requirements
--- other terms and conditions, and
--- term and termination

We recommend the contract state that catering customers and the institution rate (using a survey form) the caterer's performance after each and every event. The caterer's rating should be part of the basis that they can continue to work at your institution. Furthermore, caterers that do not follow the rules should be written-up, and after a formal warning and notice for repeated infractions, these caterers' contracts should be terminated. Customers should have their own facility rental contract to sign covering similar terms and conditions as the caterer.

We want to have non-exclusive catering, but the restaurant operator wants exclusive catering.

Most institutions want to have the ability to use a variety of caterers for special events. The advantage of having a non-exclusive catering arrangement is that it provides internal and external (outside groups and organizations) customers a variety of menu, pricing and services. In the case of an institution that wants to optimize facility rental income from outside groups, a non-exclusive caterer policy allows outside caterers to bring their customers that can increase overall institution- earned revenue.

Many cultural institution cafés/restaurants, however, cannot be profitable without also doing all of the catering services at your institution. The institution needs to carefully weigh its needs, goals and financial objectives when deciding on an exclusive or non-exclusive catering policy.

If we have a non-exclusive caterer policy, which is better: allowing most any caterer to work at our institution or only a limited, approved list of caterers?

It is highly recommended to establish an approved list of caterers. When we work with clients that have 8, 10, 15 or more caterers we always find the 80/20 rule to be true: 20% of the caterers on the list do 80% of the catering. That being said, with most cultural institutions we have found that a short-list of 3-5 caterers, depending on how many total rental and internal events you do each year, can meet their needs. Among the reasons for a short-list of caterers is:

--- less wear and tear on your building and property
--- it is much easier to work with a short-list of caterers that you know and that are familiar with your policies and procedures.
--- It is also possible, in many cases, to establish a commission policy with your approved caterers whereby they will pay you a percentage of their food (and alcoholic beverage) sales (usually about 8-15%, depending on annual volume).

If you consolidate to 3-5 caterers, then the value of your catering business increases because 100% of your catering sales (for rentals and internal needs) goes to a few, which means you will get much improved financial return and benefits than with a longer list.

Besides a catering commission from catering services for facility rental clients, you should expect financial benefit from:

--- Discount on internal catering
--- Annual marketing event to showcase your institution to facility rental prospective clients
--- Annual corporate membership
--- Annual minimum guaranteed commission

See the article in The Manask Report, Spring 2004 issue, for additional information in this regard.

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Foodservice for Small Museums

We are too small to install a restaurant. What are our options for foodservice?

We would recommend installing a "cart" program. This can be as simple as a coffee cart that will provide a variety of fresh brewed coffee, espresso, cappuccino, latte and related hot beverages. Most coffee cart programs can also include a selection of cold beverages (bottled waters, juices and soft drinks) and snacks such as cookies, scones, muffins, biscotti and chips. There are three main cart options:

1. Independent contractor coffee cart operators in many U.S. cities that will place a cart at your location, operate it, and possibly provide a small commission payment in the form of a percentage of their gross sales. If using an independent contractor, be sure to check references and confirm and verify that they and their equipment are licensed and approved by the local health department.

2. You can purchase your own cart(s) and contract with a local caterer or restaurant operator to operate the cart(s) for you.

3. Operate the cart(s) yourself. Be sure to pick a high-traffic and high-visibility location and install tables and chairs.

If your cart program is very successful, a small café or restaurant could be in your future (expansion). If a cart and/or self-operated foodservice is not a feasible alternative, vending machines would be another alternative that can provide hot and cold beverages, snacks, and even a selection of sandwiches and salads and other cold (frozen) food, if applicable, for the comfort and convenience of your visitors.

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Engaging A Consulting Service

We don't have a lot of money for consulting services. How can I justify this expense?

Manask & Associates, and other consulting firms, regularly help cultural institutions like yours of all sizes (under 100K annual visitors) improve their earned income by increasing sales and profits while reducing expenses. In most cases these efficiencies and recommendations pay for the services many times over. Is it really worth it? It is highly recommended to check the references of your prospective consultant, especially the consultant's clients where they have done engagements most similar to what they are proposing for you. Ask the reference about their opinion of "cost-benefit." Was the service worth the cost?

See the Testimonials section in our website for additional information in this regard.

Do food service consultants specialize?

Yes, you should always look to firms or individuals that are specialists in their respective fields. This is the same as you would do when engaging the services of an attorney or accountant.

First look at the consultant's clients to see in what markets they specialize. Some consultants have successful practices in more than one area. Be sure to determine their area of specialty and competency. Primary foodservice/hospitality client categories include:
--- Commercial restaurants and restaurant chains
--- Design and concept development
--- Schools and colleges (higher education)
--- Health care (hospitals and retirement homes)
--- Corporate dining
--- Museums, zoos and aquariums (cultural institutions)
--- Convention centers, stadiums and arenas
--- Theme parks

Following is a listing of consulting areas (within the above markets) offered by veteran foodservice industry consultants:
--- Operational evaluation and assessment
--- Financial review and audit
--- Purchasing review, inventory management, cost controls, audit, systems and procedures
--- Market and visitor research
--- Food safety and sanitation
--- Request for Proposal process
--- Contract preparation and negotiation
--- Food facility design
--- Sustainability
--- Programming and planning