Meal Plan Trends in Retirement Communities

As new generations of both residents and facility managers enter the Retirement Living markets, the demand for increased flexibility and choice continues to rise and technology is there waiting to meet the need. A quick walk through any of the larger trade shows like the Annual Leading Age Conference will show dozens of new vendors each year, all with an angle toward providing options and independence to both the end consumer (the Residents) and the facility operators.

Operators can no longer afford to underestimate the importance of dining options, food quality and service levels when residents are selecting a retirement community. Housing developers have increasingly placed greater emphasis on the kitchen area when designing homes in the last decade in recognition of the increasing importance of eating as a socially critical event in our day. This trend spills over into retirement living in the size, number, quality & atmosphere of on-campus dining facilities. In order to compete for market share, operators will no longer be able to simply offer one or two choices for dining and as such, it will become increasingly more difficult to accurately measure effectiveness or adequately plan in food service operations without the proper tools at our disposal.

At CARDWATCH we have noted the trend over the past few years toward issuing Flex Dollars to spend in on-campus dining venues is on the rise. “To date this year, 60% of new installations have opted to go with the issuance, at least to some degree, of Flex Dollar plans to their residents in an effort to meet the rising demand for flexibility in Resident Dining options.” Mr McMullen goes on to highlight, “almost all Retirement Facilities who have expanded or plan to expand this or next year have added new dining options such as Bistro’s, Cafes or Lounges which just five years ago were a rare occurrence.” These new venues give greater choice to Residents who can now use their Flex Dollars as they wish.

FAQ’s Behind Flex Dollar Plans

How do we determine how many flex dollars to issue to residents?

This is actually a lot simpler than one might think…just not easy! If you are switching over from a fixed meal plan such as 30 meals per month, you simply want to ensure that, based on the a-la-carte prices for your menu items, residents can still get 30 generous (or fair) meals with the flex dollars you issue each month. For example, if a resident is able to eat 30 dinners and the typical dinner would be about $10 if they were to order off the a-la-carte menu, then you should issue $300 per month. How they spend those Flex Dollars is up to them. They may be able to get 20 dinners and 15 lunches out of the $300 but the key is that it was their choice.

How do we set our a-la-carte prices for menu items?

Again, the answer to this is simple, but not easy as it will require you to do your homework. Visit other local restaurants where your residents may frequent and check their prices on key items as well as their menu offerings in general. Even if you set your prices the same as theirs, in most case you will still have a more competitive value since you may not be charging sales tax or allowing tips. Ultimately, you want your residents to get a fair value and make it inviting for them to stay in the community rather than leave to eat elsewhere. If your food and service are great and prices are fair, you should have a healthy participation rate and residents will complain less about the unused dollars you are taking away at the end of the meal plan period.

Should we allow the roll-over of unused flex dollars into the next meal plan period (month)?

This is really a decision for each community to make on their own. Perhaps the real question is “why would you need / want to?” If Residents have too much left in their Flex Dollar account at month end then you may be giving them too much to begin with. That said, you certainly cannot take it away from them by reducing the dollar amounts of their monthly entitlement for fear of an all out mutiny, so roll-over is not a bad idea, but can exacerbate the issue the following month when even more dollars may be remaining in a Resident’s account. No doubt that rolling over at least a portion of the unused balance is a kind consideration for those residents who may normally spend all or most of their Flex Dollars but not very effective if you are issuing far too much to begin with.

If you are converting your plans from Fixed Meal Count to Flex Dollars, start out with a “test group” of residents and issue Flex Dollars a little on the low side to start with. Once you know the average spending of Residents to get their promised meal allotment (eg. 30 meals), you can adjust the amount of Flex Dollars issued each month. Remember that by starting on the low side, you can always adjust up but taking dollars away will be tricky!

If you are a new community with a blank slate, you will have lots of freedom to create plans, but little or no sales history to work with to know if your a-la-carte pricing and Flex Dollar issuance match up. Once again, it is best to start out low and increase your issuance to meet your promised service level based on average spending habits.

I’ve heard that some communities experience issues with Residents who complain that they are being “robbed” when unused flex dollars are taken away at month end.

Should we allow residents to use their flex dollars in our other venues like the Gift Shop or Salon?

Yes you can, but is it wise for your operation? This is really a question for finance but keep in mind that Meal Plans (whether Flex Dollar or a fixed meal plan) are sold to Residents to cover costs of having a very expensive food service operation in-house. After all, your operation has to stay open whether resident participation is high or low. Secondly, you have a certain margin on your food service operation (within your control) which may not be enjoyed by a retail venue. By allowing residents to use their Flex Dollars in the gift shop, you may be trading a 50% profit margin for a 10% profit margin, ultimately creating a negative margin since the food service costs are still there no matter where the Resident spends those Flex Dollars. Lastly, be prepared for a run on toothpaste and candy bars. On the last day of the residents plan when they realize they have $20 of unspent Flex Dollars, you can bet they will go shopping and clean out your Gift Shop or salon! Now multiply that by the number of residents in your community!

In the end, experience has so far shown that Flex Dollars are best kept to the food service venues and that by more accurately pinpointing the initial dollars issued to residents for the plan period, you can minimize the dollars remaining at month end and keep residents happy.

by Kevin McIntosh | Kevin has 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.