I have 3 dogs that need walking twice a day. Although this is mainly enjoyable sometimes it can be a bit of drag. I have always been the sort of person that likes to maximise his time. When I was a teenager I stopped reading fiction and started reading history or business books instead as I thought this would be a better use of my times and more instructive. If I want to wind down I watch a movie. Nowadays I love a good audiobook as well and I find that business biographies or business stories are my favourite. But when I am looking for a 30 to 60 minute quick fix, podcasts are my favourite choice. So what are the best business/hospitality business podcasts out there? Those are, in no particular order, my top 10:
I still remember the days when you could make a mistake or upset a customer and hope that no one will ever know. Gone are those days. I remember also clearly, when I started telling my staff in London that they could not get away anymore and it would be better to own up straightaway, rather than being caught later on. With the advent of Google Reviews, Facebook Reviews, Trip Advisor and requests for feedback at every possible chance from your table reservation software or websites like Top Table, Dine etc, people have got used to read and post reviews all the time. If you are sloppy, use inferior products or try to dupe your customers, sooner or later it will come out and it will hurt. As mentioned in my previous post when something is missing, you should tell the customer before taking their orders. If you take online orders and you run out of ingredients, before having the time to take this dish off the internet, you must call the customer, apologise and ask if you can substitute it for something else. It's easy to think that your customer won't notice you put cheap Tesco olives in their salads, instead of Kalamata olives. It's easy to forget that you need to mention this, and it's even easier to lull yourself in a false sense of security when you do this because you have a genuine emergency or suddenly run out of something and this is the second best option given the circumstances.
The problem with this is that every time you compromise, you lower your standards. If you send out a dish which is sub par one time, your team will think it's ok to send it out another time, you have set a precedent. And this is why it's good, from time to time, to receive a bad review, to be told that someone had a better meal somewhere else, or in other words to get a kick up our butts. We need this to keep striving to serve good food and good service.
What helps me is having a good review, a certificate of excellence or any other accolades up a wall and every time a dish is borderline, look at the accolade and think "if I serve this, am I still worthy of that accolade"?
On Monday I went to this pub nearby where I live as they were listed for the Eat Out to Help Out scheme on the government website. The government guidelines clearly state that if you participate you must offer 50% off on all applicable sales (that is food and drinks, excluding alcohol). When I got my bill, to my surprise they did not apply the discount to soft drinks. When I questioned this the poor young waitress first replied she didn't know why, then said they were too busy to apply it to soft drinks as well. There was no point discussing this with the waitress as she clearly was out of her depth. And also it was only a £3.10 discount we are talking about. But sometimes is the principle that counts. I felt misled as they are listed on the government website which will clearly give them some extra traffic. I sent them a message on Facebook and basically they replied that they would rather do it only on food rather than not do it at all and that I should have informed myself before going. Now I want you to think about the following points as all of us, sooner or later, will face this situation:
1. Offering the discount on drinks doesn't cost them anything
In my case they gave me a hand written receipt, discounted the food and could have discounted the drinks in another 5 seconds
2. If there is some important information that can affect our customers we should communicate it at the first possible chance, in this case when I made the reservation. (or for instance when something is missing on our menu, when presenting the menu, rather than when taking the order)
3. We can't just reply to a complaint in a dismissive manner without showing any sort of empathy
Expecting me to know about this was just naive. Also they did not make any extra money on me, but I lost £3.10, and because of how this was left I will never go back again (also the food was below average, but this is another story) so they have lost thousands of pounds in potential future revenues
4. You should make a difference between internal issues and customers issues.
What I mean by this is if we have a problem internally (lack of technology in this case) we shouldn't automatically assume that our customers will understand this and be sympathetic. Even as a small business we should try and move with the times. Adopt new technologies. In their case I imagine they could not program their point of sales system, but also if they have a POS, why wouldn't you print receipts from it rather than write everything by hand again? Puzzling
5. For everyone that mentions there was something wrong with their meal, there are another 10 that don't say anything and just won't come back. Mind that won't say anything to you but they will tell their story to another 8 people (real stats) or worse put it on Facebook or TripAdvisor.
When I worked in the corporate world someone coined the term "Feed Forward" (rather than feedback), as feedback helps us improve and move forward. I love good, honest, constructive feedback as if our own customers don't tell us where we went wrong how are we ever going to improve? Without feedback and criticism we risk resting on our laurels.
