For years, vending machines have played the dual role of the anti-R.D. and anti-FSD in the nation's schools.
Nutrition activists saw them as evil disbursers of high-calorie soft drinks and high-fat snack foods. School directors pointed to them as competitors for limited student school meal dollars. And principals often relied on them as indispensable, bottomless piggy banks, generating cash for everything from sports uniforms to staff parties.
Lost in the controversy is that vending machines are, well, just automated dispensers. “It's not the machine that's a problem,” says Leo Lesh, “it's what's in the machine.”
Lesh, executive director, enterprise management for Denver Public Schools (DPS), is in the vanguard of districts around the country that see an opportunity to expand school foodservice and its presence on school campuses by embracing the world of automatic merchandising.
A Natural Extension for Foodservices
School foodservice has always been a complex business. One of the greater challenges has been coping with the sale of “competitive foods,” that is, food and snacks sold outside of the USDA-regulated school meal program. Vending has always made up a large part of such competitive food sales.
Historically, this was never a level playing field. The problem was compounded with the advent of local wellness policies and community concerns about nutrition.
One solution increasingly being looked at in many districts is a move to assign more responsibility to school foodservice operators (what USDA refers to as “school food authorities,”) giving them oversight authority for any food items a district sells. For some directors, this is a very desirable outcome.
“I think vending is a natural extension for foodservices,” Lesh observes. “Most directors already run good businesses. We know how to handle money, how to manage procurement and how to ensure food safety standards in our food preparation and handling. We understand USDA's nutrition regulations and also know what kids want. So it's a good fit for us.”
Vending in particular has the potential to be a great adjunct to the school meal program and a viable business opportunity, Lesh believes, augmenting existing business and extending the reach of the cafeteria in both time and space.
Lesh and others say the advantage of assigning administrative responsibility for vending to the SFA is that it increases accountability and control. The foodservice director is more likely to ensure that vended foods comply with federal and state laws as well as local policies. They can also ensure that offerings are coordinated with those already offered in school cafeterias.
At DPS, the vending program has been profitably managed by the foodservice department for the past 10 years. All of the products vended on campus meet minimum nutritional standards and vended beverages all comply with AHG (Alliance for a Healthier Generation) guidelines.
More recently, Lesh was instrumental in getting the district to serve as the beta site for a unique pilot program in Colorado to test vending in an Offer-vs.-Serve reimbursable meal model.
At one high school, hallway vending machines provide rembursable meals during an extended, 10 a.m.-4 p.m. lunch window. Students can select a customized, reimbursable breakfast or lunch meal, paying for it via their debit cards or (if qualified) obtaining it for free once they fulfill the requirements for it to meet the reimbursable standard.
To Own or Not to Own
At the same time, vending is a challenging business model that requires new skills and practices. Districts considering it as an area to explore have two primary options.
The first is to assume administrative responsibility for a campus-wide/district-wide vending program. Foodservice applies its expertise in procurement, marketing and nutrition but adds the responsibility of selecting and overseeing third-party, full-service vendors to operate its program.(See RPI vs.RFI)
The second approach vests operational responsibility for the vending program with the district foodservice department. For this to be viable, the SFA must add the staff and expertise necessary to run a vending program. This allows a school district to build its own programs, and set prices and commissions. Some economic models suggest this is a far more practical and profitable approach if it is done successfully. At the same time, vending machines are not inexpensive to buy or lease, and they require maintenance and specialized skills to manage.
In a hybrid approach, some machines are owned and operated by the district and some by a third party. For example a regional vendor might handle beverage machines, while all others are serviced by district personnel.
This is the approach Denver has taken. Foodservices owns and operates its snack machines and is in the process of reviewing its beverage contract. Foodservice shares its vend revenue with internal “clients.” (See How a Vend Program Evolved
Another issue: while DPS students have debit cards that could easily be tied into the vending system, “Just saying students could use meal credits in vending machines can have a negative connotation,” says Lesh. “Parents don't want to think their kids are spending money on snacks.” So DPS doesn't allow this option except in the reimbursable meal machines.
“Although we provide the oversight and management, we don't take any money for the beverage contract,” says Lesh. To meet legal requirements regarding revenue in the not-for-profit school meal program, DPS uses a separate account for the program so it can share profits with student and school groups. “If we make a dime and they make a dime, it's win-win for all of us. Plus, it benefits the kids,” he adds.
Regardless of which approach a district takes, progressive operators also need to consider how vending can be tied in to existing and future technology and accounting systems.
The easiest approach is to link vending into the district's existing POS system. Connecting vending machines to student accounts permits the extension of a la carte sales to other areas of the school. It can further expand the concept of “cashless campuses,” which is an important element of campus security.
The technology for this is fairly well known and tested. Using either hardwired connectivity or RF devices, drop-in modules can let vending machines communicate via a LAN/WAN application. The POS system treats a vending location just as it would any other terminal, and recognizes any interface currently available from the POS vendor, including PIN pads, cards and biometrics.
This model lets an operator capture the same data he or she would from a lunch line terminal — sales, items sold, cash collected, etc. The obvious advantage is that it creates an auditable record of vending sales, whether the machines are operated by the district or a contractor.
There are several concerns that districts should address in adapting the POS system for vending, security being the most critical. A vending machine should simply be a node on the network, exchanging data with the server. In contrast, if implementation requires that the student database be uploaded to the machines, the possibility of data theft increases exponentially.
