From Dani’s description: ‘Ken Burgin is a hospitality consultant who reckons he’s stopped hundreds of hospo wannabes from sacrificing their own homes and futures for a starry-eyed food dream. He’s a realist and a numbers guy who loves helping people see the beauty – and the necessity – of a nice set of numbers. He sees the pandemic as an opportunity to reset and refocus…’
Your feedback very welcome – share with me on Linkedin…
Wages costs and productivity are everyone’s big issue. To track performance, you need figures that are accurate, easy to find, and easy to explain to people they affect. Managers need them to benchmark rostering and hiring decisions. Staff need to understand the productivity that’s expected, and how they contribution to business success.
Important Staff KPIs:
Total cost of labour – wages plus all on-costs. Some aren’t paid at the same time as wages, but are still a part of the weekly cost eg workers compensation premiums.
Labour costs as % of total sales: the raw figure that most people watch.
Labour cost per customer: this can look frightening, but it’s real! A great way to make an impact on managers who don’t understand the impact of their rostering.
Labour cost per hour: it shows up the less profitable times.
Fixed and variable wage costs: the staff you must have, and those you can call in as needed. For a large business, a flexible and permanent workforce gives the greatest productivity, but it needs work to create the structure.
Number of hours worked: total hours, and measured by department.
Number of staff: full-time, part-time and casual/hourly staff. Ideally, we want fewer people working more hours – what’s your pattern?
Labour cost compared to budget or forecasts for each department: the variation shown as a gross figure and as a %.
Amount of accrued annual leave: the cost that’s ‘waiting in the wings’
Amount of accrued tax deductions: another cost to be placed in your cash-flow calculations.
Measuring Staff Productivity:
Staff output per hour: eg 2 sandwich staff should be able to handle 100 customers over 2 hours. Bar staff should be able to do $1000 of sales per hour in the peak period, and 4 waiters look after 100 customers on a restaurant shift. These are hypothetical figures, but you can see the thinking behind them. What are the numbers for your place?
Sales increase if an extra server is used: by how much do sales increase if you add one more good server?
Speed to complete tasks: how long should it take a barista to make 4 lattes and 2 espressos? How long does it take an efficient housekeeper to make up a room, or a function waiter to set up a banquet for 100 people? Time to set some measurable standards.
Labour cost as % of each department’s sales: kitchen, bar, restaurant, functions etc. It’s essential to give each department feedback on their performance and roster effectiveness.
Number and % of complaints: if work is rushed and errors increase, output falls and costs rise.
Return on Investment for labour-saving equipment: how quickly would you pay for a fully-automatic espresso machine, if it sped up morning queues? How much labour could be saved with new slicing and dicing equipment?
You probably already have the figures needed to make smarter decisions, now it’s time to put them to work!
Ever had a trusted employee rip you off? When I spoke with a bar owner recently, she was still in shock after uncovering a six-figure fraud carried out by a ‘trusted’ manager over more than 4 years. I hope that doesn’t sound familiar.
Most people who commit fraud against their employer are not career criminals. The vast majority are trusted staff who have no criminal history and don’t even consider themselves lawbreakers. Donald Cressey, a criminologist, calls it the Fraud Triangle. He says there are three factors that must be present for an ordinary person to commit fraud: Pressure, Opportunity and Rationalisation. Think about how this could apply at your business:
Pressure comes from a ‘non-shareable’ financial problem that can’t be disclosed or solved in a legitimate way. It might a gambling or drug addiction, desire to impress friends or problems with a loan that must be repaid urgently. Non-shareable problems involve some sort of embarrassment or shame. They threaten the fraudster’s status as a person who is trusted by others. In almost every fraud case, their financial problem relates to gaining or maintaining status.
Opportunity arises when the fraudster sees a way to use their position of trust to solve the financial problem, knowing they are unlikely to be caught. Think of all the opportunities that arise with money handling at your business: balancing the cash against the POS readout, counting cash, making up floats, ‘correcting’ over-rings and errors. Inadequate stock-control with liquor or food gives plenty of opportunity to trade these items for cash. Most hospitality businesses offer wonderful opportunities for fraudsters, with little monitoring of warning signs and poor cash control systems.
Rationalisation is the third part of the triangle. Cressey says most fraudsters are first-time offenders with no criminal record. They see themselves as ordinary, honest people who are caught in a bad situation. This lets them justify the crime to themselves in a way that makes it acceptable or justifiable. They may say they were ‘just borrowing it’, felt they were entitled to it, had to look after their family or felt they were being underpaid and therefore deserved it. Sometimes they feel the employer is dishonest and should be ‘sharing the spoils’.
