EP Insights & Action

INSIGHTS CATERING CONSULTANCY BUREAU
Clients are normally tasked each year to
make a financial saving on areas under their
control, and this could include catering.
Using an example, a client may have
two catering organisations in a tender – a
larger major player and a small company,
competing. They offer similar proposals,
presented designs and ideas for the catering
operation and have made offers of investment.
The tender has been structured and
controlled throughout the process, so it’s
unusual for there to be a great difference on
the financial side. The level playing field and
clarification questions all assist in this matter.
The smaller of the two companies offers a
loan to the client which is interest free over
the period of the contract, normally three
years, with it payable through the trading
account. This pleases the client, but may not
be as great as they think.
The larger company, whose finances are
very similar, propose a similar refurbishment
programme and investment. They offer a
greater amount of investment to cover all
aspects of the refurbishment, provide it
interest free over the life of the contract,
and also provide it as a gift with no payback
required.
This leaves the client in a dilemma.
Often, smaller companies have the
approach – “I own the company and it
is me that you deal with”, together with,
“we can address any problems that you
have immediately as we don’t have the big
company red tape to deal with.” Larger
companies however have a slightly different
approach and bring their operations director
into the tender process. At the conclusion
of this process they announce, “this is your
operations director who you know”.
At this stage I suspect that clients
need a pretty good reason to go up their
management chain to say, “both caterers
are broadly offering the same but I am going
to appoint the smaller company to whom
we have to pay back the loan, as opposed to
the larger company who are giving us the
investment as a gift”. This can often run into
hundreds of thousands of pounds.
The result is often that the smaller
company finds it difficult to compete and so
the award goes to the larger company. During
these processes consultants are asked for
their advice. They provided a response based
on the tender submissions, infrastructure,
most appropriate fit and make no reference
to investment. However, despite this input,
the smaller company is normally still
disappointed and may have spent around
£10,000 on the project. Going back to square
one can be very difficult.
In a recent conversation with a smaller
organisation they raise the question that
this process could be one of the reasons why
there has been a downturn in new companies
entering the market? It is an interesting point
and for those who do enter, they often struggle
for a while and then present themselves as a
potential “buy” for a large player.
Several caterers have mentioned that
they normally decline a tender which
requires investment. It’s a shame and at
the same time, smaller caterers are now
actively looking for other markets outside of
Business and Industry. Thankfully the initial
requirement for a caterer to invest heavily in
a facility is declining and is often something
that is offered in an effort to secure a contract
without any prompting.
The catering tender still offers opportunity
but it can be a difficult process. I’m not sure if
it still work as effectively and it is something
more are beginning to raise. This is very
much the case of ‘watch this space’.
©RADIANTSKIES | WWW.123RF.COM
...clients need a pretty
good reason to go up
their management chain
to say, “both caterers
are broadly offering the
same but I am going
to appoint the smaller
company to whom we
have to pay back the loan.
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