The Meal Plan Exception

I’ve been writing an op-ed and I wanted to know what you guys think, maybe some edits. Thanks.

“Top tier universities are lavish. At the University of Rochester we have tons of activities, the earliest classes start at 9am, and the architecture is breathtaking. But you can’t get a good bite to eat.

This isn’t specific to the University of Rochester. There is generally a commonly held belief that college dining is lacking. Why is it that these schools provide so much but do not provide a satisfying dining experience?

The quick answer is that most of them do not have proprietary dining services. They contract a third party to do it or they contract a third party to help do it. Outsourcing dining services has become common place. Here is the problem:

If a school provided their own dining they would partake in both all the costs and all the benefits. When a school brings in a 3rd party, the interests of the 3rd party aren’t the same. This is what is known as an agency problem. The college has an interest in providing more, cheaper, or better services than what would be the profit maximizing amount, price, or quality now. They want to provide a good college experience to the students. They care for the same reason they try to get the smartest and most hard working students at their institution. Because the intelligent, hardworking students that love their college experience become the biggest alumni donators.

Think of providing university services like an investment. The university provides a good service in the hopes that in the future, there will be more donations from alumni. To invest, however, you need to have capital. If strapped for cash, divestment looks like a good idea.

Before the University of Rochester’s contract with Aramark, dining services was losing a lot of money and having cash flow problems. Aramark was brought in to help change that in 1998. They succeeded, but not by increasing efficiency or quality. The biggest driver was that students would be forced to have meal plans. Anyone could run a business profitably if they could force their customers to buy their product. Instead of creating a better business model, they shifted the cost from one place to another; all the while taking a fee. Cam Schauf, Director of Dining Services at the University of Rochester, said that “one of the goals of dining services is to be financially self-sufficient and not to be a boon on the rest of the University”; a goal that, at the surface, seems met. However, transferring costs from Dining Services to the students is a cost on the University (for reasons stated above). On top of this, now there is an extra mouth to be fed, Aramark.

I can’t tell whether the amount, quality, and price of food are too low or too high. But I do know that under the assumption that dining services is a good investment, college dining should be better than elsewhere. Subjectively speaking, that is not the case. These costs may be less visible to the University (even though in the long run, it hurts them) than running a loss in Dining Services but it is very visible to the student. Duly noted.”