Jerry Brand's Host Contract Management sees the Government's decision to invite smaller firms to bid for its business as an opportunity to accelerate growth, and he has enlisted former industry big-hitter Bill Toner to help drive the initiative. Janie Stamford reports
As the Government plans to award a quarter of its contracts to small and medium-sized businesses (SMEs) those caterers that might have shied away from going head to head with the big players now have an incentive to take on the establishment.
Though some have baulked at the amount of red tape, environmental standards and tender terror associated with public-sector work, other caterers have looked upon the initiative as an invitation to reposition themselves in readiness.
At Host Contract Management, Jerry Brand has long been considering how to break through and accelerate the firm's growth. His business plan predates the coalition Government's intentions but does fortify his move towards a more corporate culture.
"We've now got more than 80 contracts. As a company gets towards the 100 mark there's a glass ceiling that needs to be broken through," Brand says. "When you do, you've got to become more corporate."
Enter Bill Toner. With 18 years at Sodexo (formerly Gardner Merchant) - the final five of which were as managing director for the UK - and then six years as chief executive of Aramark, Toner knows something about contract catering from a corporate perspective.
Rumours that Toner was joining Host began circulating within months of his exit from Aramark in 2005, and although both parties denied them at the time it has now come to light that for a while there was a grain of truth in the whispers.
Wheels were, indeed, in motion for Toner to join Host, a move he says he was very excited about, but during his lengthy gardening leave from Aramark his best friend died, and after re-examining his priorities Toner decided to give himself a longer break.
However, Brand doesn't give up easily and continued to badger the retired catering veteran over the years. Toner says: "He cleverly asked me to facilitate his management team meeting. Even though I had no intention of doing more than that, I found that I really liked what Host was doing. It made sense to me."
Managing director Brand has appointed Toner as non-executive chairman, a decision that suits both parties because Toner says he isn't interested in being part of the "Jerry Brand Show". It was the Host team that engaged him.
"That's why I made him chairman," says Brand. "So he'll be a ball and chain around my leg, because I know what the Jerry Brand Show can be like."
Entrepreneurial and energetic, Brand admits that he can get carried away with getting on with the next big idea and welcomes the grounding and long-term strategy focus of Toner. Despite their reputations for having big personalities, it is their mutual respect for each other's contrasting routes to the top and approaches to business that is likely to make the new partnership a success.
"If we'd come up the same channels, I would be highly suspicious of whether it would work, because we would have done all the same things," says Brand. "I listen to what Bill has to say because I haven't been there. Russell & Brand had around 330 jobs by the time we sold it, but that's small in comparison to the thousands at Sodexo and Aramark."
While Brand quips that one of the reasons for Toner's appointment is because "it's lonely at the top", it's clear that the appointment is integral to Host's five-year strategy for growth. Not only do they intend to smash through the 100-contract barrier, but Brand and Toner intend to give the five major operators - Compass Group, Sodexo, Aramark, Elior and BaxterStorey - a run for their money while they're at it. "We're going to take the fight to the big boys," says Toner.
The first plan is to take the company's national coverage and divide it into nine territories (from January 2011), which will be further split into "hot spots" and "enterprise zones". The hot spots, where Host already has business, will be used as hubs from which to grow the business into the currently Host-free enterprise zones. The company's offices in Liss, Hampshire, will continue to act as the nerve centre.
This strategy is aimed at doing more than just growing the business. Brand and Toner have a shared passion for their people. As much as the staff will be crucial to the success of the business development plans, the growth and restructuring of Host will also be instrumental in providing development opportunities for its personnel.
Brand says that one of the benefits of having nine territories is that it will allow the company to provide a localised service while still being part of the whole Host concept. The senior teams in each division will take responsibility for and grow the business in their regions with the benefit of a central support structure. "Get that right and you've got people believing in you and working with you," he adds.
Brand and Toner are keen to involve the management teams in the five-year plan right from the start. They want them to be engaged, to buy in to the structure and the strategy. "It's not just about me and Jerry," says Toner. "I've met a lot of talented chefs and managers here at Host who naturally want a bigger and better job, and it's our responsibility to provide growth and opportunity."
Though some caterers question the practicalities of the Government's desire to award 25% of its contracts to SMEs - red tape and stringent requirements will still be a barrier to many small and medium-sized enterprises - Brand and Toner are seeking to position Host to maximise these opportunities.
