**RANDOLPH-SHEPPARD**

**VENDING FACILITY PROGRAM**

**ANNUAL REPORT**

**FISCAL YEAR 1990**

**UNITED STATES DEPARTMENT OF EDUCATION**

**OFFICE OF SPECIAL EDUCATION AND**

**REHABILITATIVE SERVICES**

**REHABILITATION SERVICES ADMINISTRATION**

**WASHINGTON, D.C. 20202**

**[INFORMATION MEMORANDUM]{.underline}**

**RSA-IM-91-38**

**RSM-3015 [1]{.underline}/**

**DATE: September 27, 1991**

**TO : STATE LICENSING AGENCIES UNDER THE RANDOLPH-SHEPPARD ACT**

**RSA SENIOR MANAGEMENT TEAM**

**SUBJECT: Randolph-Sheppard Vending Facility Program,**

**FY 1990 Annual Report**

**CONTENT: Attached is a copy of RSA\'s FY 1990 Annual Report which is
based on the \"Report of Vending Facility Program\" (Form RSA 15) for
the reporting period October 1, 1989 through September 30, 1990,
submitted by State licensing agencies pursuant to the Randolph-Sheppard
Act.**

**The Randolph-Sheppard Vending Facility Program has continued to
provide blind persons with remunerative employment at increasing levels
of earnings. A total of 3,503 blind vendors operated 3,291 vending
facilities located on Federal and other property. The program generated
\$388.8 million in gross income and \$74.7 million in net earnings to
vendors for average annual earnings of \$23,822 per vendor.**

**This Annual Report, prepared by the Vending Facility Branch, Division
for Blind and Visually Impaired, contains statistical and financial
analysis of the Randolph-Sheppard Program.**

**Please direct any question concerning this report to**

**Mr. George F. Arsnow, Chief, Vending Facility Branch, MES Building,
330 \"C\" Street, S.W., Washington, D.C. 20202-2738, telephone (202)
732-1317.**

**Inquiries To: RSA Regional Commissioners**

**Nell C. Carney**

**Commissioner**

**[1]{.underline}/ Under Development**

**[T A B L E O F C O N T E N T S]{.underline}**

**Page**

EXECUTIVE SUMMARY of the Fiscal Year 1990 Annual

Report of the Randolph-Sheppard

Vending Facility Program \...\...\...\...\.... 1

DEFINITIONS AND FINANCIAL INFORMATION:

Income and Earnings

Program Expenditures and Sources of Funding

Number of Vendors and Vending Facilities \...\...\...\...\...\... 5

TABLES

Table 1 - Vending Facility Program Data

Summary - National Trends, FY 1986-1990 \..... 13

Table 2 - Program Income and Earnings, FY 1990
\...\...\...\...\...\...\...\...\...\...\...\.... 15

Table 3 - Cafeterias Sales and Earnings, FY 1990
\...\...\...\...\...\...\...\...\...\...\...\.... 21

Table 4 - Vending Machine Facilities Sales and Earnings, FY 1990
\...\...\...\...\...\...\..... 23

Table 5 - Other Types of Facilities Sales and Earnings, FY 1990
\...\...\...\...\...\...\..... 25

Table 6 - Gross Sales Average Per Facility, FY 1990
\...\...\...\...\...\...\...\...\...\...\...\.... 27

Table 7 - Number of Vendors and Vending Facilities, All locations, by
Type of Facilities,

FY 1990 \...\...\...\...\...\...\...\...\...\...\...\.... 29

8 - Number of Vendors, by Location and

Type of Facility, FY 1990 \...\...\...\...\...\.... 31

Table 9 - Number of Vending Facilities, by Location and Type of
Facility, FY 1990 \...\... 33

Table 10 - Vending Facilities on Federal Property by Agency Granting
Permit or Contract, FY 1990
\...\...\...\...\...\...\...\...\...\...\...\.... 35

Table 11 - Sources of Program Funding, FY 1990
\...\...\...\...\...\...\...\...\...\...\...\.... 37

Table 12 - Vending Facility Program Expenditures, by Category, FY 1990
\...\...\...\...\...\...\...\... 39

