Dear Meal Plan Stan…


From: Lance Finance [lance@aretirementcommunity.com]

Sent: Wednesday, October 05, 2011 12:54 PM

To: stan@seniorlivingpos.com

Subject: question about meal plan fee increases

 

Dear Meal Plan Stan,

Our community is in the process of informing our residents of our new Declining Dollar Dining Plan. A resident asked today about how we will handle future increases to the dining dollars issued since food prices will go up. My first thought is that annually we will make an adjustment of 3-6% on menu prices depending on inflation and rising food costs. Should this correspond to the same increase in the dining dollar amount? How have you handled this in your other communities?

Sincerely,

Lance from Finance

 

Dear Lance,

You raise a great question which sounds like it may have a complicated answer but in fact, it is really quite simple. Dining Dollar plans are in fact, pretty much the same as traditional fixed meal plans when it comes to figuring out how to increase plan fees to Residents.

The menu prices and the Dining Dollar amount issued each month should move together but ultimately don’t impact your true bottom line, just like your fixed meal plan does not. What matters the most is what you charge residents for their meal plans on their monthly invoices / statements and your total food costs (which are tied to participation). In my opinion, menu prices in this scenario are about the optics of value. Relatively speaking, as a Resident, does my dinner in the dining room at my community “appear” to be a good value compared to outside restaurants? If yes, I tend to participate more. Few will think about their monthly fee each time they sit down to eat. They will think about their monthly fee once per year when you increase it!

Finance should look at total food and related overhead and set the annual increase to th monthly plan fee to ensure gross margin. Dining sets menu prices in response to market forces and recommends Dining Dollar amounts that should be issued to ensure Residents can still get the same value as last year. Not much change from a fixed meal approach from the accounting standpoint since the objective remains to give residents enough dining dollars to continue enjoying, for example, 20 dinners and 10 lunches (generally accepted average breakdown of a 30 meal per month meal plan).

One thing to keep in mind through all this are the non-meal plan purchases. What happens when a guest or visitor buys food in your bistro or dining room?  If you have not priced your menus according to the market, you will be subsidizing their transactions. A market driven pricing strategy will accommodate your “real world” margins for things like cash transactions and extra charge purchases.  If you did not increase you’re a-la-carte prices along with Plan increases, margins would shrink on your cash and charge sales.

Even if your dining operation is not managed as a profit center, watching the bottom line should always be on the menu.

Your friend,

Stan

 


Meal Plan Stan (aka Kevin McIntosh) as more than a decade of experience in the Point of Sale and Privilege Management (meal & spending plans) market for senior living providers and has provided consulting services and developed innovations for customers to help shape what is possible today.