As vending companies grow, they often encounter the opportunity to service an account as a subcontractor working for another company. A common such occurrence is when a foodservice company manages the manual feeding of the location but subcontracts the vending to a vending specialist.
Many vending companies develop good working relationships with foodservice firms. But there are situations that can arise that can be problematic. This is why it is important for vending operators to have formal contracts when they serve as subcontractors.
This article will present key elements of a vending subcontract. As a former executive for a large vending company and a current vending and foodservice consultant, I have found these contracts useful in protecting the interest of the vending operator.
Non-commercial foodservice companies that don’t have a vending division will often consider the inhouse “res vend” (residential) concept as a means to provide vending services utilizing their cafeteria workers. When the realities of who’s going to fix the machines when they break down, manage cash controls, manage product storage and the like surface, they often turn to subcontracting.
Some mechanics employed at traditional vending companies will do the repairs for the foodservice company on a moonlight arrangement.
Why be a subcontractor?
Some operators feel that subcontracting diminishes control and increases costs. However, in some cases, it is the only practical, cost effective way to offer vending as a delivery system for food and beverages.
Why does the contractor sub the business to another party? It may be that they lack the resources, skills or motivation to do it themselves, or in the case of the vending management companies, management is their core business. Any contract holder may subcontract vending services, in whole or in part, to a third party if it:
- Satisfies the location owner that the third party can adequately provide the service proposed to be subcontracted;
- Acknowledges that it remains responsible and accountable to the location owner for the provision of any subcontracted services;
- Obtains the written consent of the location owner.
In this relationship, the subcontractor serves at the pleasure of the contractor, the holder of the prime contract, who deserves all the respect and cooperation the subcontractor would offer to any other client. A vending operator who isn’t prepared to do this should steer clear of subcontracting.
Subcontractors are still responsible
When a vending operator is the subcontractor, as in any other P&L contract, the operator assumes full risk of loss and is not provided any promise of profitability. Also, the same two universal business rules apply: a) No side deals, b) It’s not a good deal unless it’s a good deal for both sides.
In a business where the vending operator is a guest on someone else’s property, the operator is never really free to run the business exactly as they choose. When one serves a location as a subcontractor, there are even more rules he/she must comply with.
In subcontracting, there are some things that differ very significantly from direct business relationships with clients. These differences will be reflected in the contract with the contractor and these terms and conditions are often considered onerous by vending operators.
Elements of the subcontract contract
One element is the confidentiality clause, which reads as follows:
The terms and conditions of this Agreement are confidential. Sub-Contractor, its representatives and agents shall maintain the confidentiality of the terms and conditions of this Agreement. The Sub-Contractor acknowledges that the Contractor will keep confidential the terms and conditions of its agreement with the Location Owner and will not disclose this information to the Sub-Contractor.