How Should We Handle a Canteen Contractor's Request for a Rate Increase? Seeking Advice and Strategies

Canteen run by a contractor on a per-head basis for 400 employees. He is requesting a raise in his per-head rate provided by management. How can we adjust the rates? Are there any new strategies for setting the revised rates? How do we convince them after the adjustment? If there are any guidelines through PowerPoint presentations, please share. Please guide. V. Rajaram

Dear Rajaram,

As per your view, about 400 employees means it will definitely be beneficial to the canteen contractor. If the contractor wants to raise the price, should we go for an agreement basis for up to 6 months or 1 year?

During significant price fluctuations, you may need to raise the prices slightly, which should also be mentioned in the agreement.

Hope this gives you some ideas.

With Regards,

Shriram, Chennai

Dear Rajaram,

As per your view, about 400 employees, it will definitely be beneficial to the canteen contractor. If the contractor wants to raise the price, do you have to go for an agreement basis for up to 6 months or 1 year?

During price fluctuations, you have to raise the price a little bit, and this should also be mentioned in your agreement.

Hope you can get some idea...

With Regards,
Shriram,
Chennai

Rates of the meals are based on factors like ingredient prices, labor charges, administrative charges, and profit margins. Normally, future increases in the prices of the ingredients are considered while fixing the rates. However, many times it so happens that the increase in the prices is very high, and the contractor is not able to absorb the same. This happens mainly in two areas:

a) Labor charges: Due to revisions in the minimum wages, the contractor has to bear the extra burden regarding PF and ESI contributions. Normally, all companies have systems to offset this rise by including the potential rise in the minimum wages in the rates.

b) Increase in the rates of cooking oil: The rates of cooking oil are highly fluctuating. Companies typically revise the rates if the price of oil crosses certain values. It's essential to understand that contractors do business to earn a profit, and if they are unable to generate profit, they may try to manipulate either by adjusting payments to workers or making changes in the quality of foods. It is my suggestion that you always fix the rates considering the expected rise in minimum wages and oil prices.