Table 13 - Number of Persons Provided Training,

FY 1990 \...\...\...\...\...\...\...\...\...\...\...\.... 45

Table 14 - Number of Sites Surveyed,

FY 1990 \...\...\...\...\...\...\...\...\...\...\...\.... 47

Table 15 - Employees and Person Years,

FY 1990 \...\...\...\...\...\...\...\...\...\...\...\.... 49

Table 16 - Vending Locations under the Interstate

Highway Program, FY 1990 \...\...\...\...\...\..... 51

EXECUTIVE SUMMARY OF THE FISCAL YEAR 1990 ANNUAL REPORT

OF THE RANDOLPH-SHEPPARD VENDING FACILITY PROGRAM

The Vending Facility Program authorized by the Randolph-Sheppard Act
(P.L. 74-732, as amended by P.L. 83-565 and P.L. 93-516; 20 U.S.C.
Section 107 [et]{.underline} [seq]{.underline}.) provides blind persons
with remunerative employment and self-support through the operation of
vending facilities on Federal and other property. The program, enacted
into law in 1936 was intended to enhance employment opportunities for
trained, licensed blind persons to operate facilities. At the outset,
sundry stands were placed in the lobbies of Federal office buildings and
post offices. The law was subsequently amended in 1954 and again in 1974
to ultimately assure the blind a \"priority\" in the operation of
vending facilities which include cafeterias, snack bars, and automatic
vending machines.

Over 22,000 blind persons have been employed in this program since its
inception in 1936. The program has broadened considerably from Federal
locations to also include State, county, municipal, and private
installations. Randolph-Sheppard can, therefore, most accurately be
characterized as \"big business.\" The gross sales of the program rank
it within the fifty largest food service corporations in America.

The following statistical information is based upon the form \"RSA 15\"
submitted by the 51 State Licensing Agencies for the period October 1,
1989 through September 30, 1990 to satisfy the statutory requirements
for an annual report.

In FY 1990, there were 3,291 vending facilities of which 1,062 were
located on Federal property and 2,229 on non-Federal property, providing
employment for 3,503 blind vendors of which 1,137 were on Federal
property and 2,366 were on non-Federal property. These figures represent
an overall decrease of 2 vending facilities (an addition of 15 sites on
Federal property and a loss of 17 sites on non-Federal property) over FY
1989, and an overall decrease of 53 vendors (an addition of 2 vendors on
Federal property and a loss of 55 vendors on non-Federal property).

In FY 1990, the gross income (including gross sales, vending machine and
other income) from all facilities totaled \$388.8 million (up \$12.6
million) over FY 1989 (\$376.2 million). This produced total vendor
earnings of \$74.7 million\--an increase of \$1.8 million over FY 1989
(\$72.9 million). The national average annual earnings of all vendors
was \$23,822 in FY 1990, an increase of \$956 over FY 1989.

-1-

There are marked differences in the administration of the Vending
Facility Program from State to State. This report identifies differences
in data on the following specific types of facilities: Snack Bars and
Other Facilities, Vending Machines, and Cafeterias.

In FY 1990, there were a total of 3,291 vending facilities of which
2,098 or 63.8% were Snack Bars and Other Facilities, 504 or 15.3% were
Cafeterias, and 689 or 20.9% were vending machines. Of the total vending
facilities, there were 1,062, or 32.3%, on Federal property and 2,229,
or 67.7% on non-Federal property.

Snack Bars and Other Facilities were the largest of the three categories
with 2,098 facilities of which 678 were on Federal property and 1,420
were on non-Federal property. The gross sales for this type of facility
were \$214.3 million or 56.4% of the total program gross (\$379.8
million). The average vendor earnings were \$21,402.

There were 504 cafeteria type facilities of which 118 were located on
Federal property and 386 were located on non-Federal property. The gross
sales from cafeterias were \$103.0 million, 27.1% of the total. The
average vendor earnings for this category were \$27,685.

There were 689 vending machine facilities, 266 on Federal property and
423 on non-Federal property. The gross sales from vending machines were
\$62.5 million or 16.5% of the total gross sales. The average vendor
earnings for this category were \$29,031.

