From Jamie’s Italian restaurants to Neil Perry’s Rockpool, the number of closures in recent times illustrates how competitive the restaurant game has become. Even the most experienced operators are closing doors or changing their offering due to a range of reasons including higher costs, lower margins, disruptors such as Uber Eats, and social and lifestyle changes that reduce both the money and time people are able to spend in restaurants.
In clubs, the management team has a great understanding of the local market and restaurant costs, but a limited work history back-of-house, so tying up the numbers back to practical and sustainable changes in catering is challenging. However, as an integral part of the business model, losses in catering and restaurants are not sustainable in the long term.
Research concludes that people are eating out more often, but the average spend has fallen. Basically, they’re blowing the same amount of their total income on meals, but not nearly as often on a big set piece dinner. Eating has become just one part of the entertainment in a night out, rather than the primary purpose for going out.
But while MasterChef and MKR made hospitality seem like an appealing career path to fame and fortune, the reality is far different, as Alex Herbert, who opened her first version of Bird Cow Fish in Balmain 20 years ago, points out. Her back-of-the-napkin calculation is that the Greater Sydney basin has around 23,000 food businesses where nearly 20% of the population is under 14 years and the median age is 36 years.
“That equates to one F&B business to every 201 people where the average median age and number of children has a high representation of family groups, who are not your regular restaurant goers,” she says.
Revenue is vanity, profit is sanity, cash flow is reality
According to industry veteran Sophie Gilmour from Delicious Business, hospitality is a tough gig.
“Although I’m not generally a fan of ‘accounting adages’, never has a truer word been spoken in relation to hospitality, than the above. The very nature of the industry means that many owners fall into the trap of being so focused on their product and how it sells, that they haven’t taken the time to assess their profit margin”.
“But a hospitality operation is not a hobby, it’s a business, and after a period of months, we often see somewhat crestfallen folk tearing their hair out because no matter how hard they work, or how many hundreds of vegan doughnuts they sell, there is never any money in the bank to pay the bills. And the bills keep rolling in. If their profit margin is close to zero, and that multiplies with sales, well, zero multiplied by anything is still zero.”
Managing costs is the right place to start. First, focus on labour (staff hours) and food costs (ingredients and recipes). These are the main factors over which operators are able to have the most control, which makes taking a good hard look at the business and ascertaining exactly what these core costs are essential. This affords us a better opportunity to understand what adjustments are needed to ensure these costs don’t exceed 70 percent of revenue.
Service and kitchen wages, food costs and wastage controls can blow out despite management controls designed to reduce costs. This becomes an even more challenging problem with many mangers having no “back-of-house” work history in the kitchen. CMDA’s Catering for Non-Catering Managers course is perfect for all club management levels and will empower a manager to understand enough of the BOH processes to ask the right cost related questions, understand where money is being lost in margins, and even work out whether you should keep catering in-house or outsource.
To find out more about the Catering for Non-Catering Managers course click here >>>> https://www.cmaa.asn.au/CourseRegistration?crsmgtvw=CourseDescription&Course=59