“Enroute to A-La-Carte”: Operational Considerations For Spending Plan Management In Your Community.

In communities with no experience or history in automating the Point of  Sale and charge posting process, it is paramount that each method of transaction methodology be clearly understood prior to the installation of any Point Of Sale and Spending Management application.

The method chosen will impact customer throughput, the ability to provide excellent service, resident account management, sales reporting, and ultimately the accounting departments’ monthly resident invoice generation process.

Regardless of which spending management method you chose, it is imperative that each department understands the process and how that process affects your co-workers and their ability to perform their portion of the billing process.

First, in order to manage “Meal/Spending” Plans effectively, you must decide on how or what the meal plan provides; what happens when the “benefits” provided by the plan are exhausted, and what is the process when this occurs. You can offer an unlimited amount of choice to your Residents but you will want to think it through carefully so that you are charging an appropriate amount for the plan. Your ultimate goal should always be to provide the ultimate in value to the Resident without compromising your obligation to at least break-even or make profit on the food service operation.

Let’s take a look at a traditional “Meal Plan” that provides 30 meals per month. Below are some considerations you must make in order to manage this plan as effortlessly and efficiently as possible:

  • Is your Plan based on a calendar month or a date custom range?

  • Does the plan provide 1 Meal per day, or eat as often as you like until the meal allotment is gone?

  • Do you want to limit how much a resident is entitled to eat in a given meal? (eg. will you allow a resident to take two entrees as part of their meal-on-plan? or will you charge for the second entrée?)

  • Can the “Guests” consume some of the Resident’s meals on plan? If yes, how many?

  • What is the charge for Guest Meals? (Adult and Child prices)

  • What happens once the resident consumes all meals provided on the plan? Should charges be posted to the same meal account or a second charge account? Should this process be automatic or should the cashier/server be prompted by the system to make that decision?

  • Will you offer items on your menu that are not eligible as part of a meal on plan (Up charge meals) and if so, how will you track and charge for this?

  • Do you wish to set a credit limit on charges for one or more of the residents’ accounts?

  • Do you wish to manage what defines a meal on plan? For example 1xAppetizer, 1x Entrée, 3x Side Dishes, 1x Dessert, 2x Beverages?

  • Do you wish to exclude grocery, gift shop, and service charges from posting to the same account? or post to a non-food spending account?

  • Can grocery items (when sold in a Café setting) be included as Meal Eligible Items?

  • Can a meal plan be used at more than one dining location in your community and if so, do you want the same rules to apply (eg. price levels) at each location or apply unique rules?

  • Can unused meals or Flex Dollars be carried forward to the next period?

If you plan to sell items “A-la-Carte”you must also consider the following:

  • Do you sell “up-charge” meals? Many communities are now offering this service and must manage this process. How are up-charge meals identified? If, in your a-la-carte sales process, a standard meal-on-plan has a pre-defined value (or limit) of $12, and an up-charge meal is $18. Should the extra $6 charge be posted to the same account or to an alternate account? (CARDWATCH has a “Build-a-Meal” feature that will manage this process automatically).

  • Are guests charged a different “up-charge” price than residents? What about child guests?

What is the “Best” type of Meal Plan?

The “Best” Meal Plan will vary depending on whether you ask management or a resident.

For management, the best meal plan is a simple one. A “Meal Click” plan is about as simple as they come and includes a full meal whether the resident chooses to consume a full meal or not.

For example, if resident “A” shows up for Breakfast and eats toast and coffee, while their spouse, Resident “B”, consumes eggs, bacon, toast, home fries, juice, coffee and a muffin, they are both considered a “Meal”. Not fair, but incredibly easy for accounting purposes.

For residents, the “Best Plan” (and by far the one providing the highest value) is “Flex Dollars”. This method implies that each resident plan member is given (for example) a $250 “credit” to spend on prepared food in any dining venue on campus. The key benefit is that residents pay only for what they consume , rather than what is available . Using the “Breakfast” example above, Resident “A” consumes and is charged $2 for her meal, while her spouse consumes and is charged $6 for his meal. Very fair and easy to understand both from the front-end point of sale and back office accounting perspective.

