The Faculty Student Association (FSA), the organization that contracts for the food service, recently decided not to accept Aramark's bid to continue as the food provider, and chose instead Chartwells, a subsidiary of Compass Group USA. The new contract with Chartwells will take effect July 1, but major changes probably won't be seen until the Fall semester, when the new declining balance meal plan takes effect.

Under the new meal plan, each student in a residence hall must put $1200 per semester on a meal card. The student must spend $500 in the residence cafeterias (H, Kelly, and Roth), and may spend the remaining $700 either in the residence cafeterias or in the SAC, Student Union, or Humanities. All food will now be a la carte, and there will no longer be all-you-can-eat meals in H or Kelly, except for weekend brunch. The FSA eliminated all-you-can-eat meals because it felt that too few people were taking advantage of them, and H and Kelly had not attracted enough students to break even.

The FSA will also be spending about $1 million of its cash reserves on renovations to H and Kelly cafeterias, which should be completed some time during the Fall or Spring semester. H will be redesigned with a "diner" atmosphere, and will probably receive the bulk of the renovation money. Kelly will be split into the "Kelly Deli" and Taco Bell on one half, and an international food court on the other half, according to Kevin Kelly, Executive Director of FSA. The renovations will be paid for out of reserves that the FSA has collected from meal plan surpluses in previous years.
 

History of the Meal Plan

Aramark had been on campus for seven years before losing this contract. Their first five-year term began in 1991, when the company replaced DAKA (which was recently bought out by Compass Group and incorporated into Chartwells). The meal plan at the time consisted of a fixed number of all-you-can-eat meals, along with a supplemental declining balance. In Spring 1996, Aramark beat out Marriott in another bidding process, and obtained a contract which was supposed to last up to six years. The FSA instituted a new meal plan, consisting of a fixed payment up front to cover all fixed costs, and a smaller portion of money to purchase food "at cost." Aramark would call this the "Advantage" plan, but students were soon referring to it as the "disadvantage" plan because many felt that they were being overcharged. (Refer to previous issues of the Press for more detailed coverage, especially the "Aramark Makes Us Nuts!" and "Missing Million" issues from Fall 1997, and the first three issues from Fall 1996.)

In Summer 1997, the FSA decided not to renew Aramark's contract and instead to open the bidding process again. This was partly due to an enormous volume of complaints from students and parents about the meal plan, but mostly because the FSA had its own problems with Aramark. These included the firing of two Aramark managers (John Rainey and Dennis LeStrange) and the introduction of new and inexperienced management; a number of violations of the contract (e.g. pricing and labeling); and especially problems negotiating the opening of the Student Activities Center (see "How the Dining Service Contract got SACked" in the "Aramark Makes Us Nuts" issue for details).

The FSA assembled another Dining Service Selection Committee to choose the new contractor and to design a new meal plan to replace the Advantage plan. Members came and left, but by Spring 1998 the membership had settled to a total of eleven. There were four Administration members (Daniel Melucci, Peter Baigent, Judy Lum, and Dallas Bauman), four undergraduates (Frank Santangelo, Diane Lopez, Dina Covello, and Carla Lachapelle), one graduate (myself), and the FSA Executive Director, Kevin Kelly. After much debate, a majority of the committee agreed to have a declining balance plan, with the total cost being $1100 per semester: $500 for residence cafeterias, $600 anywhere.

The bids proposed came from Lackmann, Whitson's, Marriott-Sodexho (after a recent merger), Chartwells (after a slightly less recent merger), and Aramark. Lackmann was eliminated because, just as before, it could not provide certified financial statements. Whitson's was eliminated because their prices were too high and the company itself was considered too small to run a food service as relatively large as Stony Brook's. The final decision was split between Chartwells and Aramark. Aramark was preferred by Judy Lum and all of the undergraduates on the Committee, who believed that their previous concerns about Aramark were not as serious as they had thought, that Aramark was actually not doing so badly in comparison with other schools, and primarily that the other companies seemed to be far worse. The remainder of the Committee preferred Chartwells, feeling that the problems with Aramark could not be resolved, and that few people still trusted Aramark.

At the end of the Spring semester, a "Best and Final Offer," including an increase in the meal plan price to $1207, was drafted and voted on in a matter of several days. The Committee endorsed this by a vote of 9-1 (all but myself in approval). Chartwells and Aramark were presented with the Offer, and on the basis of their response, a final vote was taken. Aramark objected to a requirement to document revenues obtained from bulk-purchasing rebates, and would not spend a required $250,000 for renovations and setting up new facilities. So Chartwells ended up narrowly winning the recommendation from the Committee by 6-4, (all undergraduates voting for Aramark, everyone else voting for Chartwells), with the final vote happening just after Spring semester finals.

