For vending and onsite foodservice operators: Some good news and some bad news.

You are in a self-service business. There are three big questions for you to consider:

1. What exactly do my customers expect when they shop at my vending machines or foodservice operations?

2. How well is my company doing in delivering a great shopping experience?

3. What else do my customers expect and how can we deliver on those expectations?

It’s been a tough business climate for vending and onsite foodservice operators in 2008. Along with the bad news, there is good news. Let’s look at what’s going on – good and bad.

First the bad news: The U.S. economy is not doing well. All of your costs are up. Gas prices, while down recently, are well above what you budgeted for as you planned for 2008. The products you’re buying are increasing in price. Let’s not forget that your suppliers are also facing increases in their costs.

Sales are flat or even down for the past few years according to industry reports. The people shopping at the sites you serve are also feeling the economic pain. They’re cutting back on what they spend. The decision-makers at the locations you serve have become even more resistant to price increases.

What this means in your business: Sales growth is tougher than ever. Costs are up. This is the toughest economy for the food industry in many years – especially so for vending and onsite foodservice operators. It’s going to take new solutions to get out of this situation.

For vending and onsite foodservice operators: Some good news and some bad news.

Despite the bad news – there is some good news hidden within the bad news: There are opportunities you can capitalize on – if you recognize what’s happening and understand how to capture more transaction. Economic reports indicate that people are driving less. They’re making fewer trips and driving fewer miles each week. That means that there will be more people staying at work for lunch and breaks. College students going back to school in the fall will have less discretionary cash to spend. Their parents won’t be able to give them as much extra money as in the past. That might mean a cutback in late night pizza delivery orders. What new and different things are you doing to offer more late night snacking choices?

Technology is changing the way we all shop – presenting an opportunity for you to enhance your service to your customers. In many other convenience food shopping situations, we’re seeing technology applied to deliver new customer service applications and improved service. Kiosks in convenience stores allow shoppers to customize a sandwich or salad order. It saves time for the service staff – no need to take orders from each individual shopper. It simplifies the ordering process and absolutely eliminates errors – the customer sees a screen summarizing what was ordered and can change it if necessary before finalizing and approving the order. Supermarkets are doing the same at deli service counters – to eliminate the long delays and frustrating waiting periods until your number is called.

What this means in your business: Technology is perhaps the biggest opportunity for vending and onsite foodservice operators. This is more than route management and demand management software applications. Those cost savings benefits are real and can deliver a meaningful productivity gain on your bottom line. If you think about in terms of a restaurant – those are “back of the house” systems. Those applications are very important and are tools every vending and onsite foodservice operator must address immediately.

But the unrealized opportunity is in the “front of the house.” How do we make the vending machines and service counters better shopping environments?

We saw a new perspective on how technology is being applied in consumer marketing – for retail locations. At the Self Service & Kiosk Expo we saw the latest and greatest in new kiosk technology. More about what this means for vending and onsite foodservice operators in my next posting.

September 23, 2008, 10:30 am

When I joined The New York Times, a couple of things surprised me. One was the collegiality of the newsroom (let’s face it, everyone expects this
place to be a snake pit). Another was that a vending machine candy bar costs $1.25. Yes, $1.25. At other places I’ve worked, the same item typically would have been 75 cents. That’s an increase of 67 percent! I’ve been wondering if the mark-up is simply because of higher New York prices; before coming to The Times, I had worked mostly in Washington. (By the way, I’m temporarily working from the newspaper’s Washington bureau, where a candy bar costs 75 cents.)

My leading theory, though, is that unlike most vending machines, those in The Times’s New York office take prepaid debit cards. Pretty much any food item on sale in the New York building — through the cafeteria or the vending machines — can be purchased through FreedomPay, a cashless card system in which employees and guests pay with the swipe of a prepaid card. I wonder if the resulting absence of cash from the transaction makes buyers less sensitive to pricing.

We’ve already put the money on our cards, so it feels like a sunk cost; and besides, we aren’t physically fumbling around for nickels and dollar bills, so we’re missing the tactile cues that make us conscious of how much we’re spending. Credit and debit cards have been known to make people more footloose and fancy-free. And studies have shown that the installation of E-ZPass, an electronic, cashless toll system, has led to higher tolls.

Then again, maybe the vending machines I’d previously battled had unusually low prices. So I’m hoping you all can help me unlock the mysteries of candy-bar economics. Some question for our readers:

(1) In the vending machine nearest to your workstation (if there is indeed such a machine), how much does a standard-size Snickers bar cost? How about a bag of chips? (Leave convenience stores, pharmacies and cafe aside; their prices should be higher because these establishments have higher overhead costs.)

(2) What city do you work in?

(3) Does your vending machine take credit or debit cards of any kind,
or is it cash-only?

