I had an interesting discussion over a very pleasant dinner with Tim Connell and Frank Wilden, the owners of Sydney’s Coast, MantaRay and Libert? (formerly Ampersand) several weeks ago. We were talking about the difficulties restaurant owners face in keeping their professional staff from pushing their restaurants into market positions that are not desirable.
Independently across a number of hospitality businesses we had all observed that if you let chefs, waiters, sommeliers, restaurant managers set there own agendas, most will tend to push your business either up market towards or into fine dining or, in a fit of misplaced artistic endeavour, into a culture or menu that is too ‘out-there’ to be appreciated by your existing customer base.
What, you may well ask, is wrong with going to a higher market level or into the realms of cutting edge gastronomy? If you’re looking for personal profile, as most key hospitality staff are, it’s logical to try to operate with a concept or to a standard that will get you noticed. Unfortunately the cost of operating at this level is so high that the quest for the third ‘hat’ or Michelin Star is likely to wipe out all your profits — and profit comes ahead of status on the wish list in the minds of most of the business owners I deal with.
This brings us to the issue of available markets for your business. The old maxim: ‘Feed the rich, go home poor; feed the poor, go home rich’, is to my mind, quite accurate. Imagine the entire hospitality market is shaped like a pyramid, an equilateral triangle. Let’s divide it into three market levels . . .
At the bottom third of the market we have a broad market base — an almost infinite number of potential customers (55% of the entire market) who don’t expect much, won’t spend much but who’ll visit very regularly if you look after them. Staff who work in this segment are cheap, easy to find and train, the products you sell are easy to produce and inherently quite profitable and the rent is cheap — but there is little status or acclaim to be had, and there’s lots of competition.
In the middle sector we have the territory most hospitality businesses should look to occupy. This sector represents 33% of the available market; which is still a good enough chunk to bet on. Staff are not too difficult to find and train and your cost of operating at this level is low enough to allow a reasonable profit to be made — and your customers will still have a reasonable frequency of visits. The ratio of available customers/competition is also quite good in this segment. A nice combination of ease of operation and profitability.
The top section of the hospitality market represents less than 12% of the available market — and it’s a very tough market indeed. Why? First, the public expect the meaning of life in return for the prices you have to charge to cover your costs — in other words it’s very hard to provide a perception of value for money at this level. Second, the kind of staff that can create or maintain this standard will cost you an eye watering fortune. Third, that 12% market base is small, fickle, easy to alienate, and does not visit very often. Forth, you’ll find this market level very oversubscribed with very determined competitors.
Why do they do it? Well, the top level is where most of the publicity and hero worship occurs. We’ve all seen the way celebrity chefs can have the status of rock stars and who mingle with the who’s who of the world. Unfortunately that status is more likely to be bestowed on an employee chef than the restaurant owner. So, the top market level is the one that most business owners should seek to avoid, but most key staff in the industry would like to move into.
This is why we have constant battles trying to maintain the desired market level. We fight to keep menus from becoming too esoteric, service from becoming too formal, service levels from becoming excessive, wine lists from becoming too broad or too complex and the environment from becoming overcapitalised.
Your menu concept is most likely to provide the first major skirmish in the battle. Many good Chefs seem to have an inbuilt desire to make an artistic statement with ‘their food’. When challenged with the instruction to tone it down they can become quite truculent and resentful — and some will even make noises about leaving, as if it is their God given right to make strategic decisions about the positioning of the business.
Another skirmish commonly occurs for similar reasons in the front of house. Decisions to use linen tablecloths and Riedel glassware may make the waiters feel good but they will also put a good dent into your profitability, as will a staff/customer ratio of one to eight on your floor.
We’re coming to understand the critical importance of spelling out the desired market position of a hospitality business during the recruitment and induction process. If you make it a condition of employment that they understand and accept the market position and other important general strategies of the business you will have a lot less trouble in the long run. If you don’t you could be in for a long and traumatic battle of attrition with your staff.