Naturally, to perform a-la-carte pricing you need a POS system, a menu list, competitive pricing (what does your local external competition sell similar items for?) and naturally a back office real time Meal/Spending management system to manage the unique nature of resident spending.

Please keep in mind, that it is now possible to manage “Meal Clicks” with a-la-carte pricing, using the CARDWATCH “Build-A-Meal” feature which provides a “Meal Definition” (what item categories and quantities are included in each meal) and an option to charge/not charge for excess meal values or quantities.

Moving from a Fixed Meal Plan to A-la-Carte Pricing: How do we establish a fair retail price?

All communities struggle with their retail pricing when adopting an a-la-carte policy. They are often unsure if pricing should be set to merely cover food cost or if they should add labor and overhead as well.

The answer is once again in the simplicity. Consider that for “Meal Plan” purposes the item pricing is quite irrelevant since you will give credits (in the form of Flex Dollars) to residents to purchase food to offset the change from a fixed quantity of meals. Therefore if you set your retail prices low, you should provide fewer flex dollars to your residents each month. Set your prices higher and you will issue more flex dollars.

In the end, you want to ensure that with the “Flex Dollars” issued, the resident can reasonably replace the number of Fixed Meals on Plan that you provided them under the “old meal plan”.

The real question should be: “What should the resident (and guests) pay for additional meals once the “Flex Dollars” are gone?” Before this question can be answered you must first ask yourself, “Is the food service operation a cost center or a profit center?”

If you answered cost center , then you need to apply pricing that will cover food cost, labor cost and some other expense items such as linens, cleaning, utilities etc. without much consideration for the overhead costs of providing food service (eg. equipment, space, furnishings, lease-hold improvements, etc).

If you answered profit center then retail pricing should be set to result in a profit after total expenses and overhead are covered. As a general rule of thumb, raw food ingredient cost should be approximately 25% to 35% of your retail pricing. The variance is due, in part, to the delivery environment. Self serve / Café / Buffet may have a higher average food cost, offset by lower labor costs; while fine dining table service will have lower food costs offset by higher labor costs (Servers, Hostess etc).

Next you must consider your competition. “What do your competitors charge for similar food items in a similar dining environment?” If you don’t know, you should because your Residents inevitably will. Human nature drives us to look for value; best price and quality for the least amount of effort and maximum enjoyment. Therefore all things being equal, if you provide the same quality, price and ambiance as your competitors, Residents will frequent your in-house venues rather than traveling to an outside dining facility most of the time.

You also have a distinct advantage over your competitors in that tipping is typically not permitted in a retirement community setting and in many cases sales tax is not applicable, making your in-house dining experience that much more financially attractive to Residents.

The benefits of A-la-Carte pricing far out weigh any draw backs, however you should take these points into consideration before making your decision:


  • Fair policy for residents in “pay for what you eat” methodology

  • Residents may enjoy additional meals under a “Flex Dollar” policy vs Meal Clicks.

  • Item sales reports, as a result of A-la-Carte service will assist in measuring the success or failure of menu items including accurate pricing

  • Item sales reports, as a result of A-la-Carte service will assist in inventory management and better raw food/ingredient buying practices

  • Item sales are logged by resident to assist with nutrition / dietary counseling or simply for account review and receipt reprints

  • Food orders may be broadcast to the kitchen allowing servers to spend more time on the floor, improve service and reduce traffic in and out of the kitchen

  • Non prepared food items can be filtered out in a single transaction so they are not taken as “Meal Plan Eligible” items. (Example: Quart of milk not allowed as meal eligible item) allowing you to automatically capture extra charges and control consumption in a fair manner.

Draw Backs:

In a “Use It Or Lose It” environment, Residents may feel you are removing money from their account, if at the end of a “period” you remove unused flex dollars.

