PricewaterhouseCoopers recently released a report stating that restaurant insolvencies have increased by 95 per cent since the start of the credit crunch. Given that 30 per cent of restaurants already go bust within the first year, this is grim news for the industry.
Why does the food and restaurant industry remain one of the highest risk investments and have the highest mortality rate of almost every industry sector in the world? One reason is that while restaurant owners are experts at the look, smell and feel of their brand and its offering, too often they fail to implement the systems, processes and infrastructures common to all successful and profitable companies, no matter what the sector.
Business principles remain the same in every industry and can and should be applied throughout the retail and restaurant sectors. Every company needs methods to agree and determine a medium- and long-term strategy and then tangible ways to make it happen. They need to enable, equip, monitor and motivate hundreds (sometimes hundreds of thousands) of employees to carry out common goals, whether it be in the domain of sales, HR, marketing or industry specific core functions such as cooking, serving, cleaning, engineering or managing.
I’ve spoken to a lot of owners in the food/restaurant industry and asked them the same type of questions:
· What is your 5 year growth plan and do you have the right competences, processes and infrastructures to realistically achieve that plan?
· Besides the look and feel of your food and customer offering(s), what is your overall value proposition to potential buyers of your business if you decide to sell outright, franchise or licence?
· How long does it take your team to implement business improvements and make them stick?
· What’s your method of implementation so that 100% of the workforce happily complies to your strategic intent?
· How do you measure the effectiveness of your business improvements and how do you know if they’re working or not?
Time after time, I kept getting the same responses: an incomplete or misaligned plan, false hope, or shrugged shoulders.
If a business is running ineffectively, it’s better to act now. Business improvements (people, processes and IT) are required for any size of business, big or small; but changes are far easier to make when the company is still small. The bigger the company, the more complex and costly it is to fix.
For those owners who hope one day to sell their business, implementing these changes is crucial. Do you think potential purchasers of your business want to buy a car that doesn’t run properly? Restaurant owners have to make sure their car is running like a well-oiled machine before a buyer is going to want to pay top dollar for it.
Only now are those in the restaurant industry beginning to understand why directors of the most successful companies in the world continuously engage cross-industry global business management consultants (at alarmingly high daily rates) to embed leading-business improvements quickly in order to strengthen the business and make more money. Making these changes is far easier than you think. Experts can implement change in a few months rather than six months to a year.
These are difficult times. All around, your existing competitors and potential entrants to your market are calculating how to improve their operations to take your customers away. As Jack Welch, former chairman of General Electric, famously said: “When the pace of external change exceeds the pace of internal change the end is in sight.”
Companies who focus exclusively on survival are missing the big picture. It is during turbulent times that companies can open up the greatest opportunities. Rapid changes in the external market, combined with inward-looking, reactive competitors, add up to big opportunities to create durable competitive advantage for companies with the vision, tools, expertise, disciplines and courage to pursue them.
What does success look like? A past client helps us to answer this: “Today, we are more accountable, more measured, aligned and with far better morale, while still retaining the good parts of the culture. Within three months we improved our complete performance structure, communication structure, prioritised and re-worked existing systems and processes, defined and agreed a five year strategy amongst all key stakeholders and created a structure to achieve it via implementation into the workforce. If the day comes that we ever decide to sell or licence our group, we offer a distinct luxury brand and operation that continues to earn value with a further plan, people, processes and tools to grow. At the end of the day, our business boils down to improved product consistency, improved staff engagement and productivity, improved customer satisfaction, improved margin and increased sales.” At the time, this group only had five sites.
I firmly believe that this industry, despite the economic climate, has a fantastic opportunity to capitalise in so many areas. There is still a lot of value to be created. If you don’t know what a high-performing business should look like, it’s time to reach out.
David Gibson advised some of the world’s best-known companies while working at Accenture. He set up Gibson Business Infrastructures (GBI) to specialise in helping food retail and restaurant companies.
For more information about David Gibson or the team at GBI, please visit www.gibsoninfrastructures.com
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