Structure Drives Behavior
Two dining contracts with identical culinary programs can produce very different results simply because of how the money moves.
Before comparing rates, understand what each structure rewards.
1. Profit and Loss (P&L)
The provider assumes financial risk and typically returns a commission on sales to the institution.
Advantages include budget predictability and transferred risk. The tradeoff is reduced visibility: when margin belongs to the provider, cost decisions are made with the provider's margin in mind.
2. Management Fee (Open Book)
The institution owns the operating result and pays a fee for management. Costs are transparent and auditable.
This structure typically produces the greatest visibility and the most upside — and requires the greatest institutional capability to oversee it.
Open book is only valuable if someone is actually reading the book.
3. Commission-Based Retail and Hybrid Structures
Many programs blend structures: P&L on resident dining, commission on retail, management fee on catering or concessions.
Hybrids can align incentives well, but they multiply the number of definitions that must be precise — especially what counts as gross receipts.
4. The Terms That Actually Move the Money
- Definitions
Gross receipts, exclusions, taxes, discounts and comps.
- Escalators
Annual increases, index basis and caps.
- Guarantees
Minimum returns, shortfall treatment and reconciliation timing.
- Capital
Amortization period, unamortized balance and buyout terms.
- Meal Plans
Rate setting, board plan economics, declining balance and carryover.
- Audit
Rights, frequency, scope and remedy for findings.
5. Choose the Model That Matches Your Capacity
An institution with strong internal financial oversight often captures more value under a management fee model.
An institution that needs predictability and has limited oversight capacity may be better served by a P&L structure with rigorous KPIs — or by an independent advisor who provides that oversight.