COMMENTS by Tom Britten (the vendor defender)

I was bothered by your vending machine cost comparison direction to “leave convenience stores, pharmacies and cafe aside; their prices should be higher because these establishments have higher overhead costs”

With all due respect to your well established expertise in economics Catherine, maybe, you could use a little lesson in the seldom understood field “candy bar” economics.

The vending business is a “buy it by the mile sell it by the inch” business that involves huge numbers of small transactions over wide distribution areas. This involves precise logistical planning and management of how candy bars are moved, especially in metro areas such as New York and Washington. This required micro distribution of products is in itself a major overhead cost unique to this industry.

Vending companies don’t manufacture the products they sell, they merely purchase and resell, and accordingly they are allowed only a small mark-up over prices changed by Hersey, Frito, Pepsi and the like.

In reality, the manufacturers set the price of the candy bars, the vending company does not.

The skilled service people who replenish the machines when candy bars are sold are well paid career employees with medical insurance and full benefits. Compare that to convenience stores, pharmacies overhead costs.

You ask why prices for the same candy might be different from Washington to New York. Accommodating credit card purchases of candy bars does in some cases increase sales; however, the cost of telemetry and credit card company’s transaction fees negates any bottom line effect. Your theory, relating higher selling prices to the availability of cashless purchases is flawed. The most-likely reason is the commission on sales that your vending machine company pays to your employer.

I suggest you add this to question for your readers: How much less would a candy bar cost if the vending company didn’t have to pay a commission?

Tom Britten (the vendor defender)

Tom Britten
 Analyst . Intermediary . Consultant
3922 Bubba Drive, Zephyrhills FL 33541
Phone 813.469.5437
Fax 813.783.7908
E-Mail tombritten@msn.com

A study published by Harvard Business Review indicated that normal ‘performance indicators’ (education, experience, sex, gender, race, age) are NOT what cause a person to fit their job and become a superior performer with an increase in productivity and a decrease in turnover.

The study (360,000 employees over 20 years in 14 industries) concluded the factors that cause a person to fit their job are how well the respective person matches the needs of each job with regards to: mental capabilities, behavioral traits and occupational interests.

As we all know, success in any job is related to how well the person does the job.

However, the measurement of success in any job (sales volume and/or profit are commonly used measures along with inventory value, orders filled completely, etc) does not tell us WHY someone was successful or not, they just tell us IF the person was successful or not.

How well any person does in any job is DIRECTLY related to the learning skills required by the job, the behavior necessary in that organization, and the interests needed to stick with the job COMPARED to the capability of the respective employee.

In most companies, top performers have more productivity (at least 60%) and less turnover (up to 300% less) than average workers. Thus the connection between Job Fit and productivity and turnover is clear: the better the job fit, the higher the productivity and the lower the turnover.

Since top performers capabilities CAN be measured with regards to learning, behavior and interests in any job, a job pattern can be established that indicates what the job requires. Once the pattern is established (every job in every company is UNIQUE), potential candidates (or struggling incumbents) can be compared to the pattern to determine job match.

If a high job match is present, productivity goes up and turnover goes down because the employees LITERALLY fit their jobs.

If a low job match is present, productivity goes down and turnover goes up because employees can’t do the job (mental), can’t do the job the right way (behavior), or won’t do the job (lack of interest).

Unfortunately, an interview is the most common hiring process toda, which finds a top performer less than 15% of the time. In other words, the process fails to find the top performer you are looking for more than 85% of the time. Talk about a dysfunctional process!

If you are coming to St. Louis for NAMA National in mid October, I would recommend you plan to check out the HOT TOPIC presentations that are presented during show hours at the main NAMA both. You can be face to face with experts that CAN help your business, and ask them the questions you always want to ask….but never have the chance.

Coming next quarter: How your hirning process impacts your bottom line!

“See you in St. Louis, Louis”…..travel safe!

Sincerely,

Dave McCaffrey

Thank you for your recognition that Employee performance management is an important tool successfully used by best in class companies.

As you state, and I agree, many best in class companies also use objective measures of employee performance as well, including mystery shopping programs. I also agree that when used correctly and positively, this type of program can objectively measure employee performance on an ongoing basis, allowing managers to provide feedback and additional training where needed as issues arise versus waiting for a performance review.

While mystery shopping will measure employee performance in an objective manner, it cannot tell the company WHY the employee is not doing the job properly. Was it a training issue? Is it a management issue? Unless job fit is determined, all we can see is the fact, yes, through mystery shopping, that the performance is lagging when compared to company standards and objectives. However, the real information needed is WHY the performance may not be known at this time.

What you will see in our next post is the relationship between Job fit (a.k.a job match), productivity and turnover. Once a standard of success for a particular position is established, it becomes much easier to define the ‘WHY’ component of success in any position in any company.

