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AGENDA ITEM: V
Florida Polytechnic University
Board of Trustees
Finance & Audit Committee
March 27, 2014
Subject: Approval of the Dining Services Contract
Proposed Committee Action
(1) Authorize the Chief Operating Officer to sign the agreement provided the agreement has a
clause that states that the agreement is effective only if it is approved and ratified by the full
Board.
(2) Approve the selection of Option B in the Agreement.
Background Information
Several campus food services providers were offered the opportunity to present food services
contracts to the University to “piggy-back” on for purposes of providing food services on
campus. Sodexo was the only provider that presented contracts for consideration. The proposed
contract results from piggy-backing on the agreement Sodexo entered into with University of
Michigan for its Dearborn campus.
The proposed Florida Poly agreement adjusts the University of Michigan contract based on our
student population during the first five years, and it includes three significant changes. First,
Sodexo is offering to make a one-time investment of $1 million, instead of the $50,000
investment at Dearborn. If the University accepts that investment, there will be annual
guaranteed minimum sales amounts that must be met. Second, Sodexo is offering an additional
investment of $500,000 if the University enters into an agreement with Sodexo for facility
services. And third, Sodexo is offering an Option B, which allows the University to keep a
portion of the meal plan revenues in lieu of receiving a minimum annual payment. The Major
Terms are set out in the “Sodexo Proposed Agreement Major Terms”, which are attached and
provided as supporting documentation.
Assuming that the Academic Affairs Committee, the Audit and Finance Committee, and the
Operations Committee approve of this Agreement, an additional provision was added so the
COO can sign the Agreement shortly after approved by the committees, but the Agreement will
only become effective upon being approved and ratified by the full Board of Trustees.
Staff has projected estimated revenues under both Option A and Option B for contract years 1-5
and is recommending that the University enter into the agreement and choose Option B. If 80%
of the students and employees on the campus participate in the dining services programs, staff
projects that the University will receive $3.5 million in estimated revenue over the next 5 years,
in addition to the $1 million investment by Sodexo.
Agenda Item V: Approval of Dining Services Contract 1
Fiscal Impact: See Proposed Agreement Major Terms Sheet.
Supporting Documentation:
Sodexo Proposed Agreement Major Terms
Agreement for Providing Food Services between the Board of Trustees of Florida Polytechnic
University and Sodexo America, LLC- DRAFT
Prepared By: Gina DeIulio, Vice President & General Counsel and Ray Galleno, Executive
Director of Business and Auxiliary Services
Agenda Item V: Approval of Dining Services Contract 2
Sodexo Proposed Agreement
Major Terms
(Adopting agreement between Sodexo and BOR of Michigan for Michigan Dearborn campus with
additional opportunities that are favorable for the University.)
General Terms:
Term: Initial Term is for 7 years with the ability of the parties to renew for three additional one year
periods. (June 1, 2014- May 31, 2021 initial term)
Termination: Either party can terminate for breach (30 calendar day cure period); or without cause by
providing 60 calendar days’ notice- however, effective termination date is at the end of a semester.
Premises:
IST Building coffee shop- completed no later than July 7, 2014
Wellness Center Food Services- (retail and non-retail) completed no later than August 14, 2014
Venues and Hours of Operation:
Hours of operations will be mutually determined, initial hours of operation:
IST Building Coffee Shop- will have Starbucks and Simply to Go (food & drink only) - open
Mon.-Thurs. 7:30 AM – 5:00 PM, and Friday 7:30 AM-1:30 PM, closed weekends.
Wellness Center- Retail- will have Starbucks, Grill, Sub Connection – open
Mon.-Thurs. 7:30 AM – 5:00 PM, and Friday 7:30 AM-1:30 PM, closed weekends.
Wellness Center- Non-Retail All-You-Can Eat with Food Stations (“cafeteria”)- daily
rotations of entrees and sides, salad/soup, pizza, deli, grill, desserts and beverages and
Open: Mon.-Fri. 7:00 AM – 9:00 PM for breakfast, 11:30-1:30 for lunch, and 5:00 PM to 7:00
PM for dinner; Saturday and Sunday 11:00 AM-1:00 PM for brunch and 5:00 PM to 7:00 PM for
dinner.
Wellness Center- Simply to Go convenience store that has prepackaged food, and sundries-
open Mon.-Thurs. 7:30 AM – 5:00 PM, and Friday 7:30 AM-1:30 PM, and Saturday and Sunday
11:00 AM – 7:00 PM.
Pricing of Meals
Prices charged will be competitive and in keeping with similar operations of businesses conducted within
the Lakeland, Florida area. University must approve any subsequent increases. Biannual meetings to go
over menu and pricing; pricing increases limited to the Producer Price Index, Foods Manufacturing
Series. (*For pricing, see Financial Arrangement section below.)
Fixtures and Equipment:
Sodexo will furnish, install and maintain all fixtures and equipment necessary to display, sell and conduct
its business on the Premises.
University is responsible for the maintenance of the core building systems (HVAC, plumbing, electrical,
gas, water and sewer for the building), as well as maintenance of the common areas of the building.