The total program expenditures for administering the Vending Facility
Program by the State Licensing Agencies were \$50.2 million in FY 1990.
The funding for those expenditures came from the following sources of
support: machine income - \$8.7 million; levied set-aside from vendors -
\$11.9 million; State appropriations - \$5.5 million; and Federal
(Section 110 funds) - \$24.1 million.

The General Services Administration was the largest Federal property
landlord with 554 facilities. The U.S. Postal Service was second with
246 facilities, and the U.S. Department of Defense was third with a
total of 104 facilities.

In FY 1990, the 51 State Licensing Agencies reported that 543.5 person
years were used to administer the Vending Facility Program. They also
reported that 451 blind persons were trained to become vendors of which
230 or 51.0% were placed as licensed vendors, and that 814 potential
sites were surveyed of which 308 or 37.8% were accepted.

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In addition to the 3,503 licensed blind operators employed by the
Vending Facility Program, the program employs 521 individuals with
visual impairments and 504 with other disabilities.

The new RSA 15 report provides data on State participation in the
Kennelly Interstate Highway Program. Currently 35 States participate in
that program. Since Washington, D.C., Puerto Rico, the Virgin Islands
and the States of Alaska and Hawaii have no interstate highways, only 11
States are not participating in this program which provides a livelihood
for vendors.

In reviewing this statistical program summary, it should be recognized
that business opportunities for blind persons in the Randolph-Sheppard
Program may be limited by the resources available to the State Licensing
Agency and/or by the availability of

vending sites on Federal and other property in a State. State Licensing
Agencies should find the comparative data available in these tables
helpful for making program decisions and expanding business
opportunities for blind clients. States with similar profiles may wish
to enter discussions about mutual problems and achievements. One
important gauge of the value of this report will be the advancement of
employment opportunities for blind persons in each State\'s vending
facility program.

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RANDOLPH-SHEPPARD VENDING FACILITY PROGRAM

FISCAL YEAR 1990 ANNUAL REPORT

DEFINITIONS AND FINANCIAL INFORMATION

This report and accompanying tables are based on RSA-15 data reported by
State Licensing Agencies for the Blind on three specific types of
vending facilities, as defined under the Randolph-Sheppard Regulations
in the following manner:

1.\"Snack Bars and Other Facilities\" means all types of business
enterprises which are not included under the cafeteria and vending
machine definition. The category includes snack bars and dry/wet
facilities.

2.\"Vending Machine Facility\" means an automated coin or currency
operated facility which dispenses a variety of food and refreshment
items and services. The licensed business operator is responsible for
the complete management of the machines and the area in which they are
located. The vendor also must be located on the premises and provide
such functions as loading and servicing such machines and other
necessary customer related services.

3.\"Cafeteria\" means a food dispensing facility capable of providing a
broad variety of prepared foods and beverages (including hot meals)
primarily through the use of a line where the customer serves himself
from displayed selections. A cafeteria may be fully automatic or have
some limited waiter or waitress service, and table or booth seating
facilities are always provided.

[INCOME STATEMENT]{.underline}

In FY 1990, the Vending Facility program expanded the income account to
eleven items. Gross profits and net earnings are now reported with more
supporting information indicating how the figures were obtained, as
shown in this schedule followed in preparing the annual report for FY
1990:

