Types of catering contract

by Angela Frewin, Friday 11th June 2010 15:38

During recession-hit 2009, food service management companies were obliged to take on greater commercial risks as profit and loss contracts grew by more than 75%.

The drift away from cost-plus contracts (where clients are billed for the cost of the operation, plus a management fee) continued. Nevertheless, they still account for nearly one-quarter (24.9%) of all contracts, but this is well down on their heyday in 1994, when they represented more than 60% of the total market.

Fixed price contracts continue to dominate the market, although their share dropped to 63.7%, down from 71.1% in 2008.

During 2009, food service management firms invested more than £26m in client premises, a large rise on the £16m invested in 2008.

Investment in larger projects costing more than £250,000 became more pronounced in 2009, with most contracts now being dependent on the investment.

The industry has invested £175m over the past six year, with smaller operators accounting for 10% of the total.

These facts and figures are reported in the Food and Service Management Survey 2010, published by the British Hospitality Association. The full report (which is free to BHA members) can be bought for £95 (for the printed version) or £50 (for a PDF file).  For enquiries or orders, phone 0207 404 7744 or contact Philippa Brady.


More facts and figures from the Food and Service Management Survey

UK contract catering turnover >> 

Number of meals served by UK contract caterers >>

Key ratios in contract catering >>

Number of employees in UK contract catering market >>

Structure of the UK contract catering market >>



 

Number of contracts followed (in brackets) by their percentage share of total contracts


       

Cost Plus and management fee contracts

Fixed price and performance guarantee contracts

Profit and loss, concession and total risk contracts

Total contracts
ψ

2009 4,143 (24.9%) 10,553 (63.7%) 1,887 (11.4%) 16,583 
2008  3,842 (22.6%) 12,070 (71.1%) 1,071 (6.3%)  16,983 
2007  4,855 (27.6%) 12,035 (68.4%) 713 (4%) 17,603
2006  4,845 (27.8%) 11,945 (68.8%) 583 (3.4%) 17,373
2005^ 5,182 (30.5%) 11,212 (66.1%) 575 (3.4%) 16,969
2004 4,898 (27.2%) 9,335 (51.8%) 3,685 (20.4%) 18,028**
2002 5,585 (29.4%) 10,091(53.2%) 3,250 (17.1%) 18,979*

 

 

ψ The figures exclude 118 contracts in 2005, 36 in 2006, 174 in 2007, and 46 in 2008

^     Adusted to take account of Compass's sale of Select Service Partners in 2006. Excludes 118 purchasing contracts
**   includes 55 purchasing contracts
*     includes 53 purchasing contracts



Definition of terms


Cost Plus/management fee: The client is billed for the cost of the operation plus a management fee

Fixed price/performance guarantee: The client agrees a total subsidy and costs cannot rise above that figure

Profit and loss concession contracts and total risk contracts: The caterer and the client share the profit (or the loss); in total risk contracts the caterer invests in the facility and earns all the revenues.


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