New Research from Union Raises Questions, Suggests Ongoing Costs Beyond Contract Termination

Philadelphia – UNITE HERE, the union representing cafeteria workers in the Philadelphia School District, and SEIU, the union representing janitorial workers in the Philadelphia School District, released an analysis today illustrating Aramark’s mismanagement of the Philadelphia Schools’ full-service school cafeterias and called for an independent audit of the circumstances surrounding the monitoring of the contract.

The analysis comes two days after the Philadelphia School District announced their intention to terminate its contract with Aramark for failure to deliver on its promise to reduce the school food service deficit.

"This report raises serious questions that need to be answered about the integrity and ethics of the food service program Aramark was running in the Philadelphia schools. We need an independent audit to get to the bottom of this and ensure parents, taxpayers and workers aren’t left holding the bag for Aramark’s financial mismanagement," stated Lynne Fox, Manager of the UNITE HERE Philadelphia Joint Board.

According to documents obtained by the food service workers’ union, the school district’s food service deficit increased under Aramark’s management because the company failed to meet its high estimates of the number of meals it would sell and a failure to control costs.

Among the key findings in the analysis:

At the end of the 2005-2006 school year, Aramark’s food service program in the Philadelphia School District lost over $4 million. In its end of-year June 2006-2007 financial reconciliation report, the estimated loss had grown to almost $7 million – a 72% increase over the previous year’s budget shortfall;

While sales were far lower than projected by the company at the end of last school year, the company’s expenses exceeded its own budget projections. Aramark spent $1,327,947 on net supply costs – 20.4% above what they projected to the Philadelphia School District at the start of the school year. At the same time, overruns in office supplies and phone bills contributed heavily to the program’s losses. In fact, costs for phone use and office supplies were 220% more than Aramark budgeted at the beginning of the year;

From the beginning, Aramark’s budget projections appear to have relied heavily on extremely low per-meal food costs. Aramark budgeted 33 cents per meal per lunch, 40 cents per meal per breakfast and 69 cents per meal for after-school snacks. In its analysis UNITE-HERE noted that while federal and state subsidies do offset much of the cost of food for the school breakfast and lunch programs in the Philadelphia market, a carton of Grade A Large Eggs, even at bulk rates, currently costs somewhere between $1.23-$1.37 and a pound of butter $1.38, making it hard to conceive how Aramark planned to feed Philadelphia’s students on such a slender food budget. UNITE-HERE noted that in the Detroit public school system Aramark’s per meal cost is close to 81 cents – far more than the per meal cost it budgeted for lunch in Philadelphia.

The Philadelphia School District will continue to owe money to Aramark well into the future regardless of yesterday’s termination of the contract. The analysis reveals that in July of 2006, despite the food service program’s losses during the previous school year, the District agreed to purchase from Aramark two Point of Sale Systems to keep track of meals sold. These were originally valued at over $1.4 million dollars. On top of that, the District also agreed to pay Aramark for the installation of a “UBU and 12 Spot Lounges”. These were originally valued at an additional $400,000. In light of the District’s severe budget deficit, the purchase of the lounges, Aramark’s brand concepts for the teen and tween sets, should now be called into question. According to the terms of the agreement, upon termination of the food service contract at the end of this school year, the District will owe Aramark over $740,000 for the unamortized costs of these purchases.

Today union leaders and cafeteria workers called on Governor Rendell to appoint an independent auditor to conduct an assessment of the true costs of Aramark’s contract to the Philadelphia School District and to answer how the contract was allowed to continue.

“Taxpayers have the right to know why Aramark was not able to live up to its proposed sales and expense projections, which contributed to continued deficits for the school district,” said Valarie Long, a Vice President of SEIU Local 32BJ.

UNITE HERE Local 634 represents 2300 workers who work in Philadelphia public school cafeterias. 1200 of these workers were managed by ARAMARK. Local 634 is affiliated to the Philadelphia Joint Board of UNITE HERE. Lynne Fox is the Manager of the Philadelphia Joint Board and a Vice President of the International Union.

SEIU Local 32 BJ represents 80,000 building service and security workers throughout the North East including 5,000 in the City of Philadelphia. SEIU 32BJ represents hundreds of school custodians in the Philadelphia School District. Valarie Long is a Vice President of SEIU 32BJ.

Across the country UNITE HERE and SEIU represent food service workers in Aramark cafeterias.

The financial analysis and information obtained from the Right to Know request are available online at http://www.factsonaramark.org/

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