A senior who spent months probing J Street’s finances concluded in his economics thesis that the dining hub is unlikely to ever turn a profit – and will continue to burden students with extra costs.
Economics professor Donald Parsons, who oversaw John Bennett’s thesis, verified his student’s “solid arguments” that J Street is a money pit with a mandatory dining program, which also drives participating retail GWorld partners to inflate prices across Foggy Bottom to offset the high commission.
“It looks suspicious. They trap the students into spending this money, and then they go off and sell the rights to it. It seems to me a bit over the top,” Parsons said.
GW has sought to revive J Street in recent years, as Foggy Bottom’s food scene has boomed. In a 2011 dining overhaul, the University replaced nearly all of J Street’s venues, swapping out fast-food chains for options run by the hall’s food provider, Sodexo. It also dropped required J Street spending program for sophomores, facing rampant criticism, but then saw sales drop by 24 percent.
This year, J Street has reintroduced fast food with the popular Auntie Anne’s pretzels and added two other eateries.
But despite the revamps, statistics show students still prefer to eat anywhere else.
The number of meals eaten at J Street plummets by about 83 percent from students’ freshmen to senior years, when they are no longer forced to spend $1,400 dining dollars there, a Student Dining Board poll of about 720 people found last semester.
Polled students also gave J Street an average food quality score of 4.2 out of 10. Just a single student gave J Street a perfect score.
University spokeswoman Michelle Sherrard declined to release a copy of GW’s 10-year contract with Sodexo, worth $112 million in projected sales. Sherrard also declined to discuss stipulations of the contract, citing confidentiality. University officials have declined to release sales information for Sodexo since last spring, when they last reported dwindling numbers.
Head of campus dining Nancy Haaga declined to comment on the senior’s thesis findings.
Businesses have reported that they jack up prices to offset the 8 to 10 percent GWorld commission for each purchase, as well as a 10-cent swipe fee, although specific contracts depend on the venue. Bennett calculated that those costs force students to shell out at least 6 percent extra.
“We live in a very dense area with tons of food options. We have no need for on-campus dining,” Bennett, last year’s Student Association presidential runner-up, said. “It’s a waste of resources. We just have it for the sake of having it.”
The cost of a meal
Students often complain J Street is more expensive than other Foggy Bottom eateries. Haaga said J Street is competitively priced. Sodexo records prices from about a dozen popular campus restaurants each summer, she said, and marks products between 5 to 10 percent lower.
“They recognize that in order for them to be a place that students want to go to, they have to be competitive because students have lots of choices,” Haaga said, adding that not all products can be priced lower.
But The Hatchet analyzed the cost of comparable items at different Colonial Cash venues and found that J Street’s prices are more expensive than most other options.
A bottle of water at J Street is $1.69, compared to 79 cents at Whole Foods Market. At The GW Deli and Gallery Grill and Market, a bottle costs $1.10.
A half-pound cheeseburger at J Street’s Metro Diner costs $7.50 and includes lettuce, tomato, raw red onion and traditional condiments. Upgrading to a one-pound burgers costs an extra $2. That makes most J Street burgers more expensive than other local options, unless a customer opts for the $4.75 third-pound burger.
A double-patty Whole Foods cheeseburger costs $7 and comes with as many as eight toppings, including sauteed onions, mushrooms and jalapeños, and a wider variety of sauces. Burger Tap and Shake charges $6 and Bobby’s Burger Palace charges $6.75 for classic burger options.
J Street’s 16-ounce hot coffee was the third-most expensive of the options surveyed, at $1.89. The deli and FoBoGro charge $1.65 and $1.69, respectively. Whole Foods charges $2 and Starbucks charges $2.15 for a grande.
The self-serve hot bar at J Street ($7.50 per pound) is cheaper than those at Whole Foods ($8.49 per pound) and Sizzling Express ($8.79 per pound) in Columbia Plaza. The N.Y. Gourmet Deli on L Street charges $6.19 per pound for its breakfast hot bar and $7.19 for lunch options.
