Why It's Time to Can Aramark--CompetitionGuest Column by Albert L. Hsu
and Brian D'Amato
Students and faculty agree that Aramark simply has to go. Yet some students have asked if any other food service company wouldn't be just as bad. Indeed, any monopoly of MIT's food service market is a problem, and Aramark is not the only hated food service company out there. Tufts University recently told Marriott (its food service company) to leave in 30 days.
Aramark's management of MITfood services has been particularly bad, however. Instead of being close to the students, they manage from afar. Before delving into specifics, perhaps we should take a moment to look at MITfrom Aramark's point of view.
Aramarkis a national corporation with $4 billion in annual sales. It runs food service operations on both sides of the Charles River - at MIT (a $9 million account) and at Boston University (a $30 million account). The MIT account is especially nice because everyone recognizes and respects the MIT trademark. Aramark really cares about keeping its operation at MIT.
The relationship between MIT and Aramark is quite complex: While the exact details of the MIT-Aramark contract are closely guarded, MIT gives detailed and extensive directives to Aramark. In the past, for example, MIT has insisted that Aramark provide declining meal balances and the MacGregor House and Pritchett convenience stores. For its part, MIT had reimbursed Aramark's losses here until last year to the tune of $8 million over nine years.
Aramark is especially bad for us because it buys goods from suppliers affiliated with their parent corporation It is also unsympathetic to students' needs because it doesn't understand the specialized MIT market.
Sysco, a national subsidiary of Aramark, is a primary supplier for Aramark. This means that MIT's dining halls and convenience stores are required to buy goods from Sysco, rather than shopping for the best prices at local discount warehouses. When students at Next House wanted Chinese snacks at their convenience store, Sysco would ship them in from New York. Eddie Cogliano [former manager of Aramark's West Campus services] called this situation preposterous, jumping into his pickup truck to buy the snacks from Boston's Chinatown - until his Aramark boss put a stop to it. Three years ago, when MIT was losing money on food service, Sysco was making a profit. Should Sysco and Aramark be making money on operations where MIT is losing money or struggling to break even?
Worse than the Sysco problem, however, is the fact that Aramark just doesn't get it. At Boston University, Aramark can tell the students that "milk will be whole, it will be white, and you will like it." At the smaller market of MIT, students are much more empowered and much more demanding. Aramark tries to make money by consolidating costs. Two years ago, for example, Aramark told Baker House residents that they would like to have all students on the west side of campus eat dinner at the Student Center or, failing that, at a centralized dining hall. Dormitory dining halls are very important to MIT. They foster a valuable sense of community in the dormitories, helping students get through the firehose mentality of MIT academics.
Even in its present form, MIT food service does not need to lose money. The food trucks bring in $2 million in annual net sales while LaVerde's brings in $3 million. When Aramark was projecting huge losses and being reimbursed by MIT, there was no reason for them to try to lose less money. Last year, however, when the department of Housing and Food Services negotiated an end to the subsidies, Aramark actually came moderately close to breaking even. It is possible to make money in MIT food service.
Aramark's style of management from afar is inappropriate for MIT. As far as replacing Aramark on campus, managed competition is key. Businesses exist to generate wealth. Companies with a monopoly on food service will try to do anything to make money, from raising prices to cutting hours, so MIT must be very watchful.
Under MIT-managed competition, companies cannot win by raising prices; that would only make customers flock to their competition. The only way to make money will be for companies to compete for customers; therefore, they will try to do everything that MIT wants them to do: More variety and higher quality of food, lower prices, more hours of service, and better responsiveness to student suggestions. MIT food service under managed competition would meet student needs.