Similarly, ensuring the integrity of student accounts is critical. A simple interface in which students enter ID numbers can create an easy environment for rogue students to “phish” for active accounts, using them to make unauthorized purchases. Thus, vigilance is critical. Ideally, the same level of control that exists at a serving line would exist at a vending machine.
At DPS, IT department manager Joyce Rivera says “error traps” built into the interface help prevent such schemes.
Extending Reimbursability and Reach
Advances in vending technology are also making possible new opportunities. One of the most interesting for schools is the chance to vend reimbursable meals, extending the school meal program beyond the cafeteria.
The obvious advantage is the possibility of reaching students who, for any of a number of reasons, don't, won't or can't go to the cafeteria. The less obvious advantage is that states have granted waivers to districts that allow them to extend the length of meal periods, permitting students with scheduling conflicts to obtain reimbursable breakfasts and lunches outside of traditional service times.
The truly far-reaching advantage is that this approach extends the area in which students can receive and consume meals. In that context, existing federal regulations that apply to competitive foods are then in force wherever a machine that vends reimbursable meals is located.
“I initially got started in this program because I have schools with 1,700 students and only 50 minutes to serve them lunch,” says Lesh. “A principal's concern is education and how to carve out education minutes from the school day — and that often means less time for lunch. Principals count on the director to figure out how to feed students within the time frame they make available. You're the food guy!”
“I also have gotten calls from small private schools,” adds Lesh, “asking how to provide meals to kids when they don't even have a kitchen. I think meal vending is a natural solution in such locations.”
Wheeling and Spiralling
School meals can be disbursed from two types of machines — carousel and spiral. In a carousel machine, there are typically nine tiers of wheels, with each wheel divided into six wedges. Each wedge vends a complete meal.
The machines are efficient and easy to maintain, but choice and capacity are limited as they can offer only pre-assembled, five component meals. This can be a problem if a school wants to meet federal requirements for offer vs. served meals (in which a child can refuse one or two items from the offered lunch). This limitation also tends to raise overall food costs.
The second type of machine is a spiral vendor. Such machines may offer as many as fifty different item choices lined up in individual spirals that turn when an item is selected, dropping the item into a dispensing tray. Spiral vendors have much greater capacity and variety.
The spiral model being tested in Denver allows each student to select from a full array of menu choices and only vends a meal when offer vs. served requirements are met. They use an “elevator” that collects the items one by one, then lowers them to the disbursement tray (the advantage is no bruising or breaking). But spiral machines are more complex and harder to maintain.
“We actually use a combination of carousel and spiral machines,” says Lesh. “I have several meal machines in schools and offices. In the schools, they're primarily for after school. In the offices, they are where we don't have lunch service. There's a place for both in our operations.”
The most extensive venture into vending involves the creation of a full subsidiary vending business under the school foodservice program. As Lesh observes, vending can be a very profitable business. Conceivably, if the district acts as the vend operator, all revenues flow to the district. The SFA can pay royalties to various clubs and organizations that currently benefit from vending sales and still reap the profits that would accrue to the vending contractor.
Would that it were so simple.
One advantage vend operators have is the economy of scale that comes from managing multiple contracts. This might be offset in some districts by applying the same principle of economy and using existing staff and resources for vending operations. To the extent that increasing volume spreads fixed operating costs over a broader base, the marginal profit of the operation improves. Similarly, increased purchasing volumes might conceivably lower prices for items needed in the traditional meal program. And the marginal cost of producing additional kitchen-prepared meal items packed for vending is much lower than purchasing the same items from a vendor.”
On the other hand, vending operations, both administratively and technically, do require an additional skills set. To be cost effective and profitable, it is likely a district would have to hire a manager who can effectively manage the program as well as maintain the machines. Depending on the number, location, and type of machines, additional staff, or additional hours for existing staff, would need to be budgeted at sites.
Finally, there is the acquisition of equipment. Depending on a number of factors, districts might lease, purchase, or lease-to-purchase machines.
Evaluating the Opportunity
Summed up, vending offers tremendous opportunities to districts that want to expand their foodservice programs in this direction. It can be financially worthwhile and contribute to the district's commitment to a healthy nutrition-oriented environment. But it is not without its challenges. A careful analysis of the business model with honest assessments of the resources needed, economic and human, can help determine if it is a good business decision for a particular district.
As Lesh concludes, “Today, everything about public education is being re-evaluated and in some cases revolutionized: extended school days, new types of scheduling, student performance evaluations and so on.
“In many ways, school foodservice hasn't kept up. We need to feed kids when and where they're hungry, and vending offers us new ways to do that. ”
Barry Sackin is a principal of B. Sackin & Associates, a school foodservice consulting firm. He can be reached at firstname.lastname@example.org
What Other Directors Think
Food Services Director, Portland (OR) Public Schools
“The practice of assigning administrative responsibility for all vending in a school system to the SFA is a must. With wellness policies, etc., the foodservice director should be the go-to person for all foodservice on a campus.
“In the past, we had principals and even custodians negotiating. By centralizing authority with the FSD, the district has more control over these contracts.”
Director, Food and Nutrition Services, Sarasota County (FL) Public Schools
““There is a strong push for better nutrition across every campus, and that fits very well with schools having more authority over vending programs. And as our labor and benefit costs continue to increase, this could be a lower cost way to add serving lines without increasing staff.