We reached out to 60 micro market operators with our survey question:
In what percentage of your micro-markets do you require (and enforce) a daily or monthly guaranteed sales minimum or subsidized pricing?
A) Less than 10%
B) 10 to 25%
C) 25 to 50%
D) 50 to 75%
E) 75 to 100%
- 55 of the 60 operators (92%) surveyed answered A) Less than 10%
- 3 of the 60 operators surveyed (5%) answered B) 10 to 25%
- 2 of the 60 operators surveyed (3%) answered E) 75 to 100%
Operator Comments – With analysis by Steve Orlando, Co-Founder of Fixturelite.
From those who answered A) Less than 10%
- A common feature of the “A Group” was that the operators did not specifically target smaller markets, though they did operate smaller markets in conjunction with larger ones.
Analysis - We expect to see the smaller location landscape grow as the decrease in cost of technology changes the conversation around ROI.
- Others found competition to be the challenge when asking for or requiring a minimum.
Analysis - Our advice here is to adapt and change the sales conversation. In an obviously outstanding location, you may not need to talk about a minimum. In a smaller location that could be a revenue challenge, there is no need to fear the competition. Instead, have an honest conversation with the client, explaining the challenges and associated with a low volume micro-market. At the same time, be sure that your client understands the benefits of having a best of class micro-market in their business – something that might only be possible with a minimum revenue guarantee.
- Many in this “A Group” were concerned about minimums creating unhappy customers.
Analysis – It is all a matter of perspective. If a client feels that they must pay for a micro-market, versus seeing the market as a benefit and an essential amenity for their workgroup, eventually they might get tired of paying for the micro-market. Be sure that the client is sold on the benefits and upside of having a micro-market in terms of attracting and retaining talent.
- Spoilage was a major concern for operators.
Analysis - Ask your client to cover the spoilage costs. This approach allows the operator to sufficiently stock the food cooler with an adequate selection of choices; enough to make the market a go-to destination versus leaving the office for meals. Taking this approach prevents the vicious loop of decreasing what is stocked over time (due to fear of spoilage). In that dreaded situation, the selection is so small, customers stop turning to the market as a primary meal and refreshment option.
Operator Comments – From those who answered B) 10 to 25%
Among those who answered B) 10 to 25%, the primary reason for a subsidy or minimum was company policy.
- “Anything less than 150 employees requires a minimum.”
The small group - E) 75 to 100%
- Two large operators indicated that their company insists on a minimum guarantee in 75 to 100% of their locations. While the minimum or subsidy language was built into their contract language, we could not confirm whether the minimums were enforced and collected.
Conclusion: Based on our survey, daily or monthly guaranteed sales minimums or subsidized pricing is an opportunity for the operator, which has room for growth in the current micro-market landscape.
As Steve Orlando of Fixturelite notes in this newsletter, “Keep in mind that the location is likely under pressure (from HR, the CEO, or an employee wellness committee) to get a market installed. Remind the client that you are making a big investment in equipment and manpower to deliver this small market. To ensure a lasting customer-provider relationship, rather of setting the location up to churn through vendors every six months hoping for a different result, the operator needs some revenue guarantee to make the installation possible and the account a success. The biggest mistake you can make is to not ask for a minimum guarantee.”