Contracting to expand
Many contract caterers are diversifying, but Sodexho is spreading its wings more than most. The contract caterer now runs the food and beverage operations at London's prestigious St James's Club and at Friendly Hotels, and has just signed two hotel management contracts for Midlands-based organisation Prince Hotels.
Since May this year, Sodexho has been running catering, hospitality and room service for the St James's Club, which is also a hotel. Sodexho employs the kitchen staff and restaurant manager, while the front of house staff are St James's employees.
In February this year, the company signed its first major hotel deal with Friendly Hotels to take over food and beverage operations in its 44 owned hotels.
An even more surprising deal in September gave Sodexho five-year management contracts for two three-star hotels - the 80-bedroom Quality Stonebridge Manor in Coventry and the 40-bedroom Comfort Inn in Birmingham. The deal does not include the 96-bedroom Quality Boundary hotel in Walsall, bought from Forte last year.
None of the 50 Stonebridge Manor and Comfort Inn staff affected by the deal will be laid off, but will be offered posts at Sodexho.
Under the terms, Sodexho receives a management fee based on the turnover of the hotels. There is a 5%-a-year guaranteed growth in profits and an incentive fee if agreed levels are exceeded. Combined sales of the hotels in 1999 were £1.5m.
After 100 years' experience as an outsource organisation, Sodexho sees scope to pursue markets outside its traditional field, says Simon Marshall, appointed managing director of Sodexho's hotels and commercial restaurants division last year to spearhead the company's expansion into this sector.
"Sodexho has a long history of assisting various companies with food and beverage and other services, and recently became more involved in the hotel and commercial segment," says Marshall.
He stresses that Sodexho does not aspire to be a hotel company, nor own hotel buildings, but it is aware that hotel companies may want to focus on their main expertise by outsourcing various functions.
"They remain the hotelier, but as a multi-service provider we can assist hotels with other areas of their operation," says Marshall. "Hotels can benefit from Sodexho's food purchasing power and Sodexho can administer the payroll, provide most of the food and beverage staff, and provide in-depth training facilities. Sodexho has skills in housekeeping, and our attention to detail on the customer care side is high."
He lists the firm's particular skills as food and beverage operation, housekeeping and cleaning, reception, and grounds maintenance. "We offer a wealth of expertise in all of these areas and are the only contractor that offers this particular strategy within the hotel marketplace."
Marshall sees managing a hotel as simply "operating a number of different competencies under one roof".
Although Sodexho is diversifying significantly and offering other support services, it sees its main opportunity in the hotel marketplace as being in food and beverage - a particularly difficult part of a hotel's operation, says Marshall.
He predicts there will be increasing demand for expert services in the food and beverage sector and that more outsourcing will take place. He says outsourcing to Sodexho could increase a hotel's food and beverage revenues by 50% or more.
The main challenge will be to ensure a collaborative approach between hotelier and contract caterer, says Marshall. "It is evident that staff feeding within, say, the car manufacturing business is not core to making a car, but food and beverage is an integral part of running a hotel.
"In many hotels, food and beverage can account for up to 50% of revenue, and it is important that there is collaboration between the client and the supplier."
A Touch of Rhodes
As well as moving into the hotel sector, Sodexho is adding its management skills to London's St James's Club, where Sodexho business partner Gary Rhodes is contributing his expertise under a concept known as a Touch of Rhodes.
Under the agreement, St James's buys Sodexho's ability to run the club's five-star restaurant - with associated benefits such as economies of scale in purchasing - as well as logistical back-up, staff and training. Rhodes, meanwhile, offers expertise in menu development and food, acting as consultant chef to St James's new restaurant, Seven Eight.
All of the club's chefs are trained at Rhodes's London restaurants, City Rhodes or Rhodes in the Square, to learn how to prepare some 25 Rhodes signature dishes.
In addition to dishes created by head chef Mark Boreham, the menu has three Rhodes starters, three main courses and two desserts.
Rhodes dishes featured at the club include Parfait and Pressed Tomato Cake with Peppered Goats' Cheese, Tournedos of Chicken with Melting Swiss Cheese, and Rich Soft Almond Cake with Vanilla Ice-Cream. An average bill in the 20-seat restaurant is £35.
The deal is run as a management fee contract. "We operate services on behalf of St James's Club and bill them for costs and they get the benefit or revenues," says Marshall. The initial contract runs for one year.
"We enhance the quality of the food and beverage service, the quality of the operation as well as revenue levels," he adds. Expected annual turnover is £850,000, including room service and banqueting offered by Sodexho.
Simon Venison, general manager at St James's Club, says the deal offers the club a unique, high-quality product. "It has helped to give the club a consistent product. There are many private clubs in London, but we offer something that is unique and something that is appealing to a modern clientele."
Venison approached Sodexho to run the catering because he felt that in addition to Sodexho's management, Rhodes's modern British cuisine would suit a modern British club. The club was looking for "a quality product" to put into its newly built restaurant, Seven Eight, says Venison.
Other contractors have yet to follow Sodexho's example, but the interest is clearly there. Clare Parkinson, sales director of Baxter Smith, says the concept is "definitely something we would look at in the long run".
Frank Whittaker, sales and marketing director of Compass UK, says: "We have considered this but to date have never put much energy behind it. But we certainly think there's an opportunity there."
Marshall adds: "It will prove too irresistible for other contractors not to follow suit."
FACTS:
St James's Club
7-8 Park Place, London SW1A 1LP
Tel: 020 7629 7688 Fax: 020 7491 0987
Internet: www.stjamesclub.co.uk
E-mail: mail@stjamesclub.co.uk
Rates: from £165 (full member - Club Double) to £850 (temporary member - two-bedroom penthouse)
Average restaurant spend: £35
Covers: 45
Seats: 20 in restaurant, 20 in lounge
Rooms: 60
Expected turnover: £850,000 (including room service and banqueting offered by Sodexho)
Quality Stonebridge Manor, Coventry
Rooms: 80
Rating: three-star
Comfort Inn, Birmingham
Rooms: 40
Rating: three-star
1999 turnover of both hotels: £1.5m
Source: Caterer & Hotelkeeper magazine, 26 October - 1 November 2000
