The Cold- Chain Game. In the game of Life, opponents start by making a simple decision: COMMISSARY, ON-SITE, WHOLESALE: WHICH PATH IS RIGHT FOR YOU?

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1 FORK IN THE ROAD The question you should really ask is: Which path is right for your store, your staff and your customer? For many retailers with a small footprint or hurried grab-and-go customers, making food in-house isn t a practical or worthwhile investment. So using a wholesaler program or central commissary helps ensure products are consistent from store to store while keeping labor down and square footage reserved for selling goods. But commissary/wholesale has its downsides, too. The margins are slim and there is greater waste than in made-to-order formats. Aaron Noveshen, founder of The Culinary Edge, a foodservice-development firm based in San Francisco, recommends compensating for the high labor of on-site foodservice by creating a mini commissary in your store. The Cold- Chain Game COMMISSARY, ON-SITE, WHOLESALE: WHICH PATH IS RIGHT FOR YOU? By Abbie Westra In the game of Life, opponents start by making a simple decision: career or college? College puts you right into debt and on a longer road, but the investment will probably land you a high-paying, prestigious job. If you choose career, a shorter path is taken but with lower salary opportunities. Both are respectable paths, and neither guarantees you ll wind up on top at the end of the game. In the game of foodservice, operators choose between on-site food preparation, a commissary format, or wholesaler-provided packaged foods. On-site foodservice requires a greater investment in time, money and manpower but can deliver added value, distinction and quality perception. A wholesaler or commissary program has fewer barriers of entry but will have more difficulty climbing its way to the top of the foodservice ladder. So, which path is right for you? Make x-amount of sandwiches at a time to fill your shelves, and have flexible shelving so that if you have a big section of a couple hundred sandwiches in a high-density place, [it doesn t] look empty mid-day. Abundance is so important when people are looking at visual cues of food that they are taking. It can t look empty, he continues. A flexible merchandiser will help it look abundant without as much food waste at the end of the day. Meanwhile, the return on investment in an on-site program comes from the value it provides that no competitor can easily replicate. Your bottle of Coke is the same as the other guy s bottle of Coke, Noveshen says, but your signature Buffalo chicken sandwich with secret Cheddar-ranch sauce is not. For some operators, there is no one answer to the cold-chain question. Tedeschi Food Shops, Rockland, Mass., has both a commissary program as well as an on-site deli format. Twenty-one of the company s 189 stores feature a full-service operation, TD s Deli, 30

