The University of Kentucky and Compass Group, its new partner for dining and other services, agreed to create a limited liability company as a way to “advance Kentucky,” records show.

Also as part of the partnership, Compass will invest $124 million in the Advancing Kentucky Together Network, a statewide initiative focused on health, education and workforce development, according to their master contract obtained by the Herald-Leader through the Kentucky Open Records Act.

Compass, through its own limited liability company Foodbuy, and UK will share AKT Network Advantage LLC, named after and benefiting Advancing Kentucky Together Network.

Why create a new LLC? Better purchasing power, UK says

Both Foodbuy and the new shared LLC are considered group purchasing organizations, which use their collective buying power to negotiate better prices and get discounts on large volumes of purchases, according to Lindsay Travis, a UK spokesperson.

“The Local (group purchasing organization) will leverage Foodbuy’s existing national purchasing programs, supplier contracts, and procurement infrastructure to deliver competitive pricing, value, and supply chain efficiencies,” the agreement between Compass and UK says.

The company will largely benefit Advancing Kentucky Together Network, which includes a coalition of strategic partners like universities, medical providers and corporations that collaborate to advance community health outcomes. UK formally launched the program, describing it as “the evolution of our affiliation model,” after it was approved by the UK board of trustees on Oct. 18, 2024.

“As part of Advancing Kentucky, one of the big initiatives was creating a group purchasing organization so we can extend that to schools, local cities, municipalities,” Travis said. “Other people can take advantage of basically buying in bulk at the scale that the university does, so we can extend those savings to them.”

The organization is “intended to serve not only UK, but also other Kentucky-based public and private entities that elect to participate as purchasing members,” the contract said. It’ll also use “commercially reasonable efforts” to buy from Kentucky-based suppliers.

Compass Group is working with The Food Connection, a UK initiative that connects Kentucky-grown food to campus, to help local farmers scale up in production, so UK can buy from them, according to Travis.

An LLC, like Foodbuy and AKT Network Advantage, “protects its owners from being personally pursued for repayment of the company’s debts or liabilities,” according to Investopedia.

How UK, Compass, others could profit from this

For products not being procured or managed by Compass, the group purchasing structure allows UK and its affiliates to purchase products and services directly through either Foodbuy or a supplier in the group purchasing organization, according to their agreement.

When third parties – not necessarily UK and Compass – become members of the AKT Network Advantage group and make certain purchases, the group anticipates up to 60% of savings or rebates will be returned to those members and the remaining 40% split between Compass and UK.

That net revenue will be split 50-50 between Compass and UK until each receives $10 million. Then, 25% of the net revenue from the group purchasing organization will go to Compass and 75% to UK.

The Herald-Leader did not yet obtain the structure, governance and operational terms of AKT Network Advantage, which were in another agreement, according to Compass and UK’s master contract.

“The process, program and marketing materials are being developed now,” Travis said. “The plan is to start marketing to potential members in the coming months.”

UK must pay Compass back for its investments

Compass’ $124 million investment in Advancing Kentucky initiatives includes $76 million for UK’s “transition” under Compass, $18 million for the “AKT Network Fund,” $15 million for “students,” and $15 million for “research,” the contract said.

The $18 million is an unrestricted fund, which gives UK some flexibility on how it can be used.

UK and Compass’ master contract includes a rough schedule of UK’s annual amortization, or repayments to Compass, depending on how much capital Compass actually invests and UK approves.

Based on the schedule, which could change, the university will be billed for Compass’ capital investment in Advancing Kentucky across a period of 10 years once Compass pays the capital.

“The capital investment schedule between UK and Compass is a planning document, not a final bill …,” Travis previously said. “The actual figures could change depending on when the project moves forward and, ultimately, how much it costs.”

6 initiatives to keep things local

The investments will benefit at least six AKT initiatives, according to the agreement:

“Farmers Grow with Us Program, which is intended to help small farmers grow their businesses,
Supplier Accelerator Program, which is intended to help mentor and develop emerging Kentucky-based suppliers,
Retail Incubator, which is intended to help bring up-and-coming Kentucky products to a broader customer base,
Mobile food and wellness trucks, which would be an investment by Compass in a UK-branded truck to serve Kentucky communities,
other mutually agreed workforce programs, including apprenticeships & internships, and campus flex programs,
enterprise wide technology and reporting solutions.”

The initiatives have scopes of work and budgets that “Compass and UK agree to collaborate to select, build, pilot, and scale.” The Herald-Leader did not obtain their scopes of work prior to publication.

UK and Compass’ contract was finalized in September, though various UK departments began transitioning under Compass management in June. According to the contract, the company, will provide “management, labor, materials, supplies and equipment” for UK dining and food services; vending machines; concessions for athletics; patient transport and patient sitters; and custodial, landscaping, grounds keeping and maintenance.”

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