Thanks again for your comment!

Sincerely,

Dave McCaffrey

Last quarter we discussed the fact that while employee performance management has been a mainstay of most organizations, the process is fraught with imprecision and dissatisfaction. 

Rather than serving as opportunity for providing direction, growth and alignment, Performance Management is more often seen as a necessary evil.  An Aberdeen Group study indicated there is clearly a disconnect between the concept of performance management and it’s successful execution, since 95% of study reported giving performance reviews but only 11% felt the reviews actually improved performance levels.

In our June post we discussed the two key performance criteria that defined ”Best in Class” Companies with regards to performance management:

1. Improved bottom line results: best in class companies experience a minimum profitability growth of 10% or move over last 12 months.
2. Increased employee retention rates: 94% of best in class companies increased or maintained stable employee retention rates over the last 12 months.

This quarter, we would like to discuss WHY focusing on performance management is seen as more important a project than ever.

According to Aberdeen, industry pressures are forcing all companies to adapt to change in two primary elements of their business.  First, the labor pool is shrinking and second, the pressure to perform more profitably is unceasing.

The study show the top five (5) pressures driving performance management within a company were:

1. Pressure to improve overall company performace indicated by 57% of group.

2. Pressure to improve employee productivity indicated by 46% of group.

3. Pressure to increase employee satisfaction indicated by 31% of group

4. Pressure to gain visibility of goals, metrics and ratings indicated by 30% of group

5. Pressure to add structure to the process indicated by 20% 0f the group.

Key takeaway?  Employee Performance Management used by best in class companies as method to increase company performance.

Key disconnect? 31% of group indicated they were dissatisfied with their Employee Performance Management Solution.  Bottom line? The review process is anticipated by both managers and employees with a great deal of dread and trepidation. 

 Aberdeen’s study showed:

• Best In Class:  in the top 20% of companies, 94% improved employee retention and 88% increased profit at least 15%.

• Industry Average: in the middle 50% of companies, 74% improved retention and 4% increased profit at least 15%. 

• Laggard: in the bottom 30% of companies, 59% improved retention while 0% increased profit at least 15%. 

Key Takeaway?  Companies that successfully use Employee Performance Management are much more likely to retain more employees, leading to significant profit growth. 

The key to success?  Hire employees that fit their jobs, and make sure they are capable of doing the job, doing the job how you want it done, and being interested in doing a good job.

 Coming next Quarter: What IS the connection between productivity, turnover and job match?

Thank you for taking the time to read about Employee Performance Management.  Your employees are your company’s largest asset; with workforces shrinking, employee retention will be key factor impacting success of any company.

Hope to see you in St. Louis at NAMA National October 15-17, 2008. 

 Sincerely,

Dave McCaffrey

MTA (New York’s Metropolitan Transportation Authority) recently announced that they would hike fares by .25 cents because “vending machines can only dispense dollar coins and quarters.”  This has Big Apple straphangers’ up in arms (no pun intended) saying “It is not acceptable to say the vending machines made us do it.”  Following closely behind this news, is an admission by MTA that a “software glitch” has allowed vending machines to dispense free train tickets in the amount of $800,000.00.

This example suggests to me that outsourcing opportunities for the unattended sale of non-food and beverage products may exist.  Many hi-tech savvy, full line vending companies could do better than MTA in managing the process of unattended sales of train tickets.

Sources of new revenue from the vended sale of food, snacks and beverages are vanishing and will continue to do so.  It is time to get serious about searching for new revenue sources.  Take a look around your market place and note any unattended sale of any product and service.  It might be worthwhile to approach government agencies or private locations with a respectful proposal outlining the strong advantages of your experience in the management of unattended sales.

An absolute prerequisite for soliciting this channel will be the need to meticulously study state-of-the-art software systems and machines used in the sale of non-food and beverage items.  It will require plenty of hard work and lots of new learning; is it worth the effort?

I am not sure, but it certainly beats the alternative.

According to a new study by Leadership IQ, 47% of high performers are actively looking for other jobs (they’re posting and submitting resumes, and even going on interviews).  

While it’s terrible that almost half of high performers are thinking about quitting, what’s perhaps even worse is that low performers want to stay.  Only 18% of low performing employees are actively seeking other jobs, and 25% of middle performers are actively looking around.  (DHM note: why would they be seeking other jobs; they’ve found a home! They have figured out how to stay below the radar and collect a check for minimal contribution.  How long can you afford non revenue producing employees that usually make up 80% of your total workforce?). 

