Financial Times – sticker shock– and our solution!
On the 11th of June, Tim Hayward, the Financial Times’, food critic and restaurateur, wrote a lengthy, well informed piece on the fear stalking Britain’s restaurants.
He didn’t specify any solutions, but his excellent analysis illuminated issues already noted by The Restaurant Guru and for which we have developed proven, remedial techniques. (Check out the last paragraph of this blog, if you’re in a hurry!)
He described the current restaurant scene as “uniquely, grim“, quoting the statistic that “12 licensed restaurants shut every day“ in Britain.
Measures he cites being taken to stay afloat include reduced opening hours, reduced days’ trading, cheaper ingredients and compromising service standards with reduced staffing.
Steep price increases for menu items are now widespread, even universal.
At the core of his article, he makes the point that eating out is a luxury, which we, as a nation, have come to regard almost as a right.
However, with a rising prices, he writes that people are experiencing “sticker shock“, an American term, meaning the unpleasant surprise of learning of an unexpectedly high price for an item. This results in falling sales.
To give “luxury“ an historical context, he recalled his annual visit to a Berni Inn between the ages of 6 and 15 with his parents, where he enjoyed the classic Berni experience: prawn cocktail, steak and chips, black forest gateau – luxury at that time.
I was Berni’s marketing director forty years after its arrival and its early reputation as a “solid, value for money“ restaurant chain was a game changer for UK dining.
Our creation of “New Berni“ in the 1980s (preceding new Labour in 1997!) remained true to the value proposition, but streamlined the offering to keep it relevant to a more affluent, demanding population.
Since Berni days, times have changed greatly and Hayward reckons that 2000 was the time that “Britain’s current culture of food enthusiasm began in earnest“.
Although we spend less of our income on food than comparable nations, it is widely regarded as “okay to be eating out every single day – we feel we should be able to afford it.“
This is where sticker shock comes in and this is why restaurant demand is falling.
As a current example, a local, well regarded, independent Brighton restaurant, Wild Flor, has just abandoned their set menus as a result of a £65 sticker shock which reduced their sales by “25–30%”.
Turning finally to restaurant economics, using the term “hospo – catechism“, Tim refers to the “industrywide fag packet equation: food costs, 30%, labour cost, 30%, overheads, 30% and profit, 10%“
I’m afraid that this no longer works, and we have proven that food and labour costs together need be no more than 50%, some 10 percentage points lower than the fag packet equation, and producing a profit of 15% or more.
If the financial Times produces a front-page article in their weekend edition, drawing attention to the fear stalking the industry, then it is surely a reality. However, I am optimistic that, with our five pillar coaching programme, we can help restaurateurs ride out the storm.
If this intrigues you, tune into the webinar on The Restaurant Guru website to find out how we do it.