– WHAT DOES IT MEAN TO STRANGLE A HOSPITALITY BUSINESS?
Do you have a business partner or a stakeholder ….or maybe it’s YOU who thinks the way to make money is to CUT COSTS?
In hospitality, this is understandable. The BIGGEST stress for owners is WAGE COSTS.
For some venues, this can be up to 50% of turnover when not managed correctly.
So how to manage it without making things WORSE?
Of course, we have all heard the saying “You need to spend money to make money”, which means there is a time to invest in creating future growth and profits.
How do we do this successfully?
WHAT’S THE ANSWER?
Here’s a blend of stories from my 38 years of working in hospitality as a casual worker, all the way to being the CEO/Owner of my own high turnover venue.
Imagine you have a hospitality venue like a cafe or a restaurant. There are busy days and quieter days. Peaks and troughs. It’s how it is. It’s something to accept and make the most of. A lot of owners seem to go into “gloom and doom” mode, which of course, helps no one.
All sorts of things can affect trade. The weather. Roadworks. A new cafe next door.
What I have seen time and time again, is the owner reacting to the downturn in trade and immediately cutting costs.
In hospitality with casual workers, the first thing to go is someone’s shift or a reduction in their hours.
WHY IS THIS SO DAMAGING?
For one, your casual worker misses out on being paid. That could be their rent money or grocery shopping for the week. Are they going to be loyal to you after this?
The next thing to realise is that you now have a reduced ability to service the customers who ARE coming in. Not many coming in, you say? Things can change very rapidly. The cafe next door is full so customers try you. The roadworks are stopped until next week. The sky clears up and the sun comes out.
What happens if they do…and you’re not ready? Now you have a flurry of customers who are used to being served their coffee in, say, five minutes or less. And you can’t service them the way they are used to. Might they think twice about coming in next time?
Here’s two scenarios below:
STAFFED ADEQUATELY EXAMPLE
As an example (rough approximate figures) this might mean you are selling two coffees a minute with two staff providing the service (one making the coffee, one taking orders and delivering to the table, for instance).
Coffee service is turning over $10 per minute (two $5 coffees a minute).
Your two staff are costing you (roughly) $40 per hour or 60c a minute x 2 = $1.20 per minute.
Therefor staff costs are 12% of your coffee turnover.
Customers are getting served quickly and your capacity to serve as many customers as come in the door is achievable.
Your two staff members can cover each other on breaks when there is a lull (breaks that you don’t pay for generally with casual staff).
They may be able to swap roles, help each other out, and be a team. Get the job done. There may be other small jobs they can do in between, like polishing cutlery or folding napkins or tidying the counter or, even more importantly, upselling more coffees to those already in your cafe…or a cookie, or a piece of cake, or a taste of a new dessert…..
If there’s an error or a problem (and you might not be there to deal with it), someone has the capacity to handle it. Complaints and problems are feedback. Valuable feedback. The ability to have time and space to deal with them cannot be underestimated.
CUTTING BACK ON WAGES example
But… on this day…. you’ve decided to cut costs.
So, now you have one staff member on. They make and serve (doing both jobs, remember) one coffee a minute.
So $5 turnover per minute.
This staff member is costing you 60c a minute. Which is 12% of your turnover. The same as the staffed adequately scenario.
However, your turnover capacity has been reduced by HALF.
You don’t have the resources to serve everyone who MIGHT (and probably will at some point) come in the door.
The person who used to wait five minutes might have to wait ten minutes.
The coffee may have been rushed and burnt or spilt, and there’s no time to redo it.
The barista may have to go to the bathroom but can’t leave, causing them even more stress.
The barista may have to forgo a food break, which is unacceptable, (but happens all the time). They may not even have time for a drink of water.
They are overwhelmed and their mood is apparent to customers no matter how hard they try to hide it. The customer may even be let into the “secret” that they are a staff member down, and they aren’t happy about it.
You can see where this can lead.
Perhaps you, as the owner, think, “Well, I’ll just pick up the slack. Surely I can help cover if it suddenly gets busy”?
How about when there’s an important phone call for you?
Or someone wants to book a table for 20 for lunchtime and wants to talk about menus?
And you aren’t available. You’re too busy working for $40 an hour.
Not only have you missed out on potential sales, but you have also made many people frustrated and unhappy. Staff morale drops, and customer satisfaction drops.
Very, very quickly.
WHAT TO DO INSTEAD?
Use this “downtime” to make improvements to your business operations.
You need to take a good hard look at HOW to increase turnover and make some adjustments to increase efficiencies.
To increase turnover: come up with a promotion or a special. Think of what your customer wants. What is your most popular dish? Make another version of it. Are your main “bread and butter” clients tradies? Do they want a meal deal? Could you offer a local group one of your big tables between 10 and 11.30am for a coffee meeting?
Get onto all your social media accounts with some images or videos of the chefs making warm Winter soup or of the cake cabinet full of warm scones. Consider featuring sugar…it always gets attention.
Do a short survey at the till and get information from your regular customers: Out of ten, how do you find our products and services? If you can’t give us a ten, how can we improve?
This feedback is invaluable and is seldom asked for.
Chat with the head chef about their ideas on how to get more business through. You are paying them lots of money, ask them to help you increase turnover. What worked for them in another establishment? Catering opportunities, pre-made snacks for the cabinet, and deliveries to local offices? Would they like to refine the menu to make it easier and quicker to serve? Do they need a piece of equipment or tool to make a menu item more easily?
This is your time to work on the business to increase sales, otherwise known as “bums on seats.”
This is much healthier than cutting costs and strangling your business.
More fun too!
You are the owner, and leading the way is up to you.
At EMPOWER Agency we can help coach you and support you through the peaks and troughs and work towards your definition of success!