F&B-in house or out sourced operations. Which is best
Should parks go down the ‘DIY’ route when it comes to F&B operations or bring in outside contractors to take care of this aspect of the business? Andrew Mellor discusses the options with worldwide operators
THE question of whether or not parks should operate their own F&B outlets or bring in outside suppliers or well-known brands is one that often rears its head. It’s a topic that’s been debated many times and continues to be at venues of all types and size.
Popular, high street brands, for example, provide park guests with a distinct element of comfort – basically they know what to expect and will probably also have in mind the sort of price they will be paying – while in-house operations can be something of an unknown quantity, unless of course you are a regular visitor to a particular park.
But does the park visitor want what he/she can get on any high street or in any retail park? Surely a visit to a theme park is an experience that takes you into another ‘world’ so eating and drinking new and different things in very different environments is all part of the experience.
Out sourced operations also, naturally, take the matter out of the park owner’s hands, leaving them with one less aspect of the operation to think about, although ‘doing your own thing’ enables the operator to offer maybe a wider choice, something different and products priced and delivered exactly how they wish, not to mention having full control over the overall service provided.
So what’s the answer? What’s the best way to deliver F&B products and services to park guests in a way that ensures this vital revenue stream is maximised and everyone is happy? “We’ve reduced the number of high street brands in our parks in favour of our own new developments,” explained Gary Henderson, Merlin Entertainments Group F&B director. “Now we only have some in the UK – because it still remains important in this market.
“We are selling escapism so one argument, from the visitor’s point of view, could be them saying ‘You are selling me escapism, but once I’m inside it’s just like anywhere else/being at home – I am surrounded by familiar brands.’ Some people don’t want that. Alternatively, some guests are not very adventurous when it comes to food, particularly children, and are comforted by seeing brands that are familiar to them.
“High Street F&B brands were introduced to the then Tussauds sites in the mid 1990s – at a time when theme parks particularly were getting a lot of bad press re the quality and cost of food.. As we’ve got better and invested hugely in F&B we are gradually replacing these. We’ve taken out some KFCs, Café Neros and Pizza Huts for example. When we’ve been convinced we can do it better ourselves, we’ve done it ourselves – and increasingly we are creating our own F&B ‘brands’ which we are rolling out around our 78 attractions worldwide wherever we believe they are appropriate.”
And what does Henderson feel are the advantages of in-house operations?
“You are in control of it compared to outsourced or franchised units. A franchise has a responsibility to the brandmaster as well as ourselves, and so you have to be sure the brand can be flexible enough to be true to your attraction brand as well as their own. If something goes wrong it’s also often harder and slower to put right if it’s a franchised outlet.
“On the upside, a franchise provides a consistency of operation. We have ‘monster’ KFCs at Thorpe Park and Alton Towers, for example, which are run with military precision. Sometimes you don’t get that in your own sites. You also know what you are going to get with a brand. But that said the consistency of sales, profits and customer service are all getting much better, each year, at our own outlets.”
But how much does the price of the end product influence the decision on whether or not to outsource F&B? Surely parks with their own operations have more control over price, which has to be an advantage?
“In any contract we would do with a brand we’d stipulate the pricing structure,” reveals Henderson. “We would compare local stores. They can’t ramp up the prices with us just because they have a captive market.
“These things also need to fit with the respective brands. At Thorpe Park (which is aimed more at the teen and young adults market) teens love a brand, while Alton Towers and Legoland are family parks so the guests are less interested in brands but want the escapism, so high street branded outlets are not so important.
“We use a food mapping process to decide what F&B we put where – what we have now and what we want to have. Ultimately, however, parks are a mirror of what’s on the high street in terms of the type of food which is most popular – burgers, Thai, sushi … so you don’t want to be too far behind that.”
But do park visitors not expect to see well-known F&B brands in parks as a matter of course?
“They want quality food served quickly,” notes Henderson. “These aspects are more important. Food quality and choice, speed and service – if you can tick these boxes it’s more important than having a brand sign.”
At Dreamworld and WhiteWater World on Australia’s Gold Coast, food and beverage manager John Gaudin reveals that both venues’ F&B outlets are operated in house, while the product supply is a mixed combination of outsourced and in house.
“We used to make most of our own food on site,” he explains. “As the convenience food landscape has matured the value chain has changed significantly. In the past, full production kitchens were common and ‘home made’ was desirable over ‘bought in.’ There are now many very sophisticated companies that make contemporary food that is of superior quality and commercially viable to buy in.
“Departments, divisions and outlets can operate as silos and the customer moves through the silos as they experience all aspects of the park,” he continued. “Outsourcing can potentially lead to a situation where one division enabling value to another at their expense becomes more difficult, to the detriment of the customer. If we operate all outlets ultimately this is more simple as the cost and return ends up in the same place. Imagine a cleaner walking past a dirty table and not cleaning it because they don’t have a contract with the F&B outlet if either function is an externally sourced supplier.”