I recently found myself preparing a mini business plan for a new venture – how exciting. This reminded me of how many times I got things wrong in the past, and when I got them right it was for the wrong reasons!
If you listen to podcasts or read business articles, you’ll often hear how entrepreneurs big and small tell how their forecasts were wide of the mark. This can happen for a variety of reasons, but in the end it’s just impossible to account for all the variables and unforeseen circumstances.
What we should concentrate on are the things that we can accurately cost out (like cost of equipment and goods, energy, legal costs, rent), then estimate the other variable costs, leaving a bit of leeway. Finally we should estimate what our sales will be based on how many customers we can serve and the average spend (be realistic!) No need to say you should always have a contingency in place.
When I opened my pizzeria, on opening day we had £40 left in the bank! Although I had reserves, the £10k had forecast to spend became £15k and although I had more money on the side, I didn’t want to invest too much without knowing whether our concept would be well received.
You have to decide whether you will be taking a salary and come to term with the fact that that may not happen for a while.
You have to work out what your break-even point is, and if you are using a range of outcomes, probably use the lower one.
Most important costs
Rent (premium if applicable)
Rates ( in England – or other applicable taxes)
Legal costs (for the lease)
Staff (including preopening training)
Software (POS, Accounting, App ordering)
Most important Sales
Number of customers
Average dish price
This article could be just one line long. If you are not joining the scheme, you are a fool.
When I first asked my followers whether this offer could swing them to go out on a Monday, Tuesday or Wednesday, a lot replied "no, I'll stick to my normal plans". I found this very strange, who doesn't like to save a tenner? As we are normally closed on a Monday I shelved any plans of opening and maybe doing a special night. But now I can see that people are starting to book for those evenings. Never mind I will be doing my bit to save the economy by going out both for lunch and dinner on Mondays.
As a small operator I think it's a good idea to offer specials and other off-the-menu dishes that are a bit more expensive. This is a good chance to use premium produce and ingredients and become fancy. Customers will also be willing to buy a better wine or an extra starter in the knowledge that they will be saving up to £10 ahead.
As to how to implement this offer I think the easiest way to think about it is:
Take the alcohol off.
If the per-customer spend (children count as diners) is:
less than £20, apply 50% off
over £20, give £10 off
You will need to keep a record and also tally up the till at the end of the night, because although the customer is receiving a discount you will receive the balance from the government.
In our case we are very lucky to use a POS (point of sale) called GoodTill and these guys have created a button that calculates the amount of discount and tells you the balance your customer needs to pay. This was a big relief as I was already imagining my staff struggling with calculator and jotter!
A few days a go I read a post on Facebook where the owners of The Ollerod (Chris Staines - whom I used to work with - and his partner Silvana) wrote an open letter explaining why they would not pass the VAT cut on. It made a lot of sense. Hotels and restaurant have been one of those businesses hit the hardest by Covid19 and even when reopening there are so many constraints, restrictions and guidelines that it is hard to see how we will ever get back to normality.
Sure large companies have been very quick to pass the cut on and go out all bells and whistles to announce it. But small restaurants don't have investors, share holders, venture capitalists etc to rely on or ask for more money.
Before Covid19 we used to spend £40 a month in disposable gloves, now we spend £160. And then there is the sanitisers, the signage, the masks, visors, partitions etc. Tables need to be spaced out, reducing the amount of covers one can serve.
In my case we also have the challenge of having enough staff for deliveries, which are going still strong compared to pre Covid) and eat ins which require an under utilised waiting staff.
I think the word of the year is "flexibility". We operators, our staff and our customers all need to be more flexible and understanding. Fixed hours are a thing of the past.
A couple of days ago I saw a post on a pizza chef page on Facebook (Pizzaioli in UK) where someone said they were moving to Nottingham in the autumn, were planning on finding a job in another sector and then opening a pizza takeaway with someone else, and they were looking for this someone else on Facebook...I found this puzzling and I commented on this post that starting a company with someone you don't know is like jumping off a plane without checking whether the parachute is working.
