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Hospitality 

Provider of managed food and facility services increases revenues 20% annually by using Thor's services to develop customized cost estimating tool 

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.