Decoding
The Meal Equivalency Factor
What is it?
Why is it important?
Sponsored By: Illinois ASBO
Presented By: Clare Keating / Jack Bortko / Pat Fournier
What is the Equivalency Factor?
The meal equivalency factor converts
a la carte sales to full meals which are billed
by a Food Service Management Company at
the contracted lunch meal rate.
Why Does It Matter?
• Affects your monthly costs.
• Affects your bid meal rate.
• Affects your ala carte pricing
structure.
Deciphering Bid Specs
SECTION 12-FEES
The FSMC and SFA shall determine the a la carte
meal equivalents by dividing a la carte revenue by:
1) The fixed meal rate or:
2) The a la carte equivalency factor.
Equivalency factor for 2010 – 2011 =
National Free Reimbursement: $2.68
State Free Reimbursement:
$0.1275
PAL Reimbursement:
$0.195
Equivalency Factor:
$3.0025
Amounts Used For FY’11 Are Previous Year’s
(FY’10) Reimbursement Rates
Must Use Whichever Yields the Higher $
For Example:
Method 1:
Annual a la Carte Sales =
$10,000
Contract Price Per Meal =
$ 1.94
A la Carte Equivalent Meals = 5,155
Method 2:
Annual a la Carte Sales =
$10,000
Defined Meal Equivalency Rate = $ 3.0025
A la Carte Equivalent Meals = 3,331
Defined Meal Equivalency Rate of $3.0025
results in lower cost to LEA by 1,824 Meals
It Is Highly Unlikely
That An LEA’s
Meal Equivalency Rate
Will Be A Derivative Of
Their Contract Meal Rate.
Hypothetically …
Calculating Equivalent Meals
Method 1
A la Carte Sales / Contract Meal Price = Equivalent Meals
Sample
Monthly A la Carte Sales: $5,000.00
5,000 / 1.94 = 2577.32 Equivalent Meals
Contracted Lunch Meal Rate: $1.94
2577.32 x $1.94 = $5,000.00
FSMC bills SFA $5,000.00 as a line item
on the monthly invoice.
And the other side of the coin …
Calculating Equivalent Meals
Method 2
A la Carte Sales / Defined Equivalency Factor = Equivalent
Meals
Sample
Monthly A la Carte Sales: $5,000.00
5,000 / 3.0025 = 1,665.28 Equivalent Meals
Contracted Lunch Meal Rate: $1.94
1,665.28 x $1.94 = $3,230.64
FSMC bills SFA $3,230.64 as a line item
on the monthly invoice.
Financial Impact
Method 1
Method 2
$5000.00 in a la carte
sales
$5000.00 in a la carte
sales
$0.00 = SFA/LEA
portion of revenue
$1,665.28 = SFA/LEA
portion of revenue
$5,000.00 = FSMC
portion of revenue
$3,334.72 = FSMC
portion of revenue
Why This Matters …
• Reimbursable Meals and A La Carte
Equivalents Must Be Bid At The Same Price
• A La Carte Equivalent Meals Have Higher
Food Costs Than Regular Meals.
• The Greater % Of A La Carte Equivalent
Meals, The Higher The Bid Meal Rate Will
Be.
FSMC Food Cost/Profit Example
Bottled Beverage
Selling Price: $1.25
Cost of Product: $.62
1.25 / 3.0025 = .416
.416 x 1.94 = .817
FSMC receives $.82, pays $.62, profits $.20
Per unit sold
FSMC Food Cost/Profit Example
Milk
Selling Price: $.30
Cost of Product: $.21
.21 / 3.0025 = .0699
.0699 x 1.94 = .135
FSMC receives $.14, pays $.21, loses $.07 per milk
7500 students in this district
Approximately 2000 milks sold daily for 168 days
FSMC Annual loss of $23,520
Contract Renewal Options
• If method 2 is used, the a la carte equivalency
factor will change annually to reflect increases /
decreases to reimbursement and PAL rates. Rates
used are from previous year (i.e. 2011 MEF is
derived from 2010 reimbursement rates).
• If method 2 is used, the a la carte MEF remains
constant for two renewals. In year three, MEF
changes and remains constant for years three and
four.
Final Thoughts

Reimbursable Meal Prices Should Be = Or >
Than The Free Reimbursement Rate Less The
Paid Reimbursement Rate.
For 2009 – 2010 School Year:
Free Reimbursement:
Less: Paid Reimbursement:
Minimum Meal Price:

$ 2.68
$ 0.25
$ 2.43
To Encourage / Increase The Number Of
Reimbursable Meals Served, Set The Price
Students Would Pay For An Entrée + Milk The
Same As The Cost Of A Full Lunch.
Questions?
Thanks For Spending
The Last Hour
With Us.
Enjoy The Conference!