Food Service Supplier partners may offer a level of investment in securing a new contract and may include this within the budget above or below the P&L cost line. This investment capital is generally designed to fund the enhancement, refurbishment, or improvement of the Food Services facilities and equipment. The feasibility of the Supplier partner’s budget proposal for the services is often contingent upon this investment. The proposed level of investment can often be negotiated and increased, as part of the overall contract negotiation.
Supplier partner investment opportunities should be reviewed and considered within the wider CBRE / Client capital expenditure strategies and subsidy budgeting.
Suppliers should be challenged to:
- Clarify if the investment is the Supplier partner's financial liability. If it is the Supplier partner's liability the depreciation of the investment is not charged-back through the subsidy costs. Depreciation is held on the supplier partner's balance sheet outside of the account P&L and depreciated at the supplier partner's cost over the term of the contract
- Clarify depreciation expense is built into the subsidy
- Verify the depreciation / amortisation of the Supplier’s investment on a separate schedule. For Example- If a supplier partner has invested $360K over a three (3) year contract term, the expense should be a straight-line allocation monthly
Key Points
Examples of possible Supplier Investment requirements
FS-032 Ver 1.3 (May 24)
Food Services
Supplier Investments
Contracting
Supplier partner investment can eliminate the need for separate capital investment, which may prove advantageous when balancing account-level finances. Conversely, a supplier’s proposed investment may not in some instances, benefit CBRE or the Client, as a Client’s Capital expenditure budgets are often separate from subsidy budgets.
CBRE / the Client might prefer reduced subsidy levels, rather than have the benefit of a Supplier’s investment, as capital expenditure may already be secured and will be lost if not expended or where subsidy reduction is the primary concern.
It is important to clarify the financial liability with any proposed supplier investment, depending on how the supplier proposes it is administered and processed. it can be both a financial benefit and a financial burden for CBRE / the client or the supplier.