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A QualitEvolution is intended to capture positions and experiences as a participant in the evolution of the Quality profession into the 21st century. From its origins as the brainchild of Corporate Industrial Statisticians, our profession has transformed and evolved to incorporate and adapt to the demands and expectations of our modern existence.

The scope of the subject matter within A QualitEvolution extends to the furthest ranges of quality, business transformation, management science, and quality issues especially pertinent to the members of ASQ in Canada.

Tuesday, May 23, 2017

Taxes, Gratuities, and Expensive Salad Bowls

I am writing this, partly as a personal confession, and partly as a lesson learned from the Food and Beverage industry.

At the recent ASQ World Conference, I was entrusted to select the menu for a networking event hosted by one of the Divisions.  Likely due to prior arrangements or fulfilled conditions, the costs of meeting rooms were covered so we were charged for food and beverages.  As the conference was in Charlotte, North Carolina, there was a buffet with "Low Country" cuisine.  In my wisdom, I thought that the regional delicacies would be a special treat, particularly since the dawn-to-dusk events of the conference would limit the opportunities for dining independently.  However I am also sensitive to certain dietary regimens which may limit the enjoyment of local favorites like pulled pork shoulder and grilled chicken.  To supplement the meats and potatoes, I augmented the buffet with a modest bean salad, priced at $N per portion.

To my realization, the hotel served the beans in a bowl and simply augmented the cost by the quantity of diners.  While nobody specifically demanded that a bean salad be added, I took comfort in the fact that vegetarian diners had an additional option for selection.  What seems like a modest supplement actually represented a 15% cost increase for what represented a 4-5% increase in the dining options.

But wait, there's more!  The fine print of the quotation also referenced taxes and a 24% taxable gratuity.  This meant that for every $100 spent, $124 would be eligible for the various taxes charged by the hotel.  The taxes added an additional layer of costs to the final amount.

For events and activities to be feasible, the costs have to be recovered.  I recommend transparency on any costs to enable and support informed decisions on events and programs.  My personal lesson learned is that catered events will come with a 30% premium over stated costs and this should be considered as part of any fees or sponsorship amounts.  It also helps to understand why a modest meal at a catered hotel event can be so much more expensive than when the same meal is independently prepared and brought in by the volunteers.

Fortunately my event did not include alcoholic beverages.  Judging from the cost of soda and bottled water (which was not purchased in favor of the vats of coffee, iced tea, and lemonade and complimentary pitchers of iced tap water), a single alcoholic beverage would consume a minimum of $8-15 per item, depending on the grade or vintage.  A two-drink provision for a gathering of 50 attendees would add an extra $1000 to the costs; even more when taxes and gratuities are considered.

In advocating thrift, I am promoting care and attention to detail.  Hotels and catering companies use add-ons (think of the used car salesman offering ancillary items and warranties to inflate the cost of the car from the lot).  These add-ons, along with the fine print items, can come as an unanticipated and expensive surprise unless a contingency has been built in.

If you presume 30% cost overruns and another 20-30% of no-shows, the true break-even point is almost double the expected outcome.  For an event of 100 people with expected costs of $10,000 ($100 per attendee), the cost overruns of 30% and the 30% no-shows will result in having 70 people required to fulfill $13,000 ($185 per attendee).  Knowing this in advance and making the appropriate adjustments will protect the financial viability of the ASQ member unit, and ensure sustainability in the years to come.