Having run a few companies with partners I know for a fact that even with the best of intentions it's not easy to get along. When there is money at stake people change. Throw in pressure, stress and possibly substantial debts and it's easy to imagine why a lot of partnerships fail. I started my small restaurant with one of my best friends. We went to school together and even lived together in London. I knew him to be very passionate about food and to be hard working and very well organised. He was one of those chefs that finishes the evening with a clean apron! Unfortunately I had never worked with him and thinking I am laid back and easy to get on with I thought any possible hiccup or difference could be easily resolved. I was wrong. He turned out to be very stressed at work, serving our customers for him was like going to war, he was constantly pushing and stressing our staff out. In the end I said I could not work with him anymore and we should either sell or I would buy his share. Once I bought his share, I felt like I had grown a pair of wings. I was free to experiment, change the menu, change the opening times and prices without having to fight all the time. Of course I have my faults as well and one should always listen to the two sides of the story, but this goes beyond the point here. The point is that whether we take my side or his side of the story, the partnership did not work, and I had known him for more than 15 years. That's why trying to find a partner on Facebook seems crazy too me.
On the other hand, without a partner, life is really hard. All decisions, all responsibilities and all the weight are on you. It can feel lonely at times. But most importantly is virtually impossible to expand or to take some time off (without having to close) without a person that you can trust to run the restaurant like you would. Somebody that's pushing in the same direction and has got the same goals and ambitions.
So, how do we find a business partner? This is hard to say, there is no magic formula. The only thing I know is that you always have to prepare for the worst. You have to put down in writing:
If you look at a random person's wallet you most likely will find a few loyalty cards (chances are you'll find loads more in a woman's purse, but please don't get me started on this). I have a Club card from Tesco and a club card from the Coop. Does it mean I make my decision on where to shop based on club card points? Would I travel farther afield to get a bigger discount? Why do ASDA don't operate a club card scheme? Personally, and I don't think I am in the minority here, I just use the club card based on where I go and not the other way around. I go to Tesco because they are close to where I live and convenient. If there was a Sainsbury's closer to me I would use that instead. On the other hand I tend to use the same barber, the same Indian restaurant and the same farm shop, because I like them. None of them used to offer a loyalty card but the farm shop just started last month which made me think about this topic.
In my opinion you should only offer loyalty cards if you sell a product that is:
1. hard to differentiate
2. readily available in close proximity to you
For example this is the case with coffees. Can you really tell the difference between a Starbucks and a Caffe Nero? Probably not, but you may be keen to get your free coffee using your loyalty card.
On the other hand my local farm shop offers excellent produce, it's family run and the customer service is very good - if nothing else you get a smile and a chat every time you go. I could certainly drive to another farm shop or maybe use the butcher close to my restaurant, but I have now built a relationship with them so I am loyal. That's why I was a bit surprised when they started offering a loyalty card. Now every time you spend more than £10 you get a stamp, and after 10 stamps you get £5 off. That's more of less 5% off. Will that increase customer retention and loyalty? Will it bring in more customers? That's very hard to say. But I assume that a lot customers would have used the shop anyway and this loyalty card is just a whole in their pockets. This is not the sort of shop where you go to save a fiver.
You should aim at creating a restaurant where people come for a variety of reasons, and not price, special offers or vouchers. People will only look at those things when they can't see any other form of value, i.e. customer service, quality, unique products etc.
Entire books have been written about pricing (one of my favourites being "Priceless" by William Poundstone), so it's hard to keep a blog article on this topic succinct. But I will try. I will start with a funny anecdote taken from the aforementioned book. A souvenir shop in a touristic village sells quartz necklaces in various colours. The blue quartz one is not selling. The owner goes away for the weekend and leaves a note to the store manager, asking her to half the price of the blue quartz necklace. For reasons unknown to us, the store manager mistakenly doubles the price! And you know what happens? When the owner comes back on Monday the shop has sold out of blue quartz necklaces!
This is just a simple anecdote to show that price is not just a number, but rather a marketing tool. When we set a price we are in fact sending a message or sometimes making a bold statement.
Would you price something on your menu at £9.99 or rather use £9.95 or £10? And why have you chosen this price? Is it based on food cost? Or is it based on perceived value? Have you checked your competition? Could you have priced it any higher? What will you increase the price to when your costs inevitably rise?
If we are opening a restaurant there are a series of factors that will influence our prices. And hopefully we will have made all these considerations before actually signing the lease!
The first thing we should look at is our competition. This will give us an idea of what price range is our target audience used to and how far we can go. If you are based in a working class neighbourhood, opening a classy bistro with high priced dishes is probably out of the question.
The second consideration should be our food cost. As this is a blog for small restaurant owners, we don't necessarily want to create cost cards for every dish, but we need to have a good idea of what our basic ingredients and most popular dishes cost.
