Fiscal 2022 Universal Registration Document

Impact

Sodexo operates in a highly competitive environment. If it cannot meet client needs, then it may lose contracts to competitors, resulting in alack of growth of revenues and lower profitability.

Examples of Mitigating Activities

• Creation of new multichannel offers to better respond to consumer expectations.

• Investment in digital technology including digital applications, innovative food solutions such as restaurant delivery and digital retail services, robotics to enhance cleaning and the use of artificial intelligence to improve services help Sodexo enhance the consumer experience and take advantage of the opportunities created.

• Strategic acquisitions to expand Sodexo’s offers.

• STEP: Sodexo’s performance management framework designed to drive operational performance through common operational indicators.

• Identification of savings to be redeployed in investment for growth.

• Strengthening of commercial teams on the ground.

• Competitor benchmarking.

• Sector studies.

Impact

Poor service delivery to clients or non-fulfilment of contract obligations could lead to client dissatisfaction, possible contractual penalties and ultimately the loss of the client. Over-delivery of additional services not defined in the contracts and without related invoicing could lead to a shortfall in revenues and loss of profitability on the contract. Poor management of food and labor costs could result in reduced profitability on the contract. In Fiscal 2022, there has been significant and rapid increases in food inflation driven by rising commodity, transport and packaging costs and exacerbated by the war in Ukraine. Additionally, labor inflation has also increased, driven by a labor shortage in the food services sector. Both of these have meant increased costs for Sodexo. It is also likely that inflation will continue to be significant in Fiscal 2023. If Sodexo is not able to pass inflation through to the client via indexation clauses, or is able to do it, but not quickly enough, then it could result in loss of profitability on contracts.

Examples of Mitigating Activities

• “I Promise”: tools and techniques to help site managers manage their contracts and improve the services they deliver.

• Definition of operational standards and best practices that are shared to improve performance (e.g. Innovhub).

• Tools such as the Site Management System to ensure proper training of employees and the execution of quality inspections.

• DRIVE: integrated food management process.

• STEP: Sodexo’s performance management framework.

• Robust price revision process to manage contractual inflation with our clients.

• Active procurement management to limit cost inflation relative to market indices.

• Active operational mitigation plans in all countries: enhanced labor scheduling, reengineered menus, food waste reduction.

• Dynamic retail price reviews.

• Strict monitoring of under performing contracts.