Prevention is possible in all three parts of the triangle. Do you have your ‘sources’ for inside information about staff problems? Ideally, regular employee reviews will give you an understanding of the ‘whole person’ and their needs. Drug, alcohol and financial counselling services are widely available, but you may need to be bold and suggest them – this can be a sensitive topic.
Tight checks and balances with cash and stock handling will eliminate most opportunities, with unexpected spot-checks to keep people on their toes. Plus a clear division of labour between those who count and those who check the figures – whether it’s cash, liquor or food. Would an external stocktake service really be so expensive if it meant the job was done properly? Is there a good reason why the cost percentages in your Recipe Software are lower than the monthly food cost percentage?
Your Code of Conduct should also talk clearly about the value of integrity and honest dealings in the business, so rationalisation is harder: ‘but nobody said I couldn’t borrow!’. A separate Theft Policy can be useful, making it very clear about grey areas. This is not about staff needing sainthood as a condition of employment, but there are too many times that trust is misplaced through naivete or laziness. Wake up!
Feeling heavy, slow and financially unfit? Time for some urgent action – cut, reduce and tighten. Staff might complain and want to quit – lazy is always more comfortable. But the business will be slimmer, healthier and much more sexy after you’ve pushed through the pain barrier!
Day 1 – Lighten up the Fridge and Freezer. That’s where up to 80% of product value is stored. Do you really need to hold enough for a week or a fortnight? If you don’t stocktake regularly, a one-off, totally honest counting session will reveal some surprises. Organise the lists, the scales and an early start.
Day 2 – Stop the Snacking! It’s easy for bad ordering to be covered up with a quick trip to the supermarket or 7-Eleven… at twice the price. A ban on emergency shopping will have a little short-term pain and force an improvement in ordering.
Day 3 – Blitz the Rich Foods. We’re talking the expensive protein items, like meat, seafood and dairy. List them on a spreadsheet, then sort purchases from biggest spend to least and see where most of your money goes. You will soon see the items (fish, steak, nuts etc) that need close attention – not just in ordering and storage, but also their cost in recipes – a recipe costing system will help tell the truth!
Day 4 – Track your Daily Intake. We’re talking about the numbers on your POS, and detailed cost of items being delivered. Most of this POS information is never checked – what items can be cut off the menu completely? What are your least profitable items (in dollars, not percentages) and the profit heroes that need more promotion? How do this week’s meat costs compare to last week?
Day 5 – Start Weighing Your Food. Good pricing scales are cheaper than ever – like the ones in the deli where they put in the price per lb. and tell you exactly how much those 4 slices of meat cost. Your kitchen needs these too, so the chef and the boss can do an instant check.
Day 6 – Call in the Support Team. That’s your suppliers and key staff – how long since you’ve had a good honest chat? Tell them you’re on a diet and determined to lose at least 3% off your costs – how can they help? What have they done before that worked?
Day 7 – Sweat the Small Details. Weigh and cost all sauces, garnishes and side vegetables. How much is a slice of tomato, a scoop of fries or a single olive? Work out the real yield cost i.e. cost that pot of sauce and divide by how many portions sold. This is not a theoretical cost based on grams and ounces, but the real cost to serve it. There are lots more examples like this you can find.
Play it Up! – use this ‘Food Cost Diet’ as a motivating example to get staff taking cost control seriously in all areas. Have fun with the comparisons – ‘Biggest Loser’, ‘Weekly Weigh-in’, ‘Losing the Big T-Shirt’, ‘Looking Great in Lycra’, ‘Locking the Fridge’ etc.
Ever fallen into the trap of doing things you didn’t want to do? You may have given money to someone hustling in the street; signed up for products you had absolutely no need for or let a person cut ahead of you in a line for no justifiable reason.
In most instances you responded more or less automatically. They ‘influenced’ you in a way that caused you to act differently to what you thought was ‘rational’.
In most instances, the reason what you did was because you weren’t thinking clearly. You responded in a more or less automatic fashion.
As a business person, your ability to influence the actions and beliefs of others is of crucial importance. Each situation, though it may share many common features with others, is unique, with its own distinctive qualities. These qualities must be discovered through a thoughtful approach if you are to gain the maximum from each situation. Therefore, if you find yourself responding to similar circumstances in similar ways and in an unthinking, habitual manner, it may be time to reconsider your approach.