-5-

[ItemPercent]{.underline} [Million \$]{.underline}

1.Gross Sales \...\...\...\..... 100.0 \...\...\...\... \$379.9

2.Cost of Goods Sold \...\...\...\...\...\...\...\..... \$218.8

3.Gross Profit \...\...\...\.... 42.4 \...\...\...\.... \$161.1

4.Operating Expenses \...\...\...\...\...\...\...\..... \$ 84.4

5.Operating Profit \...\...\... 20.2 \...\...\...\.... \$ 76.7

6.Vending Machine/Other Income \...\...\...\...\.... \$ 9.0

7.Net Proceeds \...\...\...\.... 22.5 \...\...\...\.... \$ 85.6

8.Funds Set Aside \...\...\...\...\...\...\...\...\..... \$ 11.1

9.Net Profit to Vendors \.... 19.6 \...\...\...\.... \$ 74.6

10.Fair Minimum Return \...\...\...\...\...\...\...\.... \$ 0.1

11.Vendors Earnings \...\...\... 19.7 \...\...\...\.... \$ 74.7

[Gross Sales and Profit]{.underline}

In FY 1990, the Vending Facility program reported gross annual sales of
\$379.9 million, cost of goods sold of \$218.8 million, for a gross
profit of \$161.1 million, or 42.4 percent of gross sales.

Although the 51 State programs operate in the same line of business and
basically under similar ordinary market conditions, the margin of gross
profit ranged from 10.8 percent in North Dakota to 56.6 percent in
California. The margin of profit varied also among the three types of
facilities as follows: 48.5 percent for cafeterias, 43.8 percent for
vending machines, and 39.1 percent for snack bars and other.

[Operating Expenses and Profit]{.underline}

After deducting \$84.4 million operating expenses in payments for
equipment, maintenance and repairs, supplies, wages, rent utilities,
insurance, licenses, State and local taxes, the program reaped an
operating profit of \$76.7 million, or 20.2 percent of gross sales.

-6-

Cafeterias, which were credited with the best sales profit (48.5
percent), turned out the poorest operating profit (14.3 percent), and
the California State program which recorded the highest sales profit
(56.6 percent), managed only a below average operating profit (18.1
percent). In a conventional cost system, appropriate operating expenses
will be matched against expected revenues.

[Vending Machine/Other Income and Net Proceeds]{.underline}

The \$9.0 million vending machine income distributed to vendors and
other income from subsidies and other sources accruing to the vending
facilities, added to the \$76.7 million operating profit, yielded \$85.6
million net proceeds, or 22.5 percent of gross sales.

As a percent of gross sales, net proceeds indicate profitability after
the normal revenues and expenses are accounted for. By this criterion,
vending machines were the most profitable type of facility with net
proceeds of 31.2 percent, followed by snack bars and other with 23.3
percent, and cafeterias with 15.8 percent.

[Set-Aside Funds, Net Profit and Fair Minimum Return]{.underline}

Set-Aside funds assessed against the net proceeds of vending facilities,
an accountable item but optional with the States, amounted to \$11.1
million collected in 39 participating programs that used them to pay for
the maintenance and replacement of equipment, management services, fair
minimum return payment to vendors, and fringe benefits.

The remaining net profit to the vendors, after subtracting the \$11.1
million set aside from net proceeds, was \$74.6 million, or 19.6 percent
of gross sales.

Fair minimum return may be paid to vendors from set-aside funds in order
to provide a more uniform and equitable income for all vendors. Fourteen
States used this provision of the Act to contribute a total of
\$142,818.

[Vendors Earnings]{.underline}

The amount of vendors earnings is determined by the volume of the
program net profit to vendors (i.e. the profit after set-aside funds)
and the supplementary fair minimum return payments to the vendors. In FY
1990, the vendors earnings totaled \$74.7 million, as shown in the
following statement:

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Gross Sales, Vending Machine and Other

Income, and Fair Minimum Return \...\...\...\... \$388,948,740 100.0

Merchandise Purchases, Operating

Expenses, and Funds Set Aside \...\...\...\..... \$314,255,582 80.8

Vendors

Earnings \...\...\...\...\...\...\...\...\...\...\..... \$ 74,693,158
19.2

This means that, after all kinds of program expenses were accounted

for, the vendors take home earnings represented 19.2 percent of the
program revenues from all sources, that is about .20c on the \$1.

The vendors national average earnings, an important management figure in
the program, were \$23,822, and it ranged from \$7,064 in

Utah to \$43,193 in Colorado. Vendors in 32 State programs received
additional fringe benefits valued at \$7.5 million.

Vendors operating vending machine facilities made an average of
\$29,031, compared to \$27,685 for those operating cafeterias, and
\$21,402 for those in snack bars and other.

