1© 2016 ezCater, Inc.

1© 2016 ezCater, Inc.

Food: The Ultimate Tail SpendWhy do businesses need food? Businesses of all sizes share common objectives. They perform a service or provide a product. They want to sway buyers, satisfy customers, and make a profit. To fully succeed, they also need to control expenses. For many businesses, though, cost control in certain areas can be elusive.

That’s particularly true of food. If you’re ordering food at any volume, you likely work with many suppliers spread out across many regions. For most businesses, food-related expenses are a minor part of the overall budget. Because food is a minor expense, and it seemingly re-quires a lot of work to manage, it’s easy to neglect. Your procurement professionals can squeeze out more savings by strategically managing other areas, so food expenses likely fall into the 20% of your transac-tions that go unmanaged, or your “tail spend.”

If you work for a large organization, however, this could add up to millions of dollars of unmanaged annual spend. As Benjamin Franklin wrote, “beware of little expenses. A small leak will sink a great ship.” So how can you get more visibility without wasting resources? Set up a process, and automate it. We’ll walk you through how to move food

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Strategic Management: Understanding Food Spend

Why is food spend so difficult to manage? Food expense is typical-ly incurred by individual staff and often relies on their independent judgment. A manager orders food to satisfy participants in her lunch-and-learn. The office admin orders in for the monthly team-building meeting. An instructor provides breakfast to encourage on-time class arrivals. Of course, the largest food expense typically lives under the heading of travel and entertainment (T&E), and that is largely at the discretion of sales.

Because employees may travel or have their own favorite local restau-rants, it can seem nearly impossible to get a centralized view of what people are spending on food, and where they’re spending it. The vol-ume of food suppliers is huge, and it would take too much time to analyze the intricacies of each transaction. For some companies, like those in the pharmaceutical industry, managing this spend properly is critical if you want to stay on the right side of the law. For others,

out of the tail spend zone, and how to start seeing more savings with minimal effort.

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it’s all about increasing efficiency and allocating resources in the right places.

In theory, creating an approved vendor list would simplify things. But if you’re a large company with offices in many regions, and with sales reps who travel across the country, well … you can see how that task would snowball quickly. As a company, you also don’t want to limit the tools available to your sales reps or other employees. Ideal-ly, they’d be able to select the right caterer for the job, wherever or whenever that may be.

If you approach the task with the right tools and from the right per-spective, it’s easier than you’d think to start managing your food spend. To get the most out of the money you’re spending on food, start with a general analysis of your company’s food ordering habits. Why does your company order food, and how often do you order it?

STEP 1: UNDERSTAND THE SPEND

If you want to start strategically managing your food spend, first you need to understand how big it is. You can do a quick back-of-the-en-velope calculation by asking yourself a few questions:

Source: GBTA, Expense Reporting: Global Practices and Pain Points

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STEP 2: MAKE RELIABLE REPORTING EASY

What comes to mind when you think about travel expenses? Typical-ly, it’s airfare, hotels, auto rentals, taxis, and then maybe food and tips. One survey says that food is the third largest business travel expense. Runzheimer International notes that while most companies have spe-cific travel guidelines for airline, hotel and auto rentals, many have none for food. This doesn’t only lead to overspending or incomplete reporting—it amounts to a missed opportunity.

• Do you order food for your employees, for your customers, or both?

• If your sales reps order food, how many meetings do they order for every month?

• How large are the groups that you order food for, on average? • How much do you typically spend per head?

Once you do the math, you may find that your company is spending more on food than you’d expect. For business travellers, food “makes up more than 31 percent of daily on-the-ground business costs” according to data from Corporate Travel Index. Nationally, businesspeople spend $20 billion on corporate catering every year. When you look at how and why you’re spending money on food today, you’ll see small opportuni-ties for savings add up.

ASK YOURSELF: How might you treat food expenses differently if you had a more comprehensive view?

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Once you understand your food spend, set up a centralized track-ing system that logs spending behavior. Your company’s expense management system may be helpful here. If you’re already tracking spending behavior but just aren’t using the data, start by breaking the spend up into general categories like food purchased in sup-port of sales calls, or food purchased for team building purposes. Looking for high-level similarities and differences in food spending behavior is often enough to arrive at a set of preliminary purchasing guidelines.

