Building a Group to Ensure Repeat Business and Profitability

GBI provides a snapshot of how monetarily important repeat customers are to profit generation and how to build an organisation which better ensures success.

Allegra Strategies just released figures saying, “The UK eating-out market has fallen for the first time in 40 years...estimating the value of eating out in the UK to be £40.3bn in 2009, a 0.5bn drop on last year and the first decline in the informal eating out market since it emerged in the 1960’s”. Read: this market is still very big.

The good news is that dining and going out (eg, pub, cinema, etc) remain the top 2 consumer spending priorities, eclipsing holidays and clothes shopping according to a March 2009 Mintel report. Eating out clearly remains the top spending priority for consumers, which means the customers are there and so is the market.

The sector is also showing some resilience, with 54% of consumers stating that the recession has made no change to their dining habits. Psychological resistance to eating out is being eroded, since this result represents a 10-point improvement on the 44% response recorded 3 months ago.

Now it’s our job, as the owner / operator to capture them and most importantly keep them coming back.

Always remember that repeat customers will generate more than three times the revenue when compared to new customers, keeping in mind that 98.7% of visitors do not return, even if they buy something first, says Business 2.0.

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To read the rest of the article please click here.

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

Know Your Score and Name Your Price - Article

Article on: GBI provides a snapshot of how world class food and retail companies measure their operational improvements in order to command a premium price with a potential buyer.

“In God we trust, everything else we measure"

- Chief Operating Officer of UPS Delivery Service

In this post, we will show a basic yet standard industry Balanced Scorecard which is used to measure and monitor improvements in operations. By showing a positive improvement in operations year after year, an owner can better show the value of the organisation to potential Private Equity or High Net Worth buyers so that you can command a premium multiple of EBITDA (Earnings before Interest, Taxes, Depreciation, and Amortization).

By operating at full potential, maximum value can be earned when selling. Earlier we asked the question “Do you think potential purchasers of your business want to buy a car that doesn’t run properly?” Food and retail 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.....

Click on the title to read the rest of the artcile. This article was published the 'Restaurant Magazine' August 2009.

Building Your Future

GBI provides a snapshot of how world class companies determine their 3-5 year strategies and what needs to be done about it.

Strategy is probably one of the most used terms, yet most unachieved aspects in business today. Even with a defined strategy, the percentage of realising it is, at best, extremely low. Try looking at some historical (3-5 year old) business strategies and forecasts in this industry if you need proof as to their success. ‘We want to open X number of shops, consistently deliver the best products, which operate well and earn X net profits”, usually fail to deliver.

The biggest and arguably only reason that strategies are not realised is because executive teams and businesses do not compliment them with the right competences, systems and processes (people, processes and IT) in a short enough time period. Effective execution of strategy depends on effective project management, delegated and aligned accountabilities throughout the organisation, communication channels and methods, performance measures, ability to execute (competences) and know-how to name only a few dependencies. An achievable strategy also needs to be realistic in terms of capacity planning. In other words, a business owner / operator needs the experience of knowing how many improvements can be realistically absorbed into the workforce and by when. Keep in mind; it’s better to deeply embed fewer improvements than to thinly spread numerous improvements.

In this post, we’ve been asked to outline some exercises in order to create a strategy. Prior to that, it’s important to know that a strategy is only as good as the infrastructure you build to enable your workforce to achieve it. Chris Woodhouse, Chairman of Gondola Group says it best in his 2009 Annual Investors Report:

“We continue to make investments in the recruitment, training and development of all people at all levels across each of our businesses. PizzaExpress implemented a Leadership Development Programme that will filter down to the rest of the business through the senior management teams. Its aim is to develop and retain its best people. A Customer Service Project was also set up to ensure PizzaExpress delivers the best customer service on the high street.

ASK continued to consolidate ways of working across operations to drive consistency throughout the business. This included a Balanced Scorecard approach to measuring restaurant performance against broad business objectives and the development of a communications programme to enable effective execution across all sites. Great progress was made in the Training function with particular emphasis on the development of new managers via induction.

Zizzi has bedded down a new, clear operational structure across the business. For each restaurant a ‘familytree’ (or an organisational structure) has been developed to support recruitment and succession planning. New training programmes have been introduced that affect all operators, from restaurant teams to General Managers, to increase awareness and knowledge of Zizzi’s superior food offering.”

In other words, Chris and the team at Gondola are putting in place the right pieces of infrastructure in order to realise their strategic intent. Keep in mind, high-performing operations equate to higher revenues and profits.

The key to building a 3-5 year strategy is being realistic and most importantly, honest with both yourself and your executive team. Shoot for the stars and don’t restrict yourself from greatness. We can always align strategic intent with time, money and resources later on in the process. What strategy does not do is determine how the organisation should get to the future vision, while restricting itself to a time-frame; it can be for both short and long-term periods and it does not rely solely on quantitative variables to draw conclusions.