And he continued: “I believe the whole experience is the key driver of decision making (outsourcing or not) e.g. thrill rides, family friendly environment, tigers, wildlife, waterpark location, other attractions, food and beverage, etc. We have some brands that are very successful and popular products and they allow us to operate on terms that suit us both to the benefit of the customer, for example Krispy Kreme and Boost Juice. Many of the financial models that brands have presented to us would result in any superior returns being retained by them in terms of licenses, fees and cost of goods. Ultimately the brand equity belongs to them and they expect a return.
“We can’t build a new ride or experience with a fee paid to someone else so we try to do it ourselves if we can. We are always trying to balance product quality, diversity, nutritional balance, saleability, etc. Ultimately we regularly do in depth analysis on what is selling, what is not and customer feedback. We continue to sell what sells because that is obviously what the customers want. However if something doesn’t sell, we try to find a replacement that does.”
On pricing, Gaudin feels there are financial and non-financial considerations to be made re outsourcing and in house operation. In F&B, he notes, making a decision solely on price can be short sighted.
“We have popular items that we know we can get alternatives for cheaper but they don’t taste as good. Some are made by us, others are bought in.”
And does he think park visitors expect to see well-known F&B brands in parks today?
“In our market I think they expect to see the money invested in exciting new theme park experiences and park renewal to keep giving them reasons to return to or visit the park, generation after generation,” he says. “The money is better invested in Buzz Saw, Shockwave and Tower of Terror 2. Three new rides in a year! That’s what they are here for.”
At Ocean Park in Hong Kong, chief executive Tom Mehrmann explains that the F&B operations are primarily in-house.
“After the opening of Thrill Mountain, a major themed area, as part of our Master Development Plan which will open later this year, as well as Polar Adventure, the last area of development, opening in July 2012, we will have a total of eight restaurants and cafés as well as 34 kiosks and mobile food carts throughout the park.
“We have an agreement with McDonalds, which dates back many years and they have one outlet in the park, as well as another revenue share agreement with a tour operator who operates our large Chinese food restaurant, which is a function of the tour trade and the type of meals and group tickets that are being managed through the tour operator (non-group guests do use the facility too).
“At one time all facilities were operated by a third-party. The original park philosophy was to simply run the park and outsource the F&B and retail to third party operators, as it was not considered a core discipline of the management team. We took the entire retail operation in-house in 1998 and the F&B operation in-house in March of 2005. F&B was brought in-house after many years of dealing with a substandard product and guest concerns about the product quality and service. The length of stay in the park was around three hours and per capita spending in F&B was below desired levels. While it was an outside group running the F&B operation it was still our brand and our reputation that was being damaged by the negative impression of the product quality and service. We wanted to have full control of the guest experience, which included the F&B.”
Mehrmann notes that the advantages of the park operating the F&B outlets itself are many.
“It allows full control of the service quotient, the product quality and the guest experience. Likewise, we literally own the entire process, which means the management team engages as owners to ensure the produce, service and experience are world-class. We can control the cost and experience by managing the recipes, buying, delivery, receiving, production, storage, distribution, wastage, cash management and service delivery. Moreover, we are able to focus on maintaining a high standard in the food production process, as reflected in our recent acquisition of the ISO22000 food safety standard. The implementation of a central kitchen has also brought many benefits to our restaurants’ operations.
“Another advantage of operating our own food outlets is that we are able to prepare different cuisines to cater for guests of different nationalities, while the choices are varied in terms of taste, style and price.”
The price of the end product for Ocean Park was not the driving or compelling issue when it came to the decision to operate its own F&B; it was more about the quality of the service, the product and the full experience for the guest, Mehrmann states.
“We believed we had elasticity in pricing if we could deliver a superior product, in a great environment with quality service,” he reveals. “We have the benefit of a truly captive market, once they are inside the park. We have no competitive influences at our gate, or within walking distance of our gate. We have put a specific focus on ensuring the F&B product is culturally relevant to the markets we serve, which was not happening when the F&B was outsourced. We have introduced unique products that cannot be found outside the park and at affordable prices. We have extended length of stay to over five hours since taking over the F&B operations and we have doubled the F&B per capita spending.”
Mehrmann also believes that if there is a competitive environment outside your door to the park, and the park does not have a captive market, then guests will leave the park at meal times to go to the familiar brands.
“There is a comfort index for guests to go to brands they know and get products they know, rather than buying from an unknown themed outlet in the park. The key is to present your product in attractive ways, price it competitively, offer portions that are seen as a value for money to the guest and offer loyalty opportunities (free drinks, value added products, discounts at certain purchase points, discount coupons, etc.). Guests are looking for comfortable, convenient, clean environments, with good service and quality products, priced at a fair level and served in portions that are reasonable.”