  • A-la-carte typically requires additional POS terminals to maintain service levels

  • Each “Dining Seat” in a retirement setting typically represents a separate guest check and thus a unique charge, resulting in slightly slower data input than a traditional restaurant.

Managing Resident Accounts

Similar to a bank, CARDWATCH allows each resident to manage multiple accounts. In addition, each account can be set up to:

  • Allow Meal Items Only: This plan type is typically used as the primary “Meal Plan” account. Each “Menu Item” can be flagged as a “Meal Plan Eligible Item” (default) and only items flagged as “Yes” can be posted to this account. Items flagged as “No” must be posted to an alternate account which permits this item type

  • Allow Meal and Non Meal Items: This account/plan type permits meal and non-meal eligible items (plus any retail item or service) to be posted.

  • Allow Non-Meal Items Only: This account/plan type allows only menu items flagged as “Not Meal Plan Eligible” as well as any retail products or services to be posted.

In addition to the “Account/Plan” item filter, a default “Credit Limit” must be assigned, which can be modified for each individual resident. If the Default “Credit Limit” is zero, no additional charges can be posted to this account, thus requiring additional meals or guest meals to be posted to an alternate account. (Note: The assumption here is that this account is used for “Meal Plans” whether fixed meals or flex dollars, and once the meals or flex dollars are used, no other charges will be accepted through this account/plan.)

Here’s how the typical real time “Spending Management” application is set up in retirement settings:

  1. Define your spending Plan(s): Whether you offer one (1) type of Meal Plan for all residents, or give them a choice, your requirements must be defined and setup in the Spending Management Application so that your policies can be managed automatically .

  2. Decide how many accounts each resident should have. (Example: One account to manage “Meals on Plan”; A second account to manage all “Extra Meals” including guest transactions: and a third account for all retail goods and services charged)

  3. Next, d ecide how much credit you wish to grant each resident, for each account. (Each spending plan provides a default credit limit for ALL members of the plan. In addition, administration can customize each residents individual credit limit by over-riding the “plan settings” to suit their personal requirements.)

  4. Assign Resident (or groups of Residents) to a Spending Plan.

  5. Perform transactions at POS Stations. Here’s how the process works
    a) Enter Items at POS Terminal: When entered, items are filtered immediately for meal and non meal qualified items.
    b) Press Meal Plan/Charge Key: Items, based on the above filters, are posted to the correct account immediately. Qualifying “Meal Items” are posted as a “Meal On Plan” OR deducted from the “Flex Dollar” Balance.
    c) The receipt, if printed will reflect the items purchased, the account(s) to which the charge occurred, and the new balance for each affected account.

  6. All charges are accumulated in each account until the end of the “Meal/Spending Plan Period” at which time the “Accounting Administrator” will export (based on your accounting application) charge transaction information for each resident. This information is available in summary or detail format and may include:
    a) Resident Account Number
    b) Transaction date
    c) Transaction amount
    d) GL/Billing Code (Note: There may be multiple GL/Billing codes for each transaction.

Note: although the charges are exported to your primary billing application at month (or period) end, CARDWATCH stores transaction detail for all residents, staff and departmental charges forever. This permits detailed receipt reprints or reports at any time and provides a complete audit trail.

Setting up an a-la-carte environment for the first time can be a daunting task whether you are an existing community or a brand new facility. A new facility has its advantages of being a clean slate and not having to worry about Resident resistance or ensuring value from a pre-existing fixed meal plan remains strong. On the other hand, with no historical sales and operational track record, setting prices and menus can be a tricky task even for the most experienced manager. If you are unsure about how to set up a-la-carte pricing and service delivery, contracting an outside consultant experienced with and specializing in Retirement Communities would be a wise investment that could bring a handsome return.

Gary McMullen has over 30 years experience in the Point of Sale and Privilege Management (meal & spending plans) industry and has provided consulting services to the Retirement Community and seniors housing market to help shape what is possible today.