It is impossible not to influence others. So when we discuss the issue of influence, we need not ask the question. “Do we, in the course of our interactions, influence one another?’. A more appropriate question would be, “How, when, where, and why do we influence others?”. These 6 Influence Patterns come from the famous book Influence by Robert Cialdini. Let’s see how they apply with service in a cafe or restaurant…
Reciprocity – a favour for a favour Do you have friends who always ask you to dinner, and you feel you ‘owe them’ a return favour? When we give something, whether it is information, food, money or whatever, the other party feels compelled to give back equitably what you have given in order to cancel out the obligation. Be the first to give service, information and concessions and your customers will repay in kind. Examples:
A small taste of tonight’s special arrives on the table as the menus are delivered – enough to whet the appetite and show the generosity of the waiter. You are more likely to ‘order up’ from the menu.
A waiter offers you a great window seat/nice compliment/free extra serve, knowing that this is likely to be repaid with a good tip.
You ask the party organiser from a local business to have dinner with your compliments, as you know she’s planning this year’s Christmas event.
Scarcity – don’t miss out! Ever bought something (that you didn’t need) at a sale because it was the very last one? Possessing scarce or exclusive items, conveys information about one’s status, intelligence and wealth. As objects of value become less available to people they increase in value. Use the unique information that you possess about a product to harness this rule. Examples:
‘We don’t take bookings, but if you are here at 6pm you can claim the window table…’
‘We only take bookings up to 7pm…’
‘The double chocolate mousse sells out every time we make it – will I keep one for you?
‘No-one has been able to get Crowdy Creek Chardonnay after that great review – the boss must have pulled some strings…’
Authority – 9 our 10 dentists recommend… Authorities gain their power through conditioning – an experience common to us all. Even as adults, we become respect the opinion of individuals in positions of power. By establishing your business position through professionalism and credentials, you are more in a position to execute influence. Examples:
Waiter says: ‘I’ve tried all these red wines and I would recommend this as the best to go with your meal…’
‘The owners only drink Mt Lofty Spring Water, never plain tap water…’
‘The chef recommends fresh beans as the best side vegetable with the fish…’
Consensus – everyone agrees… When deciding what to do in an unfamiliar situation, it is helpful to look to others in that situation for an answer. You can unleash people power by providing information on trends and similar mass movements of others and by showing evidence of the success of others. Testimonials on how good your product serves as ‘social proof’ of the product’s benefits. Examples:
‘It’s our most popular seafood dish – everyone loves it…’
‘Lots of kids order this pasta – it never comes back!’
‘Peroni is our most popular imported beer…’
Commitment & Consistency – the same as last time… We tend to like individuals who act consistently because it allows us greater control in a situation. When a person’s behaviour is relatively consistent, we know what to expect from them. By having your customers make a small commitment you are more likely to be able to influence them to add to this commitment. They’re need to stay consistent to their word comes into play here. Examples:
‘Our family always has Mother’s Day Lunch at La Perla – they really know how to look after us’.
‘We will call you in the afternoon to confirm your Saturday night booking – may I have your mobile phone number?’
‘Would you like a bottle of Jason’s Creek Merlot like last time?’
‘They always know exactly how my partner likes his steak done…’
Liking – we prefer to be served by nice people… We tend to like (and be influenced by) people like ourselves. That is because they reinforce who we are, what we believe in, and what we value. Uncover similarities and opportunities for cooperation with your customers and you will not only achieve your goals, but also those of your customer. Examples:
‘The chef is so helpful – I know she would make a special birthday treat for you…’
‘It’s really nice to see you here again – would you like to sit at the same table? ‘
At a minimum, this means all your staff are likable and ‘nice’ – it’s not an old-fashioned word! Say goodbye to people who can’t or won’t smile.
Name tags help build familiarity and liking for your staff Is this all just manipulation? Cialdini suggests that ‘you can not not influence others’, so why not do it effectively rather than by accident or random. You be the judge…
This video is a good summary of the general principles of Influence…
Many people assume ‘word of mouth’ works automatically, and it’s always positive. As if people will say the nicest things without you making any effort. Sorry, that’s not going to happen! And word of mouth can also be negative – ‘OMG did you hear that place got a food poisoning fine, and they’ve been underpaying their chefs!’.
However there are ways to guarantee that people have a lot to talk about, and you rise above the sameness of other new places having their six months of fame. It starts with the promises you make – if they’re too flamboyant, you’re asking for disappointment. Claiming to have ‘Adelaide’s best dessert menu’ implies a 10/10 experience, so what happens when customers enjoy it but only feels it’s worth 8/10. In other situations, 8/10 is a great result, but here they have been disappointed. Under-promise so you over-deliver.
