Flexible Resident Spending Plans: A New Budget Process

By Schelley Hollyday

If you have implemented or are anticipating implementing flexible spending (a dollar value allowance rather than meals per day/month), your food service budget, metrics and results take on a different approach than with a meal count based plan.

Under a meal count based plan, the budget centers on a desired “cost per meal” and financial results are measured against that cost.  Once your meal plan shifts to flexible spending dollars, a true restaurant model of thinking moves into play.  An increase in cost per meal, reflects on the choices your residents have made using their allowances.  Your flexible plan gives them the opportunity to select more expensive menu items and “spend” their dollars accordingly.  If a resident uses all their plan dollars, additional purchases become realized revenue for the community, offsetting any additional food cost.  Metrics shift from “cost per resident meal” toward average cost per transaction or average sales per transaction.

Communities moving to or using flexible spending need to base their budgets and monthly operating results on achieving the desired food cost percentage.  Like restaurants, this will typically range from 33 – 40%.  It is a detailed process which involves accurately costed menu items and a strategic pricing methodology.  Communities typically use different food cost percentages for different menu items groups or food departments.  For example, a pre-packaged bag of chips may sell for a 50% food cost, but pasta items sell for a 30% food cost. Even within a menu item group, you may break it down further into subgroups or “classes”.  For example, fountain and pour beverages might have a higher margin than bottled.

For those areas of the community that are not on flexible spending or a-la-carte pricing such as Skilled Nursing and Assisted Living, the cost of meals is developed through a standard process of food, labor, and supply costs.

More communities are moving to a profit and subsidy statement for their dining programs, just like restaurants!  The Dining Services department gets “revenue” from meal plan dollars, as well as the “value” of the meals provided to Skilled Nursing and Assisted Living, internal catering and requisitions.  Additionally, “real revenue” that is generated by resident sales outside the meal plan, guest sales, employee sales and private catering sales all contributes to the Dining operations revenue.  Operating costs are deducted to determine profit or loss (or subsidy).

The Items Sold  or Item Movement report generated by your POS system will provide the necessary data to determine the overall product mix.  A specialty POS vendor like CARDWATCH that has extensive experience in the senior living market and flexible spending plans will be a critical partner who can help guide the process with the right set of tools. 

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About the Author:

Schelley HollydaySchelley Hollyday has over 25 years of experience in the Senior Living industry with a focus on hospitality.  She has held senior leadership positions with two national senior services management companies. A graduate of the Hotel School at Cornell University, Schelley has taken her love of customer service and hospitality to the Senior Living industry. During her career, Schelley has worked with over 300 Senior Living communities.  She is a recognized speaker, including Professional Association and university lectures.  She has done extensive research identifying best practices and hospitality trends.

Recognizing that Senior Living Communities are quickly assimilating to the hospitality model, Schelley can provide the necessary support to communities transitioning to a more specific hospitality culture. Consulting support to enhance hospitality including a strong customer focus, restaurant operations (particularly when opening new venues and concepts), concierge services, and food and beverage operational analysis, including financial and quality benchmarks.  For more information visit: www.CCRChospitality.com.