Sodexo is responsible for maintenance and repair of all movable fixtures and equipment owned by
Sodexo, and also of all University-owned equipment that Sodexo uses.
Agenda Item V: Approval of Dining Services Contract 3
Small Wares:
Small wares will be paid by the University or paid out of Sodexo’s $1M investment. Sodexo is
responsible for maintaining the wares and replacing them as necessary.
Utilities:
University provides the utilities; Sodexo is supposed to conserve resources where possible, use recyclable
disposables, and incorporate other sustainability measures. Sodexo is responsible for paying for its phone
service and local/long distance charges.
Custodial Services:
Sodexo shall be responsible for all custodial services for the Premises, including bussing and cleaning of
tables during hours of operation, and will place the trash in University provided receptacles.
Insurance: Sodexo is responsible for maintaining certain levels of Insurance coverage ($1M/$3M Commercial
general liability, $1M/$2M professional liability/errors and omission, worker’s compensation, $1M auto
liability). University is responsible for self-insurance/insurance as to the buildings against loss or damage
by fire, explosion or other cause normally covered by standard broad form property insurance.
Personnel:
The University will have the opportunity to interview final candidates for management positions (GM,
catering manager, and executive chef). The University has the ability to have a Sodexo employee
reassigned from our premises if they repeatedly fail to perform in a competent manner.
Sodexo is required to make every attempt to employ qualified University students.
Sodexo must pay for and perform background checks on all personnel assigned to the Premises in order to
ensure the safety of the University community (background checks will be performed initially and then
regularly thereafter).
Facilities:
The University is responsible for providing Sodexo with the space, facilities and accommodations the
University deems reasonably necessary to support Sodexo in providing the services under the Agreement.
Sodexo cannot use the premises for any other purpose.
Sodexo is responsible for providing, at their sole cost and expense, drawings, specifications and
construction plans meeting all applicable building codes and showing all initial improvements to be made
to the premises prepared by licensed architects/engineers knowledgeable with University and State of
Florida codes. All plans must be architecturally and aesthetically compatible with the building in which
the premises are located, as reasonably determined by University.
Sodexo is responsible for initial inspection and acceptance of existing systems as being adequate for their
operations. Any required changes to existing systems within the premises and/or building systems in
order to meet the needs of the Sodexo’s operation must be approved and coordinated by the University,
with Sodexo being responsible for the costs.
Collection of Payments and Technology System
Sodexo is responsible for processing the credit/debit card transactions using Sodexo’s technology systems
and broadband internet connectivity- existing independent of the University’s existing infrastructure. The
University will provide access to all necessary points of demarcation for broadband internet connectivity
and provide Sodexo with physical cabling structure necessary to extend broadband Internet connectivity
to the credit/debit cardholder data environment and associated hardware. Sodexo will provide network
security and management, and all associated hardware, for the credit/debit cardholder environment at
Agenda Item V: Approval of Dining Services Contract 4
University’s premises through Sodexo’s third party provider. Sodexo will comply with PCI/DSS
requirements.
Financial Arrangement:
1. Meal Plans. Sodexo will offer the following Meal Plans/Declining Balance (“DCB”) plans to
students and employees:
Description of plan Cost
14 Meal per week + $225
DCB
$1818.30
per
semester
50 Meal Block Plan
$415.80
per
semester
$650 Declining Balance Plan $600.00
$750 Declining Balance Plan $700.00
$150 Declining Balance Plan
(Summer Only) $150.00
“14 Meals per week + $225 DCB” also referred to as “14 Meals Per Week Plan” provides the patron with
14 meals per week during the semester in the cafeteria only and $225 DCB to use in the cafeteria or retail
space.
“50 Meal Block Plan” the patron has 50 meals to use the Academic year.
“DCB Plan” provides that, for example, the patron pays $600 for the semester, and is provided a
beginning balance of $650 against which the patron is charged $6.00 per meal in the cafeteria and actual
cost in retail spaces until the balance is zero.
2. Commission. Sodexo will pay the University a commission on the retail sales and operations as
follows:
5% on all net retail cash sales
5% on net sales DCB
25% on board meal plans (14 Meals Per Week Plan and 50 Meal Block Plan)
3. Scholarships. Sodexo will provide $15,000 per year for the University to use for student internship
scholarships of $5,000 each and/or meal plan scholarships.
4. Student Programming Fund. Sodexo will use 1% of total annual Net sales in all categories for a
student programming fund for enhancing the student dining experience at Florida Poly.
5. $1M Investment. Sodexo will make a one-time investment of $1M (vs. the $50,000 investment that
was in the Michigan agreement) for equipping the coffee shop and the dining facility- to be administered
and construction supervised by the Sodexo Solution Center. Sodexo will amortize the investment
(straight line over 9 years) as an operating expense; University owns the equipment/renovations;
University only pays the unamortized amount after expiration or termination of the Agreement.