Following this, the Committee was disbanded, and the FSA?s Board of Directors authorized Kevin Kelly, Fred Preston (Vice President of Student Affairs), and Richard Mann (Vice President of Administration) to negotiate with Chartwells in secret. Once they were convinced that Chartwells would do everything they had asked of it, the FSA announced publicly that Chartwells had won the bid and would be starting July 1.
 

The Chartwells Proposal

According to Chartwells' bid proposal, most of the campus food services will remain essentially the same, except for a couple of brand changes (such as in coffee). The exception is Humanities, which Chartwells claims will focus heavily on vegetarian and vegan food, while also having the vending machines and prepackaged food currently there.

Chartwells was the only company to propose that catering be self-sufficient; the other four bidders each proposed that the meal plan students subsidize catering. However, there has been some concern among people who cater frequently that Chartwells has somewhat higher prices than the other bidders offered.

However, Chartwells proposed somewhat lower prices than Aramark for most meal plan items. Many of Chartwells' prices are the same as current Aramark prices, but Aramark proposed to raise most of their prices by about 2-3%. Chartwells prices will probably still seem high in the Fall, however, since with few exceptions they are not actually reducing prices.

There was quite a bit of concern about the fact that Chartwells was not very specific in its bid about exactly what it was planning to do. Some felt that Chartwells would simply say "yes" to everything to get its foot in the door, and then try to change things once it was already established on the campus. Chartwells is not a very well-known company, and does not have many contracts with large universities. Most of its contracts are with universities or colleges that had contracts with DAKA and were taken over automatically by Chartwells.
 

The $1200 Buy-In

The bids were originally required to offer an $1100 meal plan. Aramark claimed that $1100 was not sufficient to cover its costs, and suggested raising the price of the meal plan to $1207. Chartwells claimed it could make a $300,000 profit with the $1100 buy-in, as did the other three companies. For some reason, Aramark's proposal was the only one viewed as credible by the FSA. Most members of the Dining Service Committee quickly convinced themselves or were convinced by others that the contractor would need $1207 just to break even, and that other contractors didn't know this because they weren't familiar enough with the campus.

There was some debate about what the buy-in level should be, but the arguments of Kevin Kelly and Ken Johnson, that the labor schedules and food costs proved that the buy-in had to be $1200, ultimately convinced a majority of the FSA Dining Service Committee, the FSA Budget Committee, and the FSA Board of Directors.

The FSA then lowered its commission, from 15% to 13% of total meal plan revenues, because the meal plan revenues were increasing more rapidly than the FSA budget. This should have enabled the meal plan to be cheaper, since the FSA needs less money from meal plan revenues; however, the meal plan buy-in was not lowered proportionally.

In fact, if we go by Chartwells budget, we find that if Chartwells receives $1200 from every student on the meal plan instead of $1100, and 3800 students per semester sign up for the meal plan, we find that Chartwells makes $760,000 more than it needs to, pushing it well past $1 million in profit. Of course, Chartwells could hardly say "no" to this when the FSA offered it to them, but why did the FSA offer it to them?

According to Kevin Kelly, the FSA still does not know how many students will be enrolled in the Fall, and therefore cannot say what sort of profit Chartwells might make. He was also concerned that Chartwells not be able to claim what Aramark had claimed, which is that the FSA was starving it, that it could not make a profit, and that it needed to cut services and raise prices. If the buy-in starts too high, then at least it can't be raised in the second year.

It remains very mysterious, to me at least. Chartwells can do its own budgeting, or so we are hoping. We pay them to manage a food service professionally, and they should not need the FSA to tell them that they need more money than they're asking for. The same thing happened with Aramark two years ago: it proposed an 8% markup on Advantage food, but the FSA decided that was too low, and gave them a 10% markup. But even with the extra money, Aramark still claimed it was losing money, and was still asking for price increases and service cuts. It seems that when the contractor knows that the FSA will do anything necessary to help it make a healthy profit, the contractor begins to ask for more and more.
 

What the Future Holds

Now the question is whether Chartwells will be any different from Aramark. If the FSA and the Administration wish to prevent the same problems from reoccurring, they must be willing to let Chartwells succeed or fail on its own. The FSA created, with Aramark, a mentality that "When you fail, it's our fault, but when you succeed, it's your achievement," and Aramark took advantage of this. Eventually the FSA realized it was being manipulated, and ejected Aramark from the campus. But will the FSA repeat its mistakes?

Perhaps the more pressing question is: will Chartwells repeat Aramark's mistakes? We should be optimistic, of course; after all, we did get rid of Aramark. However, next year we'll know just what sort of company we've ended up with. Watch them carefully.