Tariffs relate to items on sale within Restaurants, Coffee bars, Deli bars, Vending, etc., and are essentially the “Selling Prices” established to provide a solution that is equitable and yet profitable for the seller, but affordable to Client employees and guests.

Importantly:

• Clients normally drive the Tariffs and the Tariff Strategy and will not grant tariff sovereignty to a supplier partner
• CBRE may have in some cases Tariff sovereignty
• Prices set are normally cheaper than high-level retail but not below Supermarket pricing
• Annual benchmarking of selling prices is often included in a suppliers agreement

1. What are Tariffs?

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2. The Tariff Strategy

Food Services tariff strategies are a vital commercial driver to manage the service effectively. Many clients have very specific tariff strategies, however, they are a material contributor to achieving optimised customer satisfaction and managing operating budgets for the Food Services in scope. 

The tariff strategy sets the price-point for all Food Service sales and recharges, governing and steering the price end-users and individual lines of business pay for the services. However, free-issue products and services, such as office coffee and pantry consumables or unique out-of-hours supplementary meal entitlements, are within the scope of the tariff strategy considerations identifying the elements that are available to client staff as free issues.

Free-issues can represent a significant value and the scope and options should be regularly sense-checked as part of any tariff review to ensure that the scope, product specification, quality, or scale hasn’t evolved and developed into a cost-prohibitive service.

The Tariff strategy sets out how the individual services perform financially for the prices charged at point-of-sale and the recharge levels to LOB. Some services produce “profit” or positive over-recovery of costs, which offsets other services that operate at a loss or subsidy. 

 Tariffs can be defined using a number of different factors and considerations:

• Legacy pricing as the baseline-tariffs are reviewed annually and the existing tariff is simply increased by an agreed ratio, often set against an agreed indexation such as CPR
• Price points can be driven by local benchmarking against comparable external products
• Subsidy level values / ratios and the tariff required to achieve a defined subsidy budget
• Price-points driven by local staff demographics, pay grades, and perceived disposable income
• Customer feedback, customer profiling, and survey results
• Logistic considerations at the site and the feasibility of staff using alternative options
• Client culture, well-being, and workplace strategy

3. Tariff Strategy across All Service Lines

The way in which a tariff strategy is structured across all service lines can drive commercial benefits whilst enabling wider client and CBRE strategies. Each service line tariff can be structured to deliver benefits to the overall cost of the subsidised Food Services, therefore appropriate overall tariff strategy planning should be applied when reviewing or setting a tariff strategy.

 There are sometimes less emotive service lines that sustain higher tariffs, or where customer expectation is such that a higher tariff is anticipated and readily accepted. These service lines should be optimised to deliver commercial benefits, or at the very least, proposed to the client as an option to consider, demonstrating the potential value CBRE is able to offer. 

The following extract demonstrates the commercial relationship between different service lines:

A Staff restaurant subsidy can be off-set by profit performance within hospitality services of coffee bar services in terms of over-recovery.  The overall subsidy cost can be reduced by positive over recovery or total revenue / recharges exceeding total costs.  Using the example budget extract from the Budget section, where the coffee bar and hospitality over-recover (operate at a profit) to demonstrate:

                                          Stall Restaurant             Coffee Bar              Hospitality                GRAND TOTAL

Total Subsidy / Cost               261,667                        6,652                      24,205                         -230,811

                                                                                                                                                           -230,811 represents the net-subsidy, not 261,668                                                               

The coffee bar over recovers as this service is typically a high-margin service, driven by customers' higher tariff expectations and acceptance versus a retail benchmark.

Recharge tariffs for hospitality / catering and events are usually not owned by or the responsibility of the client, but by the individual LOB utilising the service. Recharge tariff once set and agreed with the client and LOB, has the ability to charge a more commercial rate, allowing over recovery to off-set the overall subsidy for other services. 

Labour costs attributable to providing a professional hospitality / catering and events service can be a consideration, which should be built into the recharge tariff structure as an inclusive cost for the products on offer. Alternatively, product cost can be offered at a perceived lower rate plus labour costs as an addition, although this can create unnecessary visibility and additional administration> Separating labour costs should be avoided where possible.

The strategy of over-recovery across any service lines can be contentious and politically embraced by the client, LOB and their staff. Careful consideration is needed to ensure that a proposed tariff strategy for hospitality/catering and events services is aligned with the client’s overall commercial strategy and cost recovery plans. 

Clients who operate an over-recovery methodology on hospitality / catering and events apply a strategy that does not offset subsidies to reduce their operating budget. Instead, they apply the over-recovery benefit to refurbishment and Capex works. 

Food Services

Tariffs, Strategies

Contracting

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The tariff review schedule and principles should be agreed from the outset and accurately reflected within the SOS of the supplier contract, particularly if a contract amendment is needed to meet local conditions. The tariff reviews are typically conducted at various milestones driven by client / CBRE preference and legacy considerations. Establishing the timelines is key, that can follow:

• Contract-year*
  
• CBRE client contract year anniversary
  
• Client financial year
  
• CBRE financial year
  
• Supplier financial year
  
• CBRE supplier contract anniversary
  
• Tax year

2 Months Out

The Food Service supplier partner will normally manage the majority of the above activity but does need to be managed and directed effectively on the process, to ensure its integrity, ultimate completion, and consistent implementation.

Tariff reviews should be conducted to the agreed frequency and individually item-by-item, not as a blanket increase ratio proposal. The expectation is that proposed individual prices shall represent both increases and decreases, to reflect where market product costs have increased / decreased against the previous tariff review, or where excessive or minimal GPM is achieved. Once a new tariff is approved, individual pricing shall only be altered on the agreed date once CBRE approves with the client and only after the agreed stakeholder and customer communication has been appropriately conducted.

• Commence drip-marketing activity
• Prepare updates to all published tariffs, signage, websites, portals and printed collateral
• Market tariff review specifics
• Finalise customer feedback methods and associated reporting

1. Typical Tariff Review Cycle

3 Months Out

Implementation

• Engage client & key Stakeholders
• Identify any specific client requirements
• Identify any potential roadblocks
• Brief the supplier
• Agree on Customer feedback requirements

1 Month Out

• Review supplier proposals, support data and recommendations
• Assess the exceptional ratio increase products, both high and low
• Sense-check overall commercial impact and rationale
• Present to client and seek formal approval to proceed
• Present to stakeholders and advise

• Launch new tariffs
• Replace all previously publicised tariffs
• Gauge initial feedback and process responses
• Evaluate overall customer feedback reports and publish
• Evaluate commercial impact within reporting systems

January can be a sensitive month for increasing tariffs, due to post-festive seasonal impact on disposable income. Significantly higher and negative customer feedback may be expected if implemented in January.

Food Services

Tariffs, Strategies and Reviews

Contracting

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