 Leadership IQ surveyed 16,237 employees on a range of workforce and retention issues, and then divided them into high, middle and low performer categories based on their annual performance appraisal scores.  There were 3,896 employees identified as high performers, 8,607 identified as middle performers, and 3,734 low performers. “High performers keep companies in business,” says Mark Murphy, CEO of Leadership IQ, “so every company is at risk if these people leave.  If you lose some low performers, you might actually be better off.  But when your best people quit, revenue drops, quality suffers, and snafus increase.  Even large companies can take a big hit with the departure of just a few key employees.” 

Murphy continues “The worst part of this is that we typically cause our high performers to quit by how we treat them.  Frankly, we treat our high performers worse than any other employee.  When a manager has a tough project upon which the whole company depends, to whom do they turn?  Who gets the late hours and the stress?  It’s not the low performers, because managers want the project done right.  Instead managers turn to their handful of high performers.  Over and over we ask our high performers to go above and beyond, making their jobs tough and burning them out at a terrible pace.  Meanwhile, low performers often get easier jobs because their bosses dread dealing with them and may avoid them altogether.”

So what can you do to keep your top performers happy?  Make sure you know WHY they are your top performers, not just that they are….because of sales or collections or new business. 

If you understand WHY your top performers do what they do, you can improve performance of your middle and lower groups, reducing strain on top performers while improving profitability and reducing turnover. 

The old adage…..”you cannot manage what you cannot measure”….has never been so true as it is when talking about improving performance.  There ARE tools available to help you make sure you retain your top performers and improve the rest of your team at costs FAR less than replacing a top performer…or paying a full salary to a low performer that is a non-revenue expense. 

Your employees are your company’s single most important asset: are you investing in them as much as your other assets?  If you want to be around tomorrow, investing in employees today is a good bet!

Dear Tom Britten:

Gosh, I didn’t mean to demean the mom & pops of the vending industry. I try to choose words carefully, but maybe I bungled it by using the words of the vendor this particular time.
I think his larger point was that he believes it is unfair competition when some vendors don’t get their businesses licensed and insured.  It is overhead they don’t pay, which he does. Also, lacking insurance can have devastating consequences for a lot of people if something goes wrong. This can happen in any business.

It might be easier to skip these costly legalities if the business operates “under the radar,” say from a garage. That doesn’t mean that every garage-based vendor does this.
Thanks for sending me your counterpoint. It made me think hard. I think it will make be a better reporter. And, thanks for reading,
Laura L. Ruane
Business reporter
The News-Press
Voice (239) 335-0392
Fax (239) 335-0265
Visit us on the Web at www.news-press.com 

A portion of a recent article in the Fort Meyers, Florida News-Press described Garage Vendors as the unlicensed, uninsured, unaffiliated “bane” of the vending machine industry. To portray these hard working men and women in this way is unfair and in the vast majority of instances entirely unwarranted.

The term Garage Vendor is a vending industry term used to describe a small vending company that operates out of their garage or a small rental storage facility.  Other industries often use the term “mom & pop” operation.

Most of these companies are family businesses with only 1 or 2 maybe 3 people working long, hard hours desperately trying to compete with larger vending companies who have advantages that they don’t have or may never have.  They have their life savings wrapped up in their fledgling companies and are struggling to stay afloat.  I know lots of Garage Vendors; they are some of my favorite people.  I help them whenever I can, usually at no cost. 

Many of the largest and most respected companies in the vending industry started as lowly Garage Vendors.  Nathanial Leverone (Canteen’s founder) and Davry Davidson (one of Aramark’s founders) both started as Garage Vendors in the 1930’s.  The prosperous dot com companies existing today that were started in garages are legendary.

Let’s be sporting. Give these folks the respect they deserve for risking their capital and making the effort to build something from nothing, it’s the American way.

Tom Britten
 Analyst . Intermediary . Consultant 
Phone 813.469.5437
E-Mail tombritten@msn.com

You’ve tried everything else……….. Try lowering your prices

Before you accuse me of being totally off my rocker, read on:

Mr. Client, I know you have read all the same stuff that I have about employers helping their employees’ cope with the dramatic rise in prices at the gas pump.  Some employers are giving stipends based on commuter mileage, offering work at home Fridays and company sponsored car polls. I was wondering if there was a way I could help you help your people and I came up with an idea I would like to explore with you.   What if you agreed to a reduction in commissions and I agreed to a corresponding reduction in the retail price of vended food and beverages?

Not everywhere, but, at some accounts this could be a win-win. 

As same store sales continue to slide most folks I talk to blame lack of discretionary dollars.  This is only part of the cause of lost sales.  Consumer resistance to higher prices is a big factor here.  Even if the amount of the commission reduction is exactly equal to your drop in the price, I am betting that the vending operator will experience increased sales as consumers return to lower priced products.

Tom Britten
Analyst . Intermediary . Consultant
3922 Bubba Drive, Zephyrhills FL 33541
Phone 813.469.5437
Fax 813.783.7908
E-Mail tombritten@msn.com