In all our work in the higher-ed sector over the past several years, the prospect of an upcoming enrollment cliff has been omnipresent. According to the most recent addition of the Western Interstate Commission for Higher Education (WICHE) published in December ’24, this cliff will materialize by the end of 2025. Between 3.8-3.9 million high school graduates will enter the higher education system this year, after which enrollment will decrease by more than 10% over the next 15 years. Many administrators have been gearing up for just such an occurrence to ensure financial stability at their institutions. But what some may not understand is that this enrollment cliff will have a dramatic impact on the future of higher-ed dining as well.
Like any other university department, enrollment projections are critical for building a balanced budget that takes into account food, labor, and operating costs. In an ideal world, these costs would be able to scale in proportion to revenues to maintain a financial balance within the dining program. Real-world constraints, however, often mean this can be difficult or even impossible. Dining outlets will always require a minimum number of staff to open the doors and have offerings at every station; universities will always have vocal students that demand late-night options even if these extended hours may be cost-prohibitive; and product costs have remained volatile despite the slow return to normalcy in the global supply chain. Students, particularly those enrolled in undergraduate programs who reside on campus, represent the largest potential revenue source through the sale of meal plans. Retail sales to non-plan holders are certainly a welcome boon to dining programs, but these don’t carry the guarantee of revenue as do meal plan sales. So, if revenues decrease due to enrollment and costs can’t be scaled back accordingly, how can a dining program survive without becoming a financial drain on its institution?
Fortunately, there are several strategies universities can proactively implement in the years ahead to increase their dining programs’ financial sustainability. Before looking at cutting costs, universities should first look at opportunities for revenue growth. Consolidation of services can be one of the most impactful changes to a program’s financial performance.
- Has your university mandated your dining provider as the exclusive catering provider campus-wide? If not, this could be a great strategy. Catering services, as a rule of thumb, tend to be more profitable for an Operator than student dining; product costs can be better controlled, and staff need only be paid when there is a catered event. Similarly, most operators offer vending services that are more profitable than daily student feeding. Bundling these services under one operator can help to offset decreased revenue from your dining halls as a result of decreased enrollment.
- Does your institution proactively market meal plans to commuters, graduate students, and staff/faculty? Unlike residential undergraduates, the number of commuter and international graduate students is expected to remain consistent and grow in the coming decades. These individuals all represent a potential opportunity to generate incremental revenues. Plans tailored to their specific needs, such as small block meal or declining balance plans, will require less of a financial commitment compared to traditional meal plans and will also encourage longer dwell times on campus for commuter students. Faculty & staff frequently cite convenience as a primary factor for patronizing their university’s dining hall; a plan tailored to their needs will encourage them to patronize dining outlets even more, especially if this plan represents a discount over the standard door rates. Taken together, these constituents represent hundreds or even thousands of potential customers who, all too frequently, don’t receive enough attention within a dining program.
- Have you reviewed your meal plan requirements recently? If not, it may be time to look at restructuring. This could include a limited plan requirement for residential upperclassmen who might have been previously exempt due to cooking facilities in their dorms or a modest mandated declining balance spend for commuter students. While these changes might not be welcomed by all at first, concerted messaging explaining the reasons for new requirements will go a long way to appeasing the community. After a few years of implementation, incoming classes will simply see this as the status quo which will only help to drive increased revenues.
While driving revenues should always be priority #1, cutting costs will be an unfortunate reality in the years ahead. Fortunately, there are strategies that can be implemented to reduce costs without adversely affecting the dining experience.
- Do you have a C-Store or small retail outlet that might be suited to autonomous operations? Automation has been an increasing trend in student dining as it can be a reliable way to reduce labor costs while also improving the student experience. Today’s students frequently cite convenience and flexibility as among the most important factors in their dining experience. An automated C-store or retail outlet can allow for dramatically expanded hours of operation to meet the needs of students with late practices or who are studying late into the night. Assuming such an outlet has an appealing product mix and reasonable prices, automated C-Stores or retail locations can offer great value to the student when it might not make sense to open a traditional manned dining location.
- Do you have meal periods with little foot traffic? Due to factors such as class schedules and, more importantly, student habits, some meal periods will frequently see less traffic than others. Weekend breakfast periods are a prime example. Take a look at your dining hall’s 15-minute traffic count; you’ll likely be surprised by the sharp drop in meal plan usage during particular segments. Particularly if there are other outlets to fill early-morning needs at the dining hall or late-night needs at a small retail outlet, it may be worthwhile to limit or cut these meal periods.
- Have you negotiated for all of the “hidden” sources of revenue with your Operator? While operating statements offer a vital look into the financial performance of your dining program, they don’t illustrate the full picture. Many Operators profit above the unit level on various rebates, discounts, and allocated costs that aren’t clear unless you know what questions to ask them. If these and other costs can be negotiated to the university’s benefit, it can help improve the dining program’s bottom line.
While some schools certainly understand how decreased enrollment will impact their dining program, others might feel safe in the knowledge that they are on a P&L structure where the Operator bears the program’s financial risk, not the university. P&L operations may be running smoothly now, but there is a risk that enrollment pressures will increasingly stress these agreements. Foodservice Operators are ultimately a for-profit venture; if a program is financially unsustainable, it will only be a matter of time before they begin cutting services to the program’s detriment or look to renegotiate the contract entirely. Regardless of what structure your university has in place, it is important to start looking at your program through an entrepreneurial lens to prepare for the challenges ahead.