Here are the 5 sure ways you can put Word of Mouth marketing on automatic, ticking over each day and giving people lots to share with their friends.
Design is the first – does your place look wonderful, or quirky, or unusual? Does it have some features like no-one else? It could be beautiful lamps or mirrors, or filled with original paintings like Lucio’s Restaurant in Paddington. Or have wonderful views or a garden courtyard, an old fireplaces with real fires or a big bowl of fresh fruit (like the picture below). Something that lifts it beyond the average and, these days, gets people to take out their phone and snap a photo. Up onto Instagram or Snapchat, making their friends a little jealous. What can you add that’s bigger, brighter and bolder?
Speed and Movement is next – it’s the opposite of slow and boring. Most times we don’t want to be rushed, but if we only have 30 minutes for lunch, the place that can seat, serve and take our payment in 25 minutes is the one we will tell all our friends about. Or a place with a visible kitchen, and chefs flaming food and calling orders. Or the cocktail bar is alive with action as drinks are built, shaken and served with flare – have you been to that place? You can design in these features, but make sure you don’t sacrifice service.
Generosity is a sure-fire WOM promoter – did you see those family-size pizzas loaded with toppings? Not like the $10 special that disappointed us last week. Help yourself at the amazing buffet, and your wine by the glass is filled to half full, not just a mean little puddle.
This also works in the community – people hear about your consistent support for community groups, apprentice training, recycling programs and homeless relief. Make sure they acknowledge your contribution.
Great Flavours drive word of mouth – Australians like big, bold tastes and textures. The famous Strawberry Watermelon Cake at Black Star Pastry, or the hot, spicy coconut laksa at your favourite Malaysian place. The IPA ales that a new craft brewery creates are way better than the beer giants, or that delicate Victorian pinot gris you serve by the glass. Memorable.
Inside Information is your final WOM booster – with the crazy growth of TV food shows, cooking classes and social photos, everyone loves to know what’s happening back-of-house. Where the beef comes from (and why you changed suppliers), how you get such intense flavours in the dessert, and where the pastry chef was trained. And with that $20,000 oven you’ve just installed – offer a sneaky kitchen tour when the rush dies down. And is that Justin the head chef talking to customers? Wait till I tell my friends!
We’re all watching what’s happening in the USA, Australia, UK and around the world with Black Lives Matter protests. There’s much to reflect on, and there are many times we see racism within our own hospitality industry. People of colour, immigrants and vulnerable refugees have traditionally done much of our hot, heavy and dirty work, only sometimes rising to take on better-paid jobs as trained chefs and managers.
Here are some links to articles and videos worth viewing or reading – I’ll add more as I find them, and your suggestions are welcome…
Figures of relevance to restaurants, cafes & foodservice, plus measures of the wider economic impact of COVID-19. Areas covered may vary week to week…
Hospitality Figures & Trends:
How many hospitality businesses have closed? Numbers vary – on a Restaurant & Catering Australia webinar on 13 April, the figure was given as 25%. Food Industry Foresight research group said (5 May 2020) that “45% of cafes and restaurants are closed. 84% of cafes & restaurants said their turnover had declined ‘dramatically’ to 0-40% of pre-COVID levels, and employment levels cut by 41% for cafes and 36% for restaurants.”
Heavy falls in shutdown-affected categories: gyms, public transport, travel, pubs & venues (-77%) and cafes (-36%). Stimulus has boosted some categories: online retail and subscription services, food delivery(+258%), pet care and supermarkets. (Illion)
National ANZ-observed dining expenditure is now 30% lower than same time last year, an improvement from -54% y/y for the week ending 16 April.
General Economic Figures and Trends:
Economist Stephen Koukoulas summarises the unemployment figues released last week:
832,500 people unemployed.
1,816,000 people underemployed.
554,000 additional people have given up looking for a job with the workforce participation rate diving 2.5 percentage points in the last two months.
This is more than 3,200,000 people.
500,000 jobs were lost in April; and number of people employed in Australia dropped by 600,000 between March and April. The under-utilisation rate jumped to 20% – people who would like more work than they currently have. It’s been around 15% for the last 4 years. Had the increase in the number of people who were not in the labour force been a further increase in unemployment, the unemployment rate would have increased to around 9.6%. (ABS)
Clearly JobKeeper is working to keep people off the unemployment lists, but recent government hints that it would be discontinued or limited are causing great anxiety amongst restaurant & cafe operators.
