1. Decoding The Meal Equivalency Factor What is it? Why is it important? Sponsored By: Illinois ASBO Presented By: Clare Keating / Jack Bortko / Pat Fournier

2. What is the Equivalency Factor? The meal equivalency factor converts a la carte sales to full meals which are billed by a Food Service Management Company at the contracted lunch meal rate.

3. Why Does It Matter? Affects your monthly costs. Affects your monthly costs. Affects your bid meal rate. Affects your bid meal rate. Affects your ala carte pricing structure. Affects your ala carte pricing structure.

4. Deciphering Bid Specs SECTION 12-FEES The FSMC and SFA shall determine the a la carte meal equivalents by dividing a la carte revenue by: 1)The fixed meal rate or: 2)The a la carte equivalency factor. Equivalency factor for 2010 – 2011 = National Free Reimbursement: $2.68 State Free Reimbursement: $0.1275 PAL Reimbursement: $0.195 Equivalency Factor: $3.0025 Amounts Used For FY’11 Are Previous Year’s (FY’10) Reimbursement Rates Must Use Whichever Yields the Higher $

5. For Example: Method 1: Annual a la Carte Sales =$10,000 Contract Price Per Meal = $ 1.94 A la Carte Equivalent Meals = 5,155 Method 2: Annual a la Carte Sales = $10,000 Defined Meal Equivalency Rate = $ 3.0025 A la Carte Equivalent Meals = 3,331 Defined Meal Equivalency Rate of $3.0025 results in lower cost to LEA by 1,824 Meals

6. It Is Highly Unlikely That An LEA’s Meal Equivalency Rate Will Be A Derivative Of Their Contract Meal Rate.

7. Calculating Equivalent Meals Method 1 A la Carte Sales / Contract Meal Price = Equivalent Meals Sample Monthly A la Carte Sales: $5,000.00 5,000 / 1.94 = 2577.32 Equivalent Meals Contracted Lunch Meal Rate: $1.94 2577.32 x $1.94 = $5,000.00 FSMC bills SFA $5,000.00 as a line item on the monthly invoice. Hypothetically …

8. Calculating Equivalent Meals Method 2 A la Carte Sales / Defined Equivalency Factor = Equivalent Meals Sample Monthly A la Carte Sales: $5,000.00 5,000 / 3.0025 = 1,665.28 Equivalent Meals Contracted Lunch Meal Rate: $1.94 1,665.28 x $1.94 = $3,230.64 FSMC bills SFA $3,230.64 as a line item on the monthly invoice. And the other side of the coin …

9. Financial Impact Method 2 $5000.00 in a la carte sales $1,665.28 = SFA/LEA portion of revenue $3,334.72 = FSMC portion of revenue Method 1 $5000.00 in a la carte sales $0.00 = SFA/LEA portion of revenue $5,000.00 = FSMC portion of revenue

10. Why This Matters … Reimbursable Meals and A La Carte Equivalents Must Be Bid At The Same Price A La Carte Equivalent Meals Have Higher Food Costs Than Regular Meals. The Greater % Of A La Carte Equivalent Meals, The Higher The Bid Meal Rate Will Be.

11. FSMC Food Cost/Profit Example Bottled Beverage Selling Price: $1.25 Cost of Product: $.62 1.25 / 3.0025 =.416.416 x 1.94 =.817 FSMC receives $.82, pays $.62, profits $.20 Per unit sold

12. FSMC Food Cost/Profit Example Milk Selling Price: $.30 Cost of Product: $.21.21 / 3.0025 =.0699.0699 x 1.94 =.135 FSMC receives $.14, pays $.21, loses $.07 per milk 7500 students in this district Approximately 2000 milks sold daily for 168 days FSMC Annual loss of $23,520

13. Contract Renewal Options If method 2 is used, the a la carte equivalency factor will change annually to reflect increases / decreases to reimbursement and PAL rates. Rates used are from previous year (i.e. 2011 MEF is derived from 2010 reimbursement rates). If method 2 is used, the a la carte equivalency factor will change annually to reflect increases / decreases to reimbursement and PAL rates. Rates used are from previous year (i.e. 2011 MEF is derived from 2010 reimbursement rates). If method 2 is used, the a la carte MEF remains constant for two renewals. In year three, MEF changes and remains constant for years three and four. If method 2 is used, the a la carte MEF remains constant for two renewals. In year three, MEF changes and remains constant for years three and four.

14. Final Thoughts Reimbursable Meal Prices Should Be = Or > Than The Free Reimbursement Rate Less The Paid Reimbursement Rate. For 2009 – 2010 School Year: Free Reimbursement:$ 2.68 Less: Paid Reimbursement:$ 0.25 Minimum Meal Price:$ 2.43 To Encourage / Increase The Number Of Reimbursable Meals Served, Set The Price Students Would Pay For An Entrée + Milk The Same As The Cost Of A Full Lunch.

15. Questions? Thanks For Spending The Last Hour With Us. Enjoy The Conference!