In the last few months, we’ve had ongoing conversations with our clients and friends from community colleges to the Ivy Leagues for the sole purpose of sharing ideas and resources as we all tackle the challenges COVID-19 has set before us. Continuing with our sharing of themes from these roundtables, we’ve compiled thoughts shared by dining contract administrators as to how they are approaching new contracts or renegotiating current agreements in a COVID world.
Famously, with contracts, the devil is in the details. But there are considerations and perspectives that are important to understand before arriving at a final decision.
The Current, Complicated Situation
Spring semester was a mad scramble, leaving everyone exhausted. Most of us are bracing for a very lean summer. The fall is an oddsmaker’s nightmare.
Suppliers have sustained ongoing fixed costs and commitments to staff salaries with little or no revenues to offset them. As a result, they are seeking some form of cost recovery at a time when schools have been hit hard as well.
Institutions have issued refunds for unused meal plans and in many cases have covered staff pay and benefits beyond the end of the semester.
Campus administrators are overwhelmed as they map out scenarios based on assumptions and guidelines that keep changing while facing tough decisions about further staff reductions and budget cuts.
Understandably, contract administrators are pushing back on supplier requests for relief, but everyone is under pressure to agree on a way forward.
Unfortunately, most agreements didn’t anticipate, much less adequately address, the effects of a pandemic on this scale.
So what needs to happen? Institutions need creative solutions for operating safely during COVID-19. They need assistance in addressing ongoing scenarios.
Suppliers need to know that they have a seat at the planning table, and that they will not be asked to take on all the risk when the situation is out of their hands.
Proposed Solutions from Suppliers
While there is no single solution that can be applied to every scenario, administrators reported a number of strategies proposed by their suppliers, including:
Shifting to a cost-plus or management fee pricing model – while not the same as cost recovery - may mitigate another disrupted semester
Reducing the number of serving locations
Reducing hours of service
Covering costs for special provisions, such as PPE
Granting the financial support to carry some staff – they want to be ready if and when in-person presence returns
Temporarily suspending donations and contributions
Postponing capital investments, or shifting to campus-funding model
Temporarily suspending guaranteed commissions or waiving commissions entirely
Taking on or sharing some of the supplier’s fixed costs
Restructuring meal plans
Allowing meal plan rate increases
Extending the term of the contract (especially when the contract horizon is near)
Suspending campus allocations (such as for utilities, technology, or other support functions)
Guidelines for Negotiation
Here are a few things for both parties to keep in mind when entering into negotiations.
First, it’s important to identify and align goals with institutional principles and priorities (e.g., top priority is safety, second priority is revenue). Both parties need to put all of their cards on the table (as far as actual costs), as negotiations are rarely productive without full transparency.
Acknowledge that both sides are going to take a hit during this; a true partner relationship can only work from a place of shared responsibility for the financial support of a dining program.
Separate out the responsibility for those things that the supplier can control (e.g., the cost of food and supplies or staffing levels and pay) from those that the institution is likely to have more influence over (such as the degree of on-campus presence or the quantity of locations and service hours).
Maximally leverage corporate resources, such as COVID-19 planning, specialized staff training, supply sourcing and technology platforms.
Be cautious about committing to anything beyond this fiscal year… for now. Wait to see how things play out in the near term before inking long-term agreements. Agree on what conditions must be present to trigger a return to the standard terms of your agreement; as a temporary provision, there should be a clearly established endpoint or end date.
Fall and Beyond
With careful consideration and transparent communication, institutions and suppliers alike can benefit from one another’s support through these turbulent times.