2 PURCHASING METHODS Competitive Quotes Used by smaller operations; the buyer completes a market quotation sheet with the items and specs. The form is given to two or more suppliers who provide a price quote. Often, this method will yield the lowest price but the specs must be established or products could fall short of the operator s needs as well as the price tag. which sells made-to-order sandwiches, burgers and other grill items, breakfast meals and even bulk deli meats. The other stores are supplied with fresh-made sandwiches, salads and yogurt cups from the commissary. This, says director of food service Brian Matlock, allows Tedeschi to still offer foodservice in small-footprint urban stores that aren t large enough for the full-service deli. But an important tenet of Tedeschi s parallel programs is making sure they are under the same umbrella of quality, consistency and branding. Matlock, who came to Tedeschi about a year ago, is working to standardize the commissary-delivered foods with the made-toorder deli products. The streamlined commissary line, called TD s Deli Express, has currently been rolled out to 37 locations. It complements the image, quality and consistency of our core fresh-made onsite brand, Matlock says. This strategic brand extension has helped justify putting more resources toward marketing the TD s Deli brand and ensures a consistent product from store to store. TD s Deli, inside a Tedeschi Food Shop MAKE VS. BUY An important exercise when expanding or reformulating your foodservice program is the make vs. buy decision: Do you buy prepared products to save labor and waste costs, or purchase less expensive raw products and prepare them on-site? To answer this, evaluate the prime cost that is, the many variable hidden expenses that operators incur when they process products on-site, says Clement Ojugo, regional financial controller for Delaware North Cos., Parks & Resorts, and author of Practical Food & Beverage Cost Control (see Ojugo s column on cost control, p. 16). Take purchasing bulk or diced celery as a simple example. The as-purchased price of the bulk celery could be $ Add in direct and indirect labor costs, utility costs, additional square footage required for prep, and other hidden costs, and suddenly that celery doesn t cost $13.50 anymore. But it still might cost less than the value-added product. And for some Standing Order Used for bakery, coffee and dairy products; the operator establishes a par stock for each item. Pros include even stock levels; cons are supplier abuse and increased food costs. One-stop Shop The operator purchases most if not all goods from one supplier. While this keeps delivery costs down, the method falls short when a supplier is out of an item, and it doesn t necessarily provide the most competitive prices. Cost-plus Used primarily by chains; the company purchases 100% of a particular product line, such as meat, from one purveyor who sells it at the invoice price plus an agreed-upon percentage for handling, delivery and profit. This method promises the lowest possible price, but does not allow for competition. Sealed Bids Used by large operations such as schools; the operator calculates the amount of a given product it will need over a long period of time (typically a year). The lowest bidder is selected as supplier of the product. Commissary All orders are consolidated and the commissary purchases the consolidated quantity from preferred suppliers. Often the commissary is owned by the parent company. From Controlling Foodservice Costs, National Restaurant Association T H E M A G A Z I N E F O R F O O D S E R V I C E A T R E T A I L W W W. F A R E M A G A Z I N E. C O M 31

3 operators, the scale will always tip toward house-made for the value it brings. THE TRUE BOTTOM LINE: TRUST Like most other things in foodservice, cold-chain decisionmaking comes down to the people whom you staff your stores with, and whom you do business with to make your store run. Ensure you can trust your distributor to deliver perishables in a safe matter. Guarantee they have the proper protocol and documentation to keep the food, your customers and your business safe. Know what is happening at your commissary. Make certain that there is a strict standard operating procedure Tedeschi s packaged foods come from a central commissary. for safety and sanitation, standardized recipes and quality assurance practices. Have only the best working on your store floor. When a delivery arrives, a designated employee should know how to check it for accuracy and get it to its proper storage area quickly and safely. He or she should be fully trained and retrained on not only the givens of safety and sanitation, but also the importance of foodservice merchandising. We can communicate all day long to retailers at a certain level, but at the end of the day, you have to have someone at the store level who is actually responsible for making it happen, says Noveshen. For those retailers who are committed to a foodservice program, it s very evident when you walk in the store, and it s evident when you re dealing with them on day-to-day issues because there is a sense of ownership and even price in making sure their program is successful. 32

4 Once all the logistics of labor, make vs. buy and store models are addressed, ask yourself one last, crucial question. What do you want to do? What are you prepared to commit yourself, your staff and your colleagues to? Because unlike the game of Life, you can t coast through foodservice on cruise control, hoping luck will land you on the right squares. OPERATING EXPENSES As percentage of sales; limited service, fast-food restaurants SALARIES AND WAGES: % EMPLOYEE BENEFITS: % COST OF FOOD SOLD: % Source: National Restaurant Association COLD-CHAIN EVOLUTION New technological advances in the cold chain allow retailers to receive fresh-food products faster and safer than ever. Distributor McLane Co., Temple, Texas, powers its Fresh on the Go line of sandwiches, salads and fresh-cut produce through a complex ordering system. Grant Demers, product director for perishables and foodservice, calls it the Strict Order System. A retailer places an order with all purchases, both fresh and non-fresh. The system will then identify and glean those fresh products from their regular order, pool those items by manufacturer and send them to that manufacturer for just-in-time processing, he says. Most suppliers, and McLane works about five key companies, can get the order to McLane within a week, so they can ensure the retailer that the order will arrive no more than a week out. In the best-case scenario, such as with cut-fruit suppliers, the order can be processed within a couple of days or even hours. The system looks at the customer s delivery schedule and the manufacturer s lead time. We can structure this ordering system in a very defined and definite way, says Demers. One of the highlights of the system is it removes the fallibility of forecasting. Prior to Strict Order, we had a purchasing specialist who is very seasoned and good at what they do, but was only as good as historical demand or someone having informed them that there was a change in demand. Circle 109 on page 53 for product information T H E M A G A Z I N E F O R F O O D S E R V I C E A T R E T A I L W W W. F A R E M A G A Z I N E. C O M 33