Without guidelines and adequate tracking, companies may be wast-ing staff time, missing out on discounts, and spending more than necessary to satisfy objectives and customers. You need more than a set of policies. You need an automated reporting system that mea-sures adherence to these policies, too.

Having a Policy Makes a Difference

Source: GBTA, Out-of-Policy Travelers and Their Impact on the Bottom Line

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STEP 3: MONITOR FOOD BUDGET COMPLIANCE

Most travel has a direct relationship to sales. Team building is inte-gral to morale. Training helps develop your staff. Food is often an important part of all of these expenditures. Just as you’re aware of compliance to your travel and training budgets, it’s helpful to monitor what your company is spending on food. From a reporting standpoint, though, food can be tricky. Receipts get lost, stained, or forgotten. Different vendors have different delivery fee structures. There are a number of variables that can make an apples-to-apples comparison difficult. If you have an automated system that makes reporting expenses easy or even automatic, data quality will be less of an issue.

ASK YOURSELF: Are food expenses seen at an overall company level or only as a series of unrelated expenses?

If you want to find opportunities for savings, filter your food spend data into opportunity areas. You may find that Sales Rep A is spending much more on food than Sales Rep B, but both are get-ting the same results. Getting a bird’s eye view of each expense type (like food purchased in support of sales meetings) will help you see savings opportunities more clearly, and give you a leg to stand on as you begin to enforce spending policies.

If you’re able to find a food ordering system that connects direct-ly to your expense management system, you’ll be able to monitor budget compliance more easily.

7© 2016 ezCater, Inc.

As you begin to evaluate your company’s food ordering behaviors, arm your people with a few best practices. We’ve produced a comprehen-sive food ordering guide for salespeople, which outlines some of our favorite tactics for saving time and money. Here are a few cost-saving tips from that guide:

• One entrée per event saves money: When offered two entrées, peo-ple want to try both. They’ll they take more food than they would when offered just one. The food will run out! Protect yourself by ordering 30% more of the entrées (but not of the side dishes). Of course, you’ll spend less money and waste less food if you stick with one entrée.

• Save money by not over-ordering: You can usually order side salad for just 2/3 of your headcount, not everyone eats chips, and most desserts can be cut in half to stretch your budget.

• Be savvy about tipping: If the delivery fee is less than $1/mile, the driver is relying on tips. Tip at least $1/mile, unless the order is large or last-minute. If so, consider tipping as high as 10-15% of the food cost. For a more comprehensive analysis of tipping behavior, check out our state-by-state report on tipping trends.

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ASK YOURSELF: Are there any patterns across groups or roles, or in goal achievement? What can you learn from the spending behaviors of your most effective employees?

STEP 4: AGGREGATE SPEND FOR SAVINGS

Across industries, a common method for reducing costs is to centralize your purchases, then negotiate a discount across the broader spend. When it comes to food, this can be difficult to accomplish. Unless you’re dealing with a multi-concept restaurant holding group with loca-tions that will deliver to every one of your offices and all of the offices your sales reps visit, it can be tough to mandate that your employees order food via one central service.

Nowadays, there are many online services that do this aggregation work for you. Your employees probably book their flights via a service like Expedia or Orbitz, rather than going to the airline directly. They use Uber to get around rather than hailing a taxi. These services exist for food ordering, too, and—as you may have guessed—ezCater is one of them. Though we’re not the only online food ordering service out there, we’re the only one that has a nationwide reach and that focuses exclu-sively on corporate clients.

Regardless of how you choose to aggregate your spend, be sure that you are using it as an opportunity to get savings for your company. Do what you can to make the ordering process more efficient for your indi-vidual employees. If each employee can spend less time ordering food and more time doing their real jobs, that benefits the company most of all.

9© 2016 ezCater, Inc.

ezCater is the only nationwide marketplace for business catering. ezCater’s online ordering, on-time ratings and reviews, and 5-star customer service connect businesspeople to reliable catering for any meeting, anywhere in the United States.

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