C.R.C. – 3 Words to Get Much Better Results

If your staff management, menu updates, and marketing is inconsistent, these 3 words will get you back on track. They create much-needed discipline in an industry that’s often ‘hit and miss’, and they also show staff and public that your business is professional and reliable.

Calendar + Reminders = Consistency. And consistency is what makes the difference between smart ideas, and the implementation of them that creates results. Consistency is what your competitors rarely achieve – on again, off again marketing, staff who don’t know what’s happening, unhappy suppliers – it weakens them.

What does Consistency look like, from the outside?

  • The email newsletter goes out on the first Monday of every month.
  • Members of the Birthday Club always get a text message on their big day.
  • The Summer Menu starts… on the first day of summer!
  • Post a photo on Instagram every. single. day. (so fans are more likely to see you)
  • Loyal suppliers are paid on time, just like you promise.
  • Food cost figures available for the chefs every Tuesday morning.
  • Maintenance is organised for less expensive times (e.g. fridge checks in winter), so fewer breakdowns and less cost.
  • New staff have a review scheduled 7 days after they start, without fail. And if they’re unsuitable, the issue is handled quickly.
  • Regular staff have an organised ‘how’s it going’ review every 6 months – it becomes a positive part of their job, not something unknown and scary.

A Calendar creates the system – when you put a date on an event, or a deadline for preparation, it’s much more likely to happen, specially when you set up Reminders. Set it up your calendar with an online system like Google Calendar that can sync across your PC, phone, iPad etc – wherever you are the calendar is the same. It’s easy to set up automatic repeats, and notifications for multiple people – if others know, there’s less chance of a miss.

Add Reminders so that the tasks are not forgotten – these could be an email, or a phone notification. Or a project management system (e.g. we use Teamwork.com) that sends reminders and can be accessed by others in your team. Or a person who is tasked to prepare some documents or newsletters so they’re ready on the agreed time and date – they don’t just remind you, they have the essentials ready for you to send.

Now you’re creating Consistency – people see you and the business as organised, reliable and true to your word – qualities we all admire in a business. Our example: the Hospo Reset newsletter goes out every Wednesday morning. It’s empowering to have deadlines – they add discipline and strength to the often chaotic world of hospitality.

What’s first for your new calendar?

I love this business interview with Nick Kokonas of Alinea and Tock

Make time to listen to one of the best restaurant business podcasts I’ve heard to in a long time: Patrick O’Shaughnessy interviews Nick Kokonas, founder of 3 great Chicago restaurants Alinea, Next, and The Aviary. He’s also co-founder and CEO of Tock, an innovative restaurant booking system.

Alinea broke the mould with the way they pre-sold bookings to avoid no-shows and cancellations, and introduced variable pricing (just like planes and hotels). Kokonas then developed the booking software to manage the process and the level of customer communication they wanted… and went on to sell the system to hundreds of other operators.

By knowing how many people will be visiting and what they’ll be ordering, Alinea is able to radically reduce labour and food costs – and break apart the ‘typical’ restaurant costs and profit margins (a fantastic story about how they halved the cost of high-end beef). Even learning the secrets of the publishing business to produce their cookery and cocktail books was an adventure, and created another highly-profitable niche. COVID-19 came, and there had to be a significant reshaping of the business – with strong foundations and a robust booking system, that change could be done in a matter of days.

The Alinea group is way bigger than many of the cafes and restaurants I connect with in Australia, but the lessons they’ve learned are absolutely applicable – put aside an hour of your time for some great business inspiration.

Update: here’s a long interview (3 hours!) between Nick Kokonas and Tim Ferriss from 2018.

Planning for the Worst: If You Decide to Close your Cafe or Restaurant

As the COVID crisis drags on, there are many operators who are contemplating closing up shop and walking away. Before it was hard work and OK profits, not it’s still hard work and no profit for the forseeable future.

The best way to get out is to sell your business, and a good broker will help you to do that quickly. But what if that’s not possible?

Here are some resources that could be useful…

Great to talk about Reset & Refocus with Dani Valent on the Dirty Linen podcast…

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

Measuring Staff Costs – Go Deeper for More Control & Better Results

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!

The Fraud Triangle: Could it Hit Your Cafe or Restaurant?

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!

In The Dark Side of Behaviour at Work : Understanding and Avoiding Employees Leaving, Thieving and Deceiving, the authors list 12 danger signs – do any of them look familiar?

  • Rewriting records for the sake of ‘neatness’.
  • Refusing to take vacations; never taking personal or sick days.
  • Working overtime voluntarily and excessively, and refusing to release custody of records during the day.
  • Unusually high standard of living, considering the salary.
  • Gambling in any form beyond ability to withstand losses.
  • Refusal of promotion.
  • Replying to questions with unreasonable explanations.
  • Getting annoyed at reasonable questions – ‘don’t you know how hard I work?’
  • Inclination toward covering up inefficiencies and mistakes.
  • Pronounced criticism of others (to divert suspicion).
  • Frequent association with, and entertainment by, a member of supplier’s staff.
  • Excessive drinking or associating with questionable characters.

What’s happening in the Australian economy & hospitality industry? May 18, 2020

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.

Sources: ANZ Research, Aust Bureau of Statistics, illion/Accenture, Food Industry Foresight and Stephen Koukoulas.

Suddenly, Everything Needs to be Negotiated!

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.

Why The E-Myth is Still So Relevant for Cafe & Restaurant Owners

It was published 24 years ago in 1986, and reverberated like a thunderclap in the world of business. You’ve heard that saying ‘work on your business, not in your business‘ so many times you could scream. That’s from the The E-Myth!, and author Michael Gerber’s message is still electrifying, even in a world run by digital systems… and facing virus restrictions and dislocation.

Years ago I ran one-day management events for restaurant owners and would show this short videp, pausing for discussion every few minutes. It would would totally rock them all – so powerful is the message. Wait till you hear what he says about ‘what Mary does‘ – sound familiar with how you’ve positioned your chef or a key manager? Have you created a prison with your business, instead of a path to freedom? Now watch, and find out the key to create a better future…

Here’s a summary of the key points, but don’t use this to stop watching the video!

3 Parts of the Business Development Process:
* Innovation
* Quantification
* Orchestration

4 Key Business Systems:
* How we do it here
* How we recruit hire and train people here
* How we manage here
* How we change it here

7 Point Plan for Business Success
* what’s your vision?
* develop the strategic objective
* develop an organisational plan
* develop management systems
* develop recruitment and staff systems
* develop marketing systems
* develop your operational systems – soft, hard and information

Talking about the ‘new normal’ on the Hospitality Mavericks podcast

I enjoyed talking with Hospitality Maverick Michael Tingsager from Brighton in the UK, about what we think is coming in the hospitality industry ‘post Covid-19’.

Much speculation of course, as things change on a weekly basis, but it’s useful to think about the fundamentals of business that don’t change, and how they will be relevant in a new business environment with much less money. Hope you enjoy this, and let me know your feedback via LinkedIn or my Facebook Page