A division of the largest provider of managed food
and facility services provides service to over 170 county or state correctional
facilities throughout the United States. Prior to working with Thor,
the company, operating in a highly competitive marketplace, provided
contracted food service to only 60 correctional facilities generating
annual revenues of only $40 million.
Contracts are awarded on bids including a fixed cost per meal per inmate
at the each correction facility. Menus, operating standards, and labor
parameters vary for each contract. The company was in great need of
a process to correctly identify all operating costs, so a competitive
price per meal could be formulated. Return on investment was declining
due to the declining margins to operate.
Using our in-depth consultative approach to identify business challenges
and recommend matching business solutions, a Thor constructed a solution
providing a financial consultant to develop a financial estimating tool
for multi-year contracts. This tool allowed for the accurate calculation
of food cost variables, labor costs and associated taxes varying by
state and determined the required fixed and working capital investment
and a minimum ROI. After successful implementation, this base financial
tool was further modified to accommodate commissary and correctional
facility maintenance operations. In addition to the development of this
tool, the Thor consultant trained all sales and operating management
on its utilization in the development of formal bid proposals.
Over a seven year deployment period of this financial tool, the company
increased its gross revenues from $40 million to $142 million, representing
a cumulative annual growth rate of 20%. Earnings before interest and
taxes (EBIT) increased from 4% to 6% of net sales.