Staying in Hong Kong, and moving to Hong Kong Disneyland Resort (HKDL), Peter Lowe, vice president of hotel operations, food and beverage and business solutions and events, reveals that HKDL runs its own restaurants and has three kinds of F&B service – table service, quick service and outdoor vending. All are run by the park, with the exception of one outlet – a local company called The Maxim’s Group (Hong Kong’s largest F&B and restaurant chain) operates a table service restaurant and a bakery. Internally, Maxim’s also provides the catering for HKDL’s cast members (staff).
“It’s all about quality,” says Lowe. “At HKDL, we are part of the global Disney organisation and we believe our experience in running F&B outlets all around the world is very significant. Our guests and their F&B requirements are diverse. They range from Eastern to Western cuisines, snacks to family-style dining and vegetarian meals to top-quality steaks. Gone are the days of providing very simple food. Now Guests require a wide array – which is great for us.
“In order to cater to diverse guest needs, and particularly in serving the highly diverse needs here in Hong Kong, we feel very strongly that we have the expertise, and the desire, to run our own F&B outlets. The only exception is our partnership with Maxim’s. We gave them the opportunity to run a Chinese cuisine restaurant because, at the time of our park’s opening, Disney did not have experience in this part of the world, whereas Maxim’s had great history in catering to Hong Kong guests. The relationship made sense and was a good business fit.”
He points to flexibility as being the big advantage of in house operations, in being able to change the product depending on guest requirements and the guest mix, adding that HKDL guests come from many different countries and have their own distinctive palates and tastes.
“Variety is required and that means our flexibility is required,” he says. Seasonal versatility is also a requirement, while partnering F&B with merchandise is another aspect to provide a higher transaction.
But does Lowe think park visitors today expect to see well-known F&B brands in parks?
“What our guests expect is a quality F&B selection. We are successful in ensuring the quality of the food and the quality of the service. That is what they expect. And we provide that on a consistent basis. The quality of a Mickey-shaped waffle made first thing in the morning, is as good as one made at the end of the night. Also, we realise that Disney is a brand. When guests come to a Disney park, they already have an expectation of quality, so the name Disney in itself is an indicator of quality.”
All F&B at Universal Studios Singapore is also operated in house and John Hallenbeck, vice president – park operations, sees many advantages to this way of working. Among them he points to a better quality control of food and ingredients, faster response time for changes, flexibility to change menus as needed quickly, shared labour with other areas, high morale of employees so better guest service and control over the selection of vendors. And he adds that he doesn’t believe guests expect to find branded F&B outlets in the park.
“I don’t think it is an expectation either way. I believe that the uniqueness of the theming of Universal Studios as well as the quality product offered creates an atmosphere when the guests are not looking for the ‘same old thing’ or something ‘well-known.’
In the US, at Holiday World & Splashin’ Safari, where again the F&B operation is 100 per cent in house, director of food and beverage Jason Martin picks out more advantages of this way of operating.
“By operating the F&B outlets in house we have more control on costs and profits. Keeping the operation in house gives staff and management ownership of the results. Those results are more directly tied with the overall success of the organisation as a whole. Also, running the operation in-house eliminates the ‘middle man’ and improves efficiency. We are well-known in the industry for having high quality food at very reasonable prices and we would not be able to do this by having franchises run the business for us.”
And he continued: “Having control of the price definitely is an advantage. Our guests rave about our food prices. They can eat in our parks for the same or even less than eating at restaurant chains outside of the park. We would lose the ability to have this competitive edge if we outsourced our operation.
“We do not have any franchises or outsourcing and have not received one complaint about it. If we offer the guests good quality product and at a reasonable price, they are going to be happy.”
F&B operations have also always been carried out in house at Germany’s Europa-Park, where Werner Ganser, director of park F&B, comments: “One of the biggest advantages is definitely the control you have over your own F&B outlets. At Europa-Park, the theming of the whole park plays a major role. F&B is not an exception here and we pay a lot of attention to the food and drinks we sell in our outlets in the different European areas throughout the park. Our visitors find Tapas in Spain or fish and chips in England, just to mention a few of our offers. Experiencing typical dishes from the respective countries is part of their ‘round trip through Europe.’ Big food brands would not fit in this concept.
“Further, by operating F&B in-house we have control over the quality of the food and beverages. We can also hire our own employees and make sure that the overall quality standard in all our F&B outlets is always as high as we expect it to be.”
And does he think park visitors expect to see well-known F&B brands in parks?
“At Europa-Park we actually think the opposite is the case. Here, visitors expect the F&B outlets to be themed according to the area they are in. A wide range of dishes and drinks is what the majority of our visitors want.”
Clearly then, for the major parks we have talked to here, the way to go with F&B operation is in house, no matter where you are in the world. Well-known, ‘high street’ brands have their place in some venues depending on the market being catered for, but in the main it’s clear that if it’s done right, in house is the way to go.