First published in FSM Magazine in June 2012
Almost every month it seems I meet people in the foodservice world, who seem surprised that they continue to trade, not just at a “survival level”, but quite well, even in the current climate. Normally the conversations start quite cautiously, then after having done what most of us do when we meet new people, the truth finally comes out, the guards come down, and you swap stories of how the recession has impacted on your business and those around you.
On almost every occasion however, the conclusion is that things really needed to change, and the “new skills” that people have acquired and learned, are useful, invaluable and even profitable.
It is nearly 5 years since the credit crunch and the recession started. Yes, it is hard to beleive. What we all thought was going to be a short dip, an extraordinary period of our lives, has turned into the “new normal”. In September 2007 many of us were sitting down watching television to be surprised with the news that savers were withdrawing their money from Northern Rock, in long lines, snaking along the high streets of Great Britain. That was the start and the cracks were beginning to show. Then a full year later, Lehman Brothers goes down, and nearly takes the world economy with it. Up until that point many of the young people in our industry had never seen recession or negative figures. Growth, prosperity and increasing standards of living were the norm, with the economy getting overheated by the boom times we were all experiencing. The cracks became chasms and it dawned on all of us how exposed we were to the world economy. Protesting loudly, the population of the UK started on the journey into recession, adamant that we had nothing to do with it, we had not caused it and we were sensible. Roll on a few months and the level of debt in UK businesses, the Irish property problem and the highly geared borrowing that had become part of UK house ownership put this view in stark contrast.
In some parts of the world, like the Middle East and specifically Dubai, they had never seen negative figures, in the history of the modern country. Since the end of the 50′s the cranes have been swinging, the hotels and apartments have been growing and some of the most ambitious and challenging projects were being delivered, as if there was no tomorrow. At the end of 2008 Dubai still thought it was immune, but it wasn’t. Like every country that relies on others for wealth and visitors, for transit customers and holidaymakers, the UAE hit the buffers, and hard. Stories of abandoned cars at the airport became the stuff of legend, but for those of us who were working there at the time, Contracts were cancelled and “getting out” was the most attractive option.
So what has kept us all here, mostly intact and continuing with our businesses? New tricks, new ways of doing things and an extreme focus on certain aspects of our business. In true Homo Sapiens style, we have mostly managed to learn new business and life skills to compete and thrive in the current market. In no particular order and with a specific focus on the foodservice market, I have listed some. You may not agree with all of them, but look how your business has changed in 5 years and it becomes clear, very quickly, why.
First, we have learnt that cash is king. Margins are brilliant if you can get them, good margins even better, but cash, turnover, sales, whatever you want to call it, matters more than ever. Cash gives you the ability to pay staff, pay the rent, buy the food and provides the liquidity to operate. So tell me why contract catering partners insist on pricing goods to maintain a good margin, but never sell much of the product? Even worse, they throw it away rather than sell it at an “end of day” discount.
Second, we have learnt that extreme value works and that does not always mean price. Give people value and they will get interested in what you are doing and buy from you. This might mean a “mini upgrade”, a complimentary item or giving them something extra that costs you very little.
Thirdly, and this has been a hard lesson for all High Street Operators to learn, when it comes to price, there is no loyalty – people will go where the offer is. Discounting and vouchering nearly brought the casual dining industry to it’s knees at one point when cost of goods went North and average transaction values went South!
My fourth point is that somebody will always do it cheaper. Avoid following a competitor into that abyss. “Canteen wars” don’t serve anybody, so my advice is differentiate, don’t just discount.
Fifth, price and value are NOT the same thing. It seems blindingly obvious, but I have sat through more contract review meetings than I care to mention and had to explain why operators should put on a premium dish, not just “value meals”.
Sixth people will leave you, if and when they can, for the competition. In contract catering they will walk out the door and go down the street, they will be lured by the sandwich delivery service or they will fall for the “new” and shiny corner cafe. Banks who have treated their established customers so badly during this recession will see a MASSIVE Exodus when these customers can leave them. A top tip, move into “friendly” banking in the next year and make your fortune. The established high street banks have given you all the customers you might want!
The real message here is don’t get complacent, dont assume they won’t go, challenge your teams to win and re-win their affections each day. Hard, but much easier to keep them, than to try and win them back once they have gone.
Seventh, we are all taking far more holidays. What? Yes that’ right. I don’t mean that we are travelling to sun kissed beaches, but we are all using foodservice as a means of forgetting our dreary lives, the financial mess we are in, or the job that we would love to leave, but can’t. A nice cheap pizza out, a cup of frothy coffee in the cafe or an indulgent and hearty main course at work allow us to transport ourselves into a “5 minute holiday”. Its the only reason why I think Coffee Shops continue to trade so well – it certainly isn’t their table clearing and cleanliness!
Eight, understand the habits of your consumers and you will likely give them a better service. Changes in travelling patterns, mode of transport, driven by cost of fuel and tickets, means that some sites are seeing big changes in the way people arrive and leave. Have you considered how this impacts on service times and delivery? – thought not.
My ninth point is marketing, marketing and marketing. People dont buy if they dont know. “I put a great special on today, really different, but nobody bought it”. No sign outside the restaurant, just a counter top A4 stand up. You need to get peoples attention and keep it. If you don’t you are not standing still, you are going backwards. Think about the marketing and advertising that you have been most taken with and copy it. For us, Social Media has been a complete revelation and has genuinely delivered significant profile and business.
My tenth and final point – EVERYTHING is up for scrutiny. The photocopier contract, the Sky subscription, the repair contract. People are looking at everything, so be prepared for them to caste their eye over you in the same way, looking closely at price, value, quantity and offer. We have adopted it in our business, as most other people have. We have changed suppliers, we have run price checks, we have looked at the small print, the annual increases and the rolling contracts. Where we have found something we dont like, we have moved supplier. Don’t become a victim of this.
Anybody that has run their own business, or a company where they have a financial interest, will support fully what I have said. What is clear is that the massive attitudinal change that was needed to survive and carry on in business over the last five years, is, I am sure, here to stay. The consumer is not going to suddenly stop being interested in getting more for their money. They have got the taste for it, and I am sure will continue.
I fear we will drop back to the “old ways” eventually, but in the meantime “extraordinary” is the new normal.