A ‘lucrative’ contract
GW has the final say in dining decisions like removing venues, but Sodexo runs day-to-day dining operations.
Sodexo and GW inked a projected $112 million 10-year contract with GW in 2006. The company must earn its J Street sales, University spokeswoman Michelle Sherrard said, but has some financial stability with the help of mandatory freshman spending programs for freshmen.
Bennett called Sodexo’s contract – producing an estimated $11.2 million a year in revenue – “lucrative,” comparing it to larger schools like Georgia Institute of Technology, which reported earning about $1.6 million yearly.
Since Sodexo has run campus dining, sales from students using dining dollars and catering for GW groups and departments have climbed from about $6 million to $7 million, according to GW’s 990 tax forms, the most recent available. Even at its peak in fiscal year 2010, when GW transferred about $7 million to Sodexo, according to the tax form, that figure was still $4 million less than the company’s projected revenue.
Sodexo still earns some revenue from cash or other credit card purchases at Sodexo-run campus dining spots, as well as catering events for non-GW groups that rent space in University buildings like the Marvin Center. But Bennett’s analysis found the majority of Sodexo’s sales come from dining dollars.
The meal plan’s mandatory dining dollars program is one of the most criticized components of GW dining. Freshmen are required to spend $1,400 in J Street, G-Dub Java or the Mount Vernon Campus’ Pelham Commons and $1,000 at other GWorld vendors. Upperclassmen living on campus also must buy GWorld dollars but on a declining scale, depending on class year.
In his thesis, Bennett argues that between 82 and 90 percent of the food bought at J Street is “artificially propped up by the dining dollars mandate.” When GW nixed mandatory dining for sophomores, which Bennett calculated made up 26 percent of total J Street dining that year, the University told The Hatchet that sales decreased by 24 percent.
Using an outside food provider turns “the university into a middleman, who contributes little but seeks to extract profit,” he wrote in his thesis.
Other city schools like Howard, Fordham, Tulane and Northwestern universities also use Sodexo’s dining services. Fordham University has an entirely retail-based program like GW, but most other schools use a combination plan of meals per day with the dining dollars for flexibility. With a total student body of about 15,000, Fordham paid Sodexo more than $13 million for fiscal year 2010, according to Fordham’s most recent public 990 tax form.
Another dining service provider, Aramark, ran J Street until 2006. It opted out of its contract because it could not turn a profit with the retail-based program, after scaling back on hours two years prior and shutting some venues due to competition from Colonial Cash vendors.
The price of a swipe
GW’s partnerships with businesses through GWorld are also costing students their cash, Bennett argued in his thesis.
GWorld partners inflate their prices to afford the 8 to 10 percent commission fee and the 10-cent swipe fee to the University. Major credit cards charge between 2 and 5 percent in surcharges.
With 10,000 undergraduates, the thesis found, each student pays $800 extra to GW in hidden tuition, based on the price they wouldn’t have to pay if GWorld prices weren’t inflated. The University accrues more than $2 million a year from this practice.
Haaga said “no comment” when asked about the potential for small-scale GWorld vendors to inflate their prices in order to profit despite steep swipe fees.
Assistant general manager at Tonic Restaurant Lauren Matthias said most of sales come from the bar, where students cannot use GWorld to pay. She said GWorld charges make up “a small amount” of total sales, but if more than 50 percent of sales were charged to GWorld, prices would have to increase.
“We have to budget for it every month,” Matthias said. “It’s always higher than it should be.”
Reviving J Street
To save J Street, Bennett said GW should break with Sodexo and to bring in chain restaurants – like Wendy’s and Chik-fil-A, which were scrapped in fall 2011 – that would be able to keep prices low. He also called on the University to end its mandatory GWorld meal plans, so students would not have to pay hiked-up charges at shops.
Bennett said he handed over his thesis to the Student Association and the Student Dining Board, but doesn’t know if it will create change.
“This wasn’t just a mental exercise for its own sake,” Bennett said. “I don’t know if anything is going to come from it, but at least I tried.”