Then we should go on and set our prices. In my opinion 9.99 and the likes are better left to fast food and cheap and cheerful outlets as the convey a message of "cheap" and "bargain". Exclusive restaurants (for instance Michel star ones) will normally just use whole numbers as their clientele is not price sensitive. For our small restaurant we can either use whole numbers or possibly 9.25, 9.50, 9.75 and 9.95/10. I find 9.95 way more elegant than 9.99 and portraying an image of quality more than justifies losing the 4 pence. One of the advantages of using this progression is that often customers won't notice the difference if prices are increased as people tend to look at (and remember) the first digit.
When we set our prices is very important that we consider the VAT. I very often see owners miscalculating their profit margins as the fail to remove the VAT from their prices. If your dish sells for £12 and the food cost is £2.50, you are not making £9.50 gross profit, but rather £7.50 (12/1.2 - 2.50).
When we finally get to our theoretical price we then want to consider whether we can actually use a slightly higher price. Are we using ingredients that justify a higher price (meat from the local farm shop, free range, an expensive cut of meat or veg? Are we offering a dish that normally commands a higher price than our theoretical price, for instance a burger or a steak? A good method to test your customers price sensitivity is to add one or two high priced dishes on your menu and see how they perform. As long as customers can understand why a dish is expensive and they perceive value, they will be happy to pay for it. You may be surprised at what people are willing to spend. A high priced dish will often have a higher food cost percentage, but in this case, as described in my post about food cost we should rather look at the absolute gross profit. If you do this, and see that customers are willing to pay higher prices than you thought, then you should increase your prices! If your pizzas sell well for £10, why not try £10.75 or £11.00?
A lot of owners have mental barriers that they are worried to push. £10 sounds good and fair, and give us a good profit margin. But £10.75 is better! Although this may sound cynical, we are in the business of making money and we should maximise our profits. We can always give back to society through charity and other good causes. Owners often fail to look at the big picture. You may think "why bother increasing a price by 50 pence? What difference is it going to make? On one count they are actually right, your customers won't care or even notice a 50 pence increase. But you will, when you read your profit and loss statement at the end of the year. if you sell 10000 pizzas a year, a 50p increase will generate an extra £5000 in revenues! Also because this 50p if above your theoretical price, this is literally £5k extra profit (well £4166 removing the VAT). Not too shabby.
Finally always consider that increasing prices dramatically from one day to another is not feasible. We should start with carefully thought of prices, choose a range of possibilities and price at the higher end of the range. Price based on value and not cost. If you have to increase prices by a lot, your best strategy is to introduce new dishes, gradually if you can, or to change the whole menu.
The short answer is no.
Of course we need to keep an eye on our food cost and of course we need to know what our dishes cost (more on this later) but only looking at the food cost or beverage cost as a percentage doesn't help us. For instance in large companies is very common to set the food cost at around 25% and this will most likely be a Key Performance Indicator for the Executive Chef and the one thing he will receive the most grief for.
This is especially true when we look at individual dishes, rather than the whole menu. For instance you may have a dish with Lobster or and expensive cut of beef and selling it at 4x cost (plus 20% VAT) may just make it too expensive or not competitive. Say for instance this dish cost you £5 per portion, you should sell it at £24 (£5x4cost +20% VAT)but as this would be too much you decide to sell it for £19.95 or £16.63 + VAT, which is 30% food cost (£5/£16.63 x 100).
Now take a normal dish, say a pasta, which costs you £2.00 per portion and you resell at £2.00 x 4 +VAT = £9.60.
PASTA DISH GROSS PROFIT: £6.00
LOBSTER DISH GROSS PROFIT: £11.63
Now let's pretend these are both pasta dishes, one with Bolognese and one with lobster. Your customers will only have one pasta dish per meal. Which one would you rather sell? You can play with the figures but the idea stays the same, sometimes we need to look at absolute profit rather than food cost as a percentage.
On a little side note, I think it's very important to maintain some sort of minimum price for all our dishes in a certain category. For instance your pasta category. If you have a pasta with tomato sauce on the menu you don't want to just look at the food cost to set up your price as the price (and the gross profit) may be too low and if you end up selling loads of this dish, yes you will have a very low food cost at the end of the month, but your bank balance will be very low too!
Alan shares his experiences, struggles and tips to help other small restaurant operators.