Last of the big tenders?

When high-street chain Boots appointed Aramark to take over the in-house catering at its Nottingham headquarters last November, it was a landmark event. The trend over the past 10-15 years has seen staff feeding at huge companies fall to the big boys - Boots was one of the largest remaining in-house contracts.

Certainly, the £2.3m a year contract to feed 8,000 people in six venues had long been in Aramark's sights. The company had even taken on the hospitality and fine-dining catering at Boots's small London headquarters to ensure it had the company's attention.

"It was fundamental to win [the Nottingham contract]," says Aramark sales director Roy Miller, "so we took their small site in London and over-delivered to show them how we managed things."

For Boots, it was a big step, too. Michael Hunter, business services manager at the health and beauty retailer, explains that the catering had been in-house since the 1920s, but the company had started a cost-reduction programme and needed to concentrate on its core business.

"We are one of the few companies that has never outsourced, so it was a very rigorous tendering process, looking at quality and cost. We also needed to see how they trained and treated people. We looked at how they performed on other contracts."

So with so much at stake, how easy has it been for both sides to adapt?

The caterer

Geoff Jameson, operations catering manager for Aramark at the new five-year contract, sees his job as bringing in the catering expertise to allow the client to concentrate on its core business. This includes relieving Boots of the time and resources it had been spending on managing the 80 catering staff, who transferred to Aramark under TUPE regulations (Transfer of Undertakings (Protection of Employment)).

Needless to say, both sides have had a culture shock. One of the biggest problems Jameson has had to overcome is the fact that many of the staff were long-serving and, in effect, had been isolated from the catering industry. They had also been used to working in their own company culture, and at first were sceptical about their new bosses.

So the Aramark team had the task of winning loyalty from the staff and bringing them within their business. The new caterer also had to develop the staff from "food servers" of traditional fare such as meat and two veg, into hospitality professionals who could interact with customers from behind, say, a Starbucks counter.

As Boots had always seen catering as a cost, there had been little training or investment in either the staff or the facilities. To build staff confidence, Aramark sent in specialists in personality training in order to transform the way they served and sold food.

Dan Wright, UK managing director for food services division won't disclose exactly how much was invested but says: "We invested more than we would in a normal mobilisation. We had to move them out of being subservient into being experts."

He explains that Aramark was willing to invest because it was conscious that the welfare of the staff was a big issue for the client. "Outsourcing is sensitive for companies with long-serving employees," Wright says. "They needed us to be on the same wavelength."

According to Jameson, all the staff have stayed so far, but Aramark has brought in some of its own managers.

Jameson has a list of other changes he wants to make. One is to encourage staff to multi-task - for instance, cover the tills if anyone is sick. He also wants to revamp the menu. It will be a gradual process, however, as he has to consult the client about price changes - and even then he can change them only once a year.

The client

For Hunter, the decision to contract out catering wasn't just about the company concentrating on its core business. Nor was it that it needed to bring in a catering expert to keep up with industry trends. It was also about shedding the costs and hassle of managing non-core staff: "We wouldn't have done it without a cost benefit," he says.

Recruitment was a big headache. Although many of the catering staff were long-servers, it was proving difficult to attract new staff to an in-house operation. "We needed experts to train and manage the staff," Hunter says.

He acknowledges that the staff have had a culture shock. "Our catering staff now have to go to Aramark with problems," he says. "We want to manage just the contractor; we don't want to do the catering."

He intends to monitor how well the caterer performs: "It's a five-year contract and we have an internal process for measuring suppliers. I am convinced that specialist caterers are the way forward."

Still, Aramark need not worry too much. "I wouldn't think it feasible to bring the catering in-house again," Hunter concludes.

Could trends change?

While giant companies such as Boots prefer to contract out, medium-sized firms are looking to take their contract catering back in-house, according to Mark Philpott, co-founder of the fledgling contract caterer Vacherin.

"We don't have much business, so are heavily sales-orientated and are speaking to lots of people at the moment. What we are finding is that there are nice nuggets of business that no longer feel they are getting personal service and flexibility and are starting to think ‘shouldn't we just go in-house'?"

Philpott who until eight months ago was managing director at Director's Table, started the company with Clive Hetherington last November. He says they have spoken to three or four possible clients who are considering going in-house. "Catering staff are more loyal to the client nowadays than they are to the caterer because it is the client that is being left to motivate staff."

One of those clients is Guy Stevenson, director at independent creative consultancy Imagination, where the pair have just been awarded their first contract.

"We did consider going back in-house for a brief time," Stevenson says. "We had been with Sodexho's Directors Table for 14 years but we became uneasy with the management changes and hidden costs. We felt like a small fish in a big sea."

In the end, Stevenson says the solution was to choose a small contractor. "We are not abreast of the health and hygiene laws so we decided to get a small niche operator in," he says. "We have a fee-only revenue line and we know what we are getting. We can have a quick conversation about it and know what we are buying.".

Wendy Bartlett, director at independent contract caterer Bartlett Mitchell, has also noticed that clients are more likely to ditch the big boys for independents than go back in-house. She says her company wins at least 95% of its business from the big contractors. "Choosing a small contractor is not dissimilar to going in-house," says Bartlett. "It's a personal relationship."

The fact that catering is not a core business will keep clients contracting out, whether to large or small contractors, thinks Geoff Jameson, operations director at Aramark. "It's rare for catering to go back in-house - one of the key issues is food regulations."

Phil Hooper, marketing and communications director at Sodexho, agrees that if any companies are taking their business back in-house they are the exception rather than the rule. "Our stats show that 90% of business and industry catering is now contracted out."

In-house gems

Boots may be sewn up for the time-being but there are still lots of opportunities out there, says Phil Hooper, marketing and communications director. He points out that only 40% of government departments are contracted out and there is still 50% of business to be won in private schools.

The challenge, of course, is persuading them to contract out: "You have to have long-range marketing objectives and make people aware of what you provide," Hooper says.

The real challenge, of course is the Houses of Parliament, says Roy Miller, sales director at Aramark. "There are a few golden eggs around the country, but I don't ever see that one coming out."

Contracts for the future?

1) Houses of Parliament (up to 12,000 people)
2) AstraZeneca (two sites in Macclesfield, Cheshire - 9,000 staff)
3) Retailers such as Marks & Spencer headquarters and Harrods, both in London
4) Government departments
5) Independent schools
6) Public and private hospitals