One of the biggest decisions a vending operator has to make today is how to source the food products for clients and customers. There are a multitude of questions to be considered that have both long-term and short-term ramifications.
Should you operate your own commissary? Should you contract with a third party provider? Should you opt for a frozen food program exclusively or simply supplement fresh food options with frozen food? How can you supplement food offerings with authentic ethnic choices and/or healthy choices?
Let me begin by taking a look at the potential benefits of operating your own food production facility.
Most vending operators look very diligently for a way to differentiate themselves from their competition. Since most of the products that our industry sells are not unique to any operator, your self-operated commissary may be one way to separate your company from other vendors.
Another advantage to operating your own commissary is that this allows you to operate carry-in manual food operations and other food programs such as senior citizen or summer lunch meal programs. This capability will allow you to sell in this market segment when a vend-only approach does not.
An additional benefit for having food production capability is the ability to provide catering services for both your own customers and non-traditional sources. The catering business has historically generated large profit margins which can supplement slower periods of activity in the vending business like the holiday seasons and summer vacation period.
Lastly, operating your own commissary gives you flexibility to respond rapidly to changes in business conditions which can necessitate adds or cuts in the amounts of food required to best service your customers. It also enables you to decide the quality of products you purchase, the portion sizes that you will offer and the look that you want to present in the merchandising and appearance of your food products.
If you were to open a non-cooking facility and already have adequate refrigeration and freezer capacity, you could get into production for less than $50,000. This investment would be for packaging equipment, tables, labeling machines, and at least three compartment sinks.
If you were going to do cooking, the price would skyrocket as the cooking battery, ventilation and fire protection systems, proper flooring, automated wrapping machines, adequate drainage, etc. are very expensive.
BENEFITS OF OUTSOURCING
There are potential advantages of purchasing fresh food from a third party purveyor. Some of the benefits are financial in nature, others are centered on increasing sales and lastly, quality and/or risk reduction related.
From a financial perspective, I have always experienced a lower cost of goods via purchasing from an outside source. This is primarily the result of the cost advantages they enjoy due to sheer volume of production.
They are typically more efficient in food cost due to better purchasing, portion control and product utilization. The labor advantages are the result of better equipment, production economics and unit volumes.
There will also be a significant savings in energy costs for your operation. It has been my experience that the vendors who operate their own food production facilities will see twice the utility costs versus those that do not. The amount of energy generated in cooking and from the additional refrigeration and freezers is that significant.
Another financial benefit gained by outsourcing is the improved cash flow gains resulting from having no commissary food inventory. Also, you eliminate the potential for product waste, product disappearance and excessive substitutions from overproduction.
Another major financial savings from outsourcing food production is reduced vended food waste. Because of the temperature controlled food handling process, they are able to utilize extended freshness dates on their products, giving the vending operators more time to sell their products.