5 HITCHHIKING LOCALCROP TAKES THE FARMER S MARKET ONTO THE SYSCO TRUCK food should not be an elitist thing, says Steve Local Schimoler, creator of Localcrop.com, a site that distributes locally grown and produced foods through existing Sysco delivery chains. We were able to prove last summer that we [can] sell vegetables for equal to or less than the price of the products that were coming from the West coast or Southeast, because we are using less fuel, and because it costs less to do it. Localcrop leverages the infrastructure of Sysco to support a local distribution model. The program currently serves Sysco customers in the Cleveland area, with plans to expand to the Columbus area by the end of the year. Foodservice operators visit the Web site, which features fruits and vegetables, meat, dairy and dry goods from approximately 100 local producers, and place an order using their Sysco accounts. The goods then get to Sysco and onto a truck with the rest of the operator s order. This isn t the first time Schimoler has thrown some random stuff onto the back of a Sysco truck. He also created ChefEx, a program that used the power of the Internet to connect artisanal food producers with chefs around the country with partners AmEx and FedEx. Schimoler eventually sold ChefEx to Sysco, followed by time with the distribution giant as general manager of culinary business development. Schimoler has also spent time as director of innovation and development for Nestlé North America as well as vice president of product development for Cabot Creamery. He is currently the chef/owner of Crop Bistro & Bar in Cleveland that is, when he s not trying to keep up with Localcrop s brisk expansion across the state. Steve Schimoler From its inception late last summer, Localcrop has grown from 30 producers to upwards of 130. It takes a couple early adapters for it to get the critical mass and for people to trust it, and then everyone wants on, says Schimoler. It ll be a good problem to manage that expansion. To make this work takes what Schimoler calls equitable sustainability : that IT S NOT JUST EXPENSIVE, FINE- DINING RESTAURANTS USING LOCALCROP. BIG CONTRACT FEEDERS ARE ALSO USING THE SERVICE IN HEALTH-CARE AND HIGHER-EDUCATION LOCATIONS. all parties involved are making enough money to make it worthwhile. Sustainability or sustainable agriculture doesn t mean anything unless there is sustainable business, he says. With the Localcrop model, farmers sell their goods at a price they set, the distributor is in a position to make money and pass along a more efficient model, the operator is able to buy products efficiently and at the right price, and consumers are able to afford local food without the high price tag. In fact, it s not just expensive, finedining restaurants using Localcrop. Big contract feeders such as AVI Foodsystems are also using the service in health-care and higher-education locations. In the long term, Schimoler foresees Localcrop taking off its Sysco training wheels, helping smaller markets to cultivate that infrastructure on their own, and becoming a nonprofit entity. It s not about the money, it s about making it happen for the businesses who are trying to make money, he explains. That s why we re looking at maybe a different legal platform where it s nonprofit supporting for-profit businesses, where we have a specific mission involved. Schimoler sees Localcrop operated as a break-even proposition, with the nonprofit classification used to obtain grant money for farm subsidies, school feeding programs, and other systems that could use the Localcrop model toward their own missions. Working with the presidents of the Sysco houses, they re the first to say, We re not going to get rich on Localcrop, says Schimoler. Localcrop is not about the money, it s about doing the right thing. 34