However, in accepting the $1M investment, the University must guarantee a minimum in total meal plan
and declining balance sales (collectively referred to as “total meal plan sales”; if the total meal plan sales
do not reach the guaranteed minimum sales in any given contract year, the University is responsible for
Agenda Item V: Approval of Dining Services Contract 5
paying Sodexo the difference between the actual total meal plan sales and the guaranteed minimum
sales. (Guaranteed minimum sales amounts are different depending on whether the University chooses
Option A or Option B, amounts provided below).
6. Options A and B. In addition to the revenue streams above, Sodexo has offered the University Option
A (was included in the Michigan agreement) or Option B (alternate added to Florida Poly agreement).
The University must choose one of the options prior to July 1, 2014; however, the University can switch
from one option to the other option at the beginning of any subsequent contract year. Options A and B
are described below.
OPTION A (Minimum Annual Payment): Sodexo will pay the University a minimum annual payment
each year of the contract. The annual amount will be paid in 12 equal monthly payments. The Minimum
Annual Payment increases each year throughout the life of the contract as follows:
Minimum
Annual Pmt.
Year 1 $65,000
Year 2 $111,031
Year 3 $173,762
Year 4 $178,975
Year 5 $219,474
Year 6 $226,058
Year 7 $232,840
Year 8 $239,825
Year 9 $247,020
Total $1,628,985
The estimate for the total sales for the Year 1 under Option A are:
Description of plan Daily Rate
Semester
Rate
No. of
patrons
per sem.
X2 = no.
of patrons
2
semesters Total in Sales
14 Meal per week +
225 DCB $16.53 $1,818.30 219 438 $796,415.40
50 Meal Block Plan $3.78 $415.80 40 80 $33,264.00
$650 DCB (fall/spring) $600.00 160 320 $192,000.00
$750 DCB (fall/spring) $700.00 40 80 $56,000.00
$150 DCB (summer) $150.00 25 50 $7,500
Total: 484 968 $1,085,179.40
Agenda Item V: Approval of Dining Services Contract 6
Therefore, estimated Payments to University in Year 1 under Option A, based on
projected sales above for Year 1 are:
Program Minimum Sales Capital
Marketing* Scholarships*
Annual
Pmt. Commissions Investment Total
Year 1 $10,552 $15,000 $65,000 $220,195 $1,000,000 $1,310,747
The guaranteed minimum sales required for the $1M Investment under Option A are as follows:
Years
Option A Minimum Annual
Meal plan and DCB sales Total
Year 1 $851,134
Year 2 $1,701,158
Year 3 $2,175,300
Year 4 $2,240,559
Year 5 $3,365,112
Year 6 $3,466,065
Year 7 $3,570,047
Year 8 $3,677,148
Year 9 $3,787,463
Option B. Under Option B, Sodexo will offer the same Meal Plans/DCB plans to students and
employees, but Sodexo will only receive $1,232.00 per 14 Meals Per Week Plan, the difference will go to
the University in lieu of the Minimum Annual Payment that is in Option A. Note, the calculations below
assume the patrons will be charged $1818.30 per semester for the meal plan. The commission paid to the
University for the 14 Meals Per Week Plan is less, as the University forgoes the 25% commission on the
amount it receives for such meal plan.
The estimate for the total sales for the Fall and Spring of Year 1 under Option B are:
Description of plan
Daily
Rate
Semester
Rate
No. of
patrons
per
semester
no. of
patrons
for 2
semesters
Total in Sales
to Sodexo
14 Meal per week +
225 DCB $11.20 $1,232 219 438 $539,616.00
50 Meal Block Plan $3.78 $415.80 50 80 $33,264.00
$650 DCB (fall/spring) $600.00 160 320 $192,000.00
$750 DCB (fall/spring) $700.00 40 80 $56,000.00
$150 DCB (summer) 25 50 $7,500
Total: 484 968 $828,380.00
Agenda Item V: Approval of Dining Services Contract 7
Estimated Payments from Sodexo and receipts kept by University in Year 1 under
Option B, based on projected sales above for Year 1 are:
Program Mark-up on
Meal plan
Sales Capital
Marketing* Scholarships* Commissions Investment Total
Year 1 $10,552 $15,000 $256,799.40 $155,995 $1,000,000 $1,438,346.40
The guaranteed minimum sales required for the $1M Investment under Option B are as follows:
Years
Option B Minimum
Annual Meal plan and
DCB sales Total
Year 1 $675,244
Year 2 $1,555,241
Year 3 $2,035,058
Year 4 $2,144,684
Year 5 Est. $3,240,490
Year 6 Est. $3,337,705
Year 7 Est. $3,437,836
Year 8 Est. $3,540,971
Year 9 Est. $3,647,200
A projection of the revenues for each of the Options is provided for contract years 1-5 on the following
pages, with the assumption that 80% of the total population of students and employees on the campus will
participate in the dining services programs. Based on the projections, staff is recommending that the
University enter into the agreement and choose Option B. Option B is preferred because the projected
revenues over contract years 1-5 are approximately $500,000 greater than under Option A. In addition,
the University has the ability to adjust the price of the 14 Meals Per Week Plan to make it more affordable
for the patrons, of course, if the price of the Plan is adjusted, the revenues to the University will be
effected.
Agenda Item V: Approval of Dining Services Contract 8