Toner's experience and insight into how the major contractors operate gives Host the essential expertise that Brand was looking for. The new chairman says that the big players will divert resources into winning the bigger contracts because their size makes them hungry for growth. "When you're turning over a billion pounds you need lots of growth just to stand still. They'll divert their energy over there, and we'll sweep in over here and attack."
Despite his absence from contract catering over the past five years, Toner has kept up to speed with industry activity and has identified the chance to capitalise on internal changes at the top of the sector. "You see all the restructuring and business losses going on at the big players," he explains, referring to redundancy announcements at both Compass Group and his former employer, Aramark. "It all has a profound effect on everything they do internally.
"People get demotivated. They're looking over their shoulder to see who's going next, and clients start to feel it because the infrastructure they were dealing with has gone. It's a fabulous opportunity to swoop in from the sidelines."
Host will initially target geographical locations where it is already naturally strong, and next year the aim is to win 30-40 contracts in order to position the company for further growth in 2012.
With VAT set to rise to 20% in January and the coalition Government's austerity measures aiming to make sure the pain is shared by everyone, such ambitious plans for expansion might seem overoptimistic. But although Brand concedes that it is a challenging economic climate, he remains confident.
"Last year we made £200,000; this year we're probably going to make £400,000; and next year we're probably going to make more, but it is tough. The market has become much more commercial, but you have to catch it with marketing expertise such as meal deals and bundle offers," he explains.
To meet the growing client demand for nil-cost contracts Host has developed two offers: a full-service one for those prepared to pay for it and a "high street" offer. The two are designed to look similar so as not to compromise the Host identity, and the food is largely the same, but it's branded differently so that Host can put the price up and achieve a higher gross profit - Brand says that while there's more marketing involved, it shunts the sales up - and a cashless system will normally increase sales by 10-15%.
"Every contract is different, and once you understand that you can start to tailor the service to your particular niche," says Toner. "You can then either support additional costs because you're attracting customers to your service or you can slim costs down, as long as the end result is the client is happy. If you get that right, it's an easy business."
"And that's it really. Off we go," adds Brand.
Staff more than 550
Pre-tax profit in 2009 £208,000
Projected profit for 2010 £400,000
Growth plans to more than double in size by 2015
Annual turnover2004 £42,000
A history of Host
When Jerry Brand launched Host Contract Management back in 2004 he made the bold decision to take the business national straight out of the traps. Following the sale of Russell & Brand to Marriott in 1996 he had the confidence to think big and the cash to invest: start-up costs were £1.2m.
The company began with three one-year rolling contracts in independent education and healthcare worth nearly £1m in sales, and six years later it has diversified into business and industry, further and higher education, beacon state schools and activity camps.
In 2008 the company delivered its first annual profit, of £54,739 (2007: a loss of £141,187), and turnover was £24.2m compared with £15.8m a year earlier. However, in 2009, a year described by Brand a one of the toughest he'd experienced in 27 years, turnover slumped to £14.5m, but despite this Host still achieved a modest profit of £41,000. Tight cost controls and the shedding of unprofitable contracts were credited with keeping the firm in the black.
Throughout the recession Host has continued to invest in IT and training, which has resulted in staff turnover remaining at just 2.5% for two years running. The firm has focused on four principles: cash is king; quality and value for money; investment in sales and marketing; and keeping the best team together ready for the recovery.
Six years after Host launched it has reached a turning point: either tread water and risk being left behind, or go for growth. Brand says it's an exciting time for contractors. "It's tough, but at the same time if you are flexible and can offer clients real value for money, then it's a business worth being in."
All corners of industry are cottoning on to the fact that social media are not simply buzz words but a practical business tool that won't go away if ignored. It is hardly surprising to see a contract caterer begin to embrace the benefits. In addition to a brand identity on Facebook, Twitter, YouTube and LinkedIn, the company's labour-intensive newsletter P&P has been transformed into a blog called On The Go.
"P&P, as in ‘a pinch and a punch', used to come out on the first of every month, and then it went to bi-monthly, but it still used up too much time and resource," explains Brand. "With On The Go we can communicate with staff as well as the outside world much more quickly."
Host is in the process of adding videos to its Meet the Team page, which Brand believes can say much more about a company than simple text. "This then moves into things like sales proposals and operations reviews, as we can then talk to clients about real people and events as opposed to the old-fashioned slick sales presentation and waving hands," he explains.
While the social media strategy has got both of the industry veterans at the helm of Host all fired up, Toner is keen to point out that the results of the social media efforts must be tangible. "Our goal is to get everybody participating, and when we all are it's amazing what can be communicated."
By Janie Stamford
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