Even as they grow, contract companies hit an icy patch

Nation's Restaurant News, June 27, 2005 by Elissa Elan

Despite posting substantial growth over the past year, the industry's leading contract feeders continue to grapple with the unstable economy, human-resources challenges and competition with mainstream commercial brands across all sectors of the segment.

Employee recruitment, discrimination lawsuits and the lackluster performance of in-flight caterers are just a few of the problems causing consternation for onsite industry members. In addition, several contract firms that rank among the industry's top 100 brands and companies have been compelled to find alternative ways to shore up arena concession business during the canceled 2004-2005 National Hockey League season.

With the economy still seesawing and job seekers becoming increasingly hard to find, operators maintain that recruiting and retaining good employees are overarching challenges. To combat those difficulties, several leading players, most notably the segment's three largest companies--Compass Group, Sodexho and Aramark, have taken to employing high-tech solutions to market career opportunities in onsite foodservice.

Based on statistics compiled by the Labor Department, a shortage of more than 10 million skilled workers is projected by the year 2010. For Charlotte, N.C.-based Compass Group, parent of such brands as Canteen, Chartwells and Eurest, employee recruitment challenges prompted the company to update its talent database using website technologies.

Gaithersburg, Md.-based Sodexho focused on ratcheting up employee retention through its Sodexho University program, a degree-granting college run in con junction with the Culinary Institute of America at four campuses and with online class participation. According to Denise Ammaccapane, Sodexho's senior director of training, the company asked its workers to register on line to ensure that all employees were aware of the program. Since the university began in 2001, 64 percent of Sodexho's corporate managers have enrolled in the program, and approximately 19 district-manager graduates have received promotions.

"There's no reason for people not to invest in themselves," Ammaccapane says.

But, says Betsy Kline, director of business development for Philadelphia-based Aramark Business Services, a big problem has been competing with retail brands for the best employees and marketing the quality of jobs that are available within the contract segment. "A lot of it is word of mouth," she says. However, confusion among candidates can arise because on-site operations run by contractors are not restaurants in the conventional sense. "And if you're not a restaurant, then what are you? A lot of [job] ads advertise for cooks or chefs, but when it's not for a particular restaurant, it can be a bit confusing."

The recruitment and retention of employees, however, hasn't been the only human-resources problem affecting onsite feeders recently. In April Sodexho agreed to settle a 4-year-old racial-discrimination suit that was filed on behalf of current and former black managers. The foodservice and facilities management specialist agreed to pay $80 million to 2,600 employees who joined the class-action suit after 10 managers sued the company in 2001. The plaintiffs claimed that black employees were passed over systematically or otherwise denied advancement over favored white workers with less seniority and fewer qualifications. The company, however, did not admit to any wrongdoing.

According to Kerry Alan Scanlon, attorney for the plaintiffs, "The outcome in this important case will change the lives of thousands of African-American management-level employees and help make Sodexho a stronger, better and more-profitable company."

In another discrimination suit Valentino Lopez, a Hispanic bartender at Yankee Stadium in New York, is suing Spartanburg, S.C.-based Centerplate Inc. He alleges that the company, which changed its name from Volume Services America last year, repeatedly passed over him and other Hispanic and African-American employees for promotions because of their ethnic backgrounds.

Even though Centerplate gave Lopez, an employee since 1994, a job bartending in one of the ballpark's suites in 2002, he says that white bartenders who have "far less experience and seniority ... are routinely assigned to larger parties and groups in which they make twice as much money."

Recently, contract foodservice conglomerates have acquired several smaller on-site companies. Last year Compass acquired San Diego-based Creative Host Services Inc., an airport feeder that operates more than 130 concessions at about 36 small- to medium-size U.S. airports. Earlier this year Compass also bought Farmington Hills, Mich.-based HDS Services, a foodservice management company specializing in health care and extended-care facilities and upscale retirement communities. The 40-year-old HDS, which is operating under compass Morrisons Management Specialists division, reported annual sales exceeding $225 million last year.

As in-flight catering by airlines continues the downward spiral begun in September 2001, airport-based feeders have garnered a growing share of the business of feeding travelers. Gate Gourmet, the U.S. in-flight caterer sold in 2002 by Swiss entity SAir Group to Texas Pacific Group, has seen its annual revenues decline by 30 percent over a five-year period. In that time, however, several retail brands have opened new outlets in airport terminals across the country.