Much ado about cheeseburgers [Updated]

"Our ridership is up, our revenue is up, we have reduced our debt, we have had our credit rating upgraded and we have a plan for the future that can be fulfilled with the dedication of this workforce, and business and political leadership. Food and Beverage has a good story to tell in its improvement. Unfortunately, our ability to tell that story is being thwarted, but our ability to continue to improve is not. We will improve.”

That was the message Amtrak President & CEO Joe Boardman sent in response to House Transportation & Infrastructure Chairman John Mica’s (R-FL) attacks on the railroad’s food service.

Chairman Mica’s political grandstanding has certainly hit a sweet spot in the media news cycle, generating a lot of inside-the-beltway coverage—even eliciting a response from Tea Party candidate Sandy Adams, his Republican primary opponent, who labeled it an “election-year stunt.”  For that reason, this post will include the full text of Amtrak’s press release; the company deserves a chance to respond.  There are also a few points worth emphasizing.

The first is that there is more variability in the cost recovery than Mica’s criticism leads one to believe.  It’s admirable that Amtrak is willing to publically recognize that its current, network-wide cost recovery rate of 59 percent for food and beverage is “unacceptable.”  It’s also admirable that it’s highlighting its goal of 70 percent recovery rate for food operations by 2015; the railroad is setting itself up for either a nice “I told you so” moment, or a very public failure.  But these aggregations gloss over the fact that there is a lot of variability in the cost recovery rate throughout the network.  Amtrak currently has a return of over 78 percent on its food and beverage costs on a direct basis in the Northeast Corridor.  That’s a higher rate than the privately-contracted service that Chairman Mica highlighted as an alternative to an Amtrak-run service. 

Where Amtrak struggles is the long distance routes, where labor and support costs are higher—not through conspiracy or inefficiency, but because more is being asked of these crews.  Mr. Mica’s protestations aside, Amtrak can’t reasonably pay a worker who’s serving food on a train that leaves Chicago on Wednesday afternoon and arrives in Seattle on Friday morning the same wage that McDonald’s pays its employees.

This leads directly to the second point, which is that there are hard and fast constraints Amtrak faces, and that all transportation providers that serve food in motion face, that will continue to keep food and beverage operations on the national network in the red.  But if food and beverage operations are necessary to long-distance routes—and anyone who’s taken a multi-state train trip should have a pretty clear sense that this is an uncontroversial assertion—then this is not an issue that needs to be “fixed.”   Rather, it is a necessary cost in providing a necessary service.  No different than the cost of maintaining highway rest stops, or the money the Federal Aviation Administration spends on air traffic control facilities equipment (over $1.4 billion in FY2012).

This is not to deny the need for Amtrak to constantly work to improve its operations.  Anecdotally, the quality of the meals Amtrak provides declined sharply in 2005, when—thanks to budget cuts—the company phased out cooked-to-order meals, replacing them with pre-prepared meals that are reheated on board (with the exception of a few breakfast dishes).  To the company’s credit, the food has gotten gradually better since the introduction of these changes, as Amtrak crews have learned to work more efficiently within these new constraints.  As the recipient of federal funds, Amtrak is obliged to be accountable and transparent in the use of taxpayer dollars.  And given the tight fiscal atmosphere faced by the railroad, it’s expected that there will be a back-and-forth over cost-control versus quality-of-service.   

But there’s only so far Amtrak can go in cutting line-item costs.  The logistical hurdles in providing a burger on a train that travels hundreds of miles are always going to be greater—and more costly—than those faced by a fast food franchise located downtown.  To hold Amtrak to the same standard as McDonald’s is to do a disservice to the hundreds of communities that rely on Amtrak service for their mobility.

Amtrak’s statement, in full:

The percentage of cost recovery in the food & beverage service is unacceptable to Amtrak, despite improving more than 20 percent from an average of 49 percent cost recovery in 2006 to an average of 59 percent in 2011. These significant improvements are the result of competitively bidding our managed services contract, implementing a simplified dining initiative on long distance trains, introducing on board credit card processing, adding at-seat cart service on selected routes, and redesigning the product offerings.  
 
In a message to Amtrak employees, President & CEO Joseph Boardman said “we can do even better.”  We have a clear plan to continue increasing our cost recovery to approximately 70 percent by 2015 and beyond.  We are installing a new point-of-sale system on-board and have a new inventory program called WIMS, among other initiatives outlined in the testimony.

The figures produced at a Congressional hearing last week were only partially derived from Amtrak data and contain estimates we cannot confirm.  Our data is provided monthly to Congress and posted on Amtrak.com, our food costs are similar to others in the restaurant and institutional food industry and we are able to leverage savings from our privately operated commissaries.

The facts of our progress have been ignored or, in some cases, misstated at the hearing and in some of the coverage by reporters, bloggers and critics.

Amtrak will not tolerate waste and theft, follows due process to dismiss employees and brings criminal charges.  To suggest there is rampant theft and it is a major factor in the cost recovery is baseless and insulting to front-line employees and to their managers.

Food & beverage is a small part of a very large business enterprise, but it contributes significantly to our ticket revenue.  Service from café, bistro, lounge or dining cars is an essential element in the journey -- particularly on trips of more than a few hours -- and elimination of food and beverage service would lead to a significant loss of ridership and revenue that would be much greater than the elimination of the food & beverage costs. It is clear that our customers value this service that cannot be measured through food & beverage revenue alone.

“Our ridership is up, our revenue is up, we have reduced our debt, we have had our credit rating upgraded and we have a plan for the future that can be fulfilled with the dedication of this workforce, and business and political leadership. Food and Beverage has a good story to tell in its improvement. Unfortunately, our ability to tell that story is being thwarted, but our ability to continue to improve is not. We will improve,” Boardman said.

Update: Read Amtrak's then-Senior Vice-President of Operations William L. Crosbie’s June 2005 testimony to the House T&I Committee on this very same subject.