Consumer spending (4-10 May): total spending per person now 7% below normal levels. Spending was boosted in the last week by the Coronavirus supplement (doubling of unemployment benefit and youth allowance) as well as the first easing of restrictions.
Super Fund Withdrawals: these are clearly having a substantial positive impact on spending – withdrawals of up to $10,000 are available before 30 June, and another $10,000 after: “More than 975,000 people registered their interest to withdraw their super early, though not everyone is expected to be approved. While the Treasury forecast that around 1.6 million people will likely make a claim totalling $27 billion, estimates among industry funds have forecast that figure to be closer to $65 billion.” Investment Magazine.
He’s raw and real (his dad was a chef), he hates fake food, and he’s getting media attention. What can we translate from this into restaurant & cafe land? Enthusiasm ✅, energy ✅, love of real food ✅, potty mouth 🤔. …
I asked a bunch of restaurant mates if Nat actually helps the industry:
Absolutely yes I love him. He’s bringing accessible cooking to people who wouldn’t watch a Jamie Oliver or Gordon’s Ramsay video. He’s real, funny and entirely a good thing as far as I’m concerned. – Rob
I had a mate yesterday mention this and he is a convert. He reckons his approach works for him and he rarely cooks. As for how it impacts cafe customers – my mate is a good example as he is high income and eats out regularly (hence not cooking much!) but he uses Nat when he has to cook. – Gordon
It’s not about us, it’s about the kids that have been scared to cook for themselves. All power to him! – Paul
I’m a big fan, he’s a hard case dude alright and his cooking is awesome. “F#*k JAR sauce!!” – Lisa
Restaurant & cafe operatiors now have to do a lot more negotiation, and it’s not just the small stuff. Three months ago you were arguing over a 20c increase in chicken prices, or the chef wanting a $30 wage rise.
Now you’re dealing with a stubborn landlord, an unknown bank manager, impatient suppliers and a cranky partner. Most of what you did before was haggling, now it’s time to work like a grown-up!
Negotiating with landlords is a good place to start, and is likely to give you the largest financial return if you get it right. Shopping centre leasing executive Julian Mero advises:
Preparation and planning are two of the most important components of a negotiation. Without them you negotiate with force, threat or bluff which is not desirable and can break down the communication.
Understand the other side – what do they need? What is the landlord’s financial position, or if it’s in a shopping centre, what are they allowed to offer?
At the beginning, create the right atmosphere, communicate your position and learn their position – asking questions gathers information and gives you time to assess.
Back up every phone call with an email, outlining what you understood was agreed.
Never give anything away without something in return – eg an extension of the lease, or help with refurbishment in return for paying more rent than you anticipated.
The first offer has more influence on the final deal than any other factor – so plan and make it carefully.
The most common mistakes Julian sees in negotiation:
Don’t rush, the person with the most time pressure has the lower hand.
Neglecting the other sides position or problems – the landlord is not a demon!
Letting price dominate all other interests – there are other concessions that may be worth more than just a rent reduction.
Searching too hard for common ground to make the deal happen.
Neglecting your ‘walk away position’ previously set – if it looks like you were bluffing, you immediately lose leverage.
Business broker Paul Leach has dealt with many landlords, and people buying and selling restaurants & cafes. His advice for negotiating in the current crisis:
Act quickly and communicate with your landlord immediately.
Crunch the numbers and make a plan. Be ready with up-to-date bookwork – your sales data, P&L statement, bank statements etc. Back up your argument with honest, transparent information.
Do all that you can to meet your current rental obligations.
Work out what help you need from the landlord and look at it from both sides.
Don’t take “No” as being final – it might be the start of some serious discussion.
Chris Voss of the Black Swan Group talks about the personal interaction that takes place, and his tips could be blended with the practical advice of Julian and Paul. Remember most of this will be on the phone or email, not face to face:
Use the voice of a soothing late-nigh DJ – let’s get everyone nice and calm.
Establish a connection with your opening – ‘I’ll bet things are crazy over your way. I’ll bet this is all pretty overwhelming.’
Label what you hear: ‘this must be pretty stressful for you’ and ‘It probably feels like things are changing from one minute to the next’ or ‘It sounds like you guys have thought through quite a few options.’
Shape new thinking with the word ‘how’ eg ‘How do we work our way through this so that we don’t destroy each other. and we’re in a position to pick up the pieces and work together when this is over?’
Buckle up – you’re about to save yourself a lot of money!
Here’s Chris Voss telling us how to save deals in the post-coronavirus environment…
Some of this article was written by me for Hospitality magazine.