Head winds – restaurant sector is facing

• Currency:

1. Brexit vote has weakened the sterling resulting in higher cost of food and drinks.

• Wages:

1. Living wage has resulted in wages increasing faster than inflation and even faster than restaurants can increase their own prices.
2. Many new entrants in the market have resulted in pushing wages higher.

• Property

1. Private equity players rushed in this sector in the last few years and offered higher rents resulting in pushing everyone’s rent up.
2. Higher rents resulted in higher Business rates.

• Online

1. New service model like Deliveroo have emerged which increased competition and take a share of profits.

• Competition

1. Supply has expended ahead of demand – there are too many restaurants.
2. So many choices have reduced the frequency of customer visits.

 

What to do?

Everyone tells me the problems but what are the solutions?

• Very tight control of costs:

There are three main areas where costs can be controlled.

1. Wage cost – reduce staff through natural turnover. Staff members also have a learning curve and longer one has been in a job better they can do it.
2. Cost of goods – chefs should be encouraged to always look for new suppliers and go to the source of food directly like farms.
3. Overheads – Every cost to be analysed and ways thought to reduce it.

 

• Think and encourage everyone in the business to think

1. How to evolve and improve the offering – quality, cost, presentation etc.
2. Increase lunch trade by shorter menus.
3. Food coming out quicker from the kitchen.
4. Lighter food which is easy to digest.
5. Improving beverage sales as they take less wage cost to prepare.
6. Staff idea board can help. Management does not have monopoly on ideas.

 

Conclusion:

Things are going to get worse before they get better. Tighten your belts and better the product and sit tight to weather the storm.

Good Luck!