[NUMBERS OF VENDORS AND VENDING FACILITIES]{.underline}

A vendor is a blind person licensed and authorized by the State
Licensing Agency (SLA) to operate vending facilities on Federal, public
(State, county, municipal) and private property. The vending facilities
are classified into three categories: cafeterias, vending machines,
snack bars and other.

In FY 1990, 3,503 vendors managed and operated 3,291 vending facilities,
distributed by location as follows: 1,137 vendors operated 1,062 vending
facilities on Federal property; 2,065 vendors operated 1,947 facilities
on public property; and 301 vendors operated 282 facilities on private
property.

Of the total 3,291 vending facilities, 504 were cafeterias, 689 vending
machines, and 2,098 snack bars and other.

A total of 1,062 vending facilities were granted permit or contract to
operate on Federal property by the following identified Federal
Agencies: GSA - 554, USPS - 246, DOD - 104, TVA - 39, HHS - 30,

DOT - 13, DOE - 11, VA - 9, Interior - 8, Treasury - 7, NASA - 6,

Agriculture - 4, Commerce - 2 EPA - 2, Fed.Pris. - 2, Justice - 1, HUD -
1, other - 23.

In FY 1990, the VF program trained 451 blind persons and placed 230

as vendors. Another 172 were certified but they had to wait for
employment. Lack of available facilities was a factor.

-8-

Mandatory annual surveys (814 in FY 1990) for potential vending facility
locations were conducted, 249 in Federal sites and 565 in

non-Federal sites. As a result of the surveys, 82 Federal sites

vs. 226 non-Federal sites were accepted as vending locations. A total of
308 surveyed sites were accepted in FY 1990. During the

same year, 179 new facilities were established and 181 were closed-a net
loss of 2. Leading reasons for not accepting surveyed sites

were \"infeasibility of site\" (242) and \"denied by property manager\"

(114).

[FUNDING SOURCES AND EXPENDITURES]{.underline}

Total public support for the VF program amounted to \$29.6 million,
\$5.5 million from State appropriations and \$24.1 million from Federal
Section 110 funds. The remainder was paid for from set-aside funds
assessed against the net proceeds of the vending machine facilities
(\$11.9 million) and from unassigned vending machine income (\$8.7
million).

The funding from these four sources amounted to \$50.2 million,
administered according to the purposes and priorities set forth in

the approved State plans, as follows:

-\$8.3 million for [the purchase of new equipment]{.underline} needed
for new

as well as for already existing facilities. Federal funds financed most
of the expenses involved. The national average

cost to establish a new facility was estimated at \$36,622.

-\$5.2 million [to maintain the equipment]{.underline} in good repair,
and

\$6.5 million [to replace equipment]{.underline}. Set-aside funds paid
mostly for these two items. The national average cost to

maintain and replace equipment was estimated at \$3,556 per

facility.

-\$3.7 million [to refurbish existing facilities]{.underline} in order
to

improve their outlook and efficiency were defrayed by funds from the
four sources.

-\$17.7 million for [management services]{.underline}. These are
services provided on a systematic basis by the program management

services staff to support and improve the business operation.

Federal funds financed more than one-half of the expenses involved.

-9-

-\$142,818 as [fair minimum return]{.underline} payments to vendors,
from set-aside funds, to provide a uniform minimum income to all vendors
under the program.

-\$6.1 million, paid for almost entirely from levied set-aside funds,
for fringe benefits under the form of:

[retirement/pension]{.underline} \...\...\... \$2.7 million,

[health insurance]{.underline} \...\...\..... \$2.6 million,

[sick leave/vacation time]{.underline} \... \$ 735,697.

-\$1.4 million, defrayed almost entirely by Federal and State funds, for
[initial stock and supplies]{.underline}.

-\$1.2 million for [other expenditures]{.underline}, paid for from State
and non-Federal vending machine income funds.

Program expenditures are growing faster than revenues. During the last
decade, from FY 1981 to FY 1990 gross income increased 49 percent (from
\$260.7 million to \$388.8 million) while expenditures increased 93
percent (from \$26.0 million to \$50.2 million).

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TABLES

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