Finally, keep it simple. It’s better to execute 3-5 things really well rather than attempting to execute 5-10 things poorly.

During strategy development workshops there will be a number of breakout sessions, where each provide an opportunity for thoughtful debate and discussion to generate ideas about the company’s overall future. It’s a good idea to use a facilitator to work with the most senior 2 or 3 people individually and then bring the executive / ownership team together to agree on one common vision and strategy to ensure honesty of goals and alignment.

Other roles of the facilitator are to:

• Manage time so that all topics can be covered and deliverables created
• Keep answers focused to issue at hand

• Avoid detailed digressions which do not pertain to intent of exercise
• Encourage idea generation through examples
• Allow executives to generate ideas alone and save personal ideas until later in the discussion

Each exercise will consist of individual brainstorming, followed by presenting ideas and finally a ‘group think’ and refinement of ideas.

Here are a few exercises which we use with business executives to help define their next 3-5 years of strategy.

Exercise 1 – Visioning:

There are two exercises for this breakout: ‘Place Your Bets’ and ‘Crystal Ball’

• ‘Place Your Bets’ allows participant(s) to invest a hypothetical £10 million into the company. They can invest in existing or new areas. The purpose of the exercise if for participants to think about what areas of the company deserve and do not deserve investment.
• ‘Crystal Ball’ follows up on the previous exercise by challenging participant(s) to write newspaper articles which would reflect their future vision of the company in five years. It builds on the first exercise by allowing participants an opportunity to realise the success of their hypothetical investments in actual words. A good technique is to write a headline and leading paragraph for a newspaper article which you would like to see in your favorite daily in the next five years. Ie. “Conran Group buys our company for £10million pounds…and here’s what happened...”.
  

Exercise 2 - SWOT

I realise that this technique is cliché in business, but there’s a reason for it. The first is that everyone is familiar with it and the second is because it works, so ‘if it ain’t broke, don’t fix it’. Being honest about your Strengths, Weaknesses, Opportunities and Threats is a good way to lay it all on the table and build agreement / alignment amongst the executive team, which will then cascade throughout the organisation.

Identify company Strengths

§ What is the company’s advantage(s)?

§ What do you do well?

Identify company Weaknesses

§ What could be improved? Think about customer requirements, distribution requirements, etc.

§ What is done poorly at the company?

§ What should be avoided?

Identify Threats to company

§ What obstacles does the company face?

§ What is the competitor doing?

§ Are the required specifications for your products/services changing?

§ Is technology threatening your position?

Identify Opportunities for the company

§ What are the good chances facing the company?

§ What are the interesting trends?

SWOT’s are not only good for aligning executives, but it also helps the management team focus on the weaknesses so you can re-visit it an a year to tick off the challenges which you’ve overcome in the last 12 months. It’s quite a rewarding experience. As a rule, do a SWOT yearly in order to help focus on the years priorities.

Exercise 3 – Establishing your driving force

What is the single, fundamental element which drives the success of the business? Key outputs of this helps to align all infrastructure and staff towards a common set of performance objectives via training, performance management and culture by building the aforementioned to ensure your workforce is best enabled to achieve your business drivers.

Step 4 – Establishing your point of difference in the market place

There are three potential exercises, including: ‘Competitive Attributes’, ‘Competitor Positioning’, and ‘The Company’s Differentiation’. The goal of these exercises is to produce 2-3 bullet points on what the company should do to be differentiated in marketplace.

• ‘Competitive Attributes’ encourages participants to brainstorm attributes upon which the company competes. These can be attributes upon which the company currently competes or they can be attributes which the company will need to compete in the future; e.g., meeting customer requirements, meeting distribution requirements, etc.
• ‘Competitor Positioning’ asks participants to map the company and its competitors along the attributes brainstormed in the first exercise.
• ‘The Company’s Differentiation’ challenges participants to detail how the company can migrate to more differentiated position along the competitor positioning profile. This differentiation should be sustainable as well as unique.

Exercise 4 – Defining your target market

• What products will we offer? Don’t forget to do some NPD visioning (New product development) as well. Investors really like to see this.

• Which customer demographic groups will we pursue? Make sure all of your external and internal offerings, training and infrastructure are geared toward these groups.

• Which geographic markets will we pursue? Keep in mind, that it’s not always the high-street locations which make money. Be creative and forward thinking and look at lower rent areas which can help with profit margins.

Exercise 5 – Establishing your delivery capability (areas of excellence)

Areas of excellence are a set of describable skills, competencies or capabilities. They are deliberately cultivated over time to a level of proficiency greater than anything else your company does and to a greater proficiency than your competitors.

Companies generally pursue 2 - 3 areas of excellence. These should receive preferential treatment during resource allocation and spend due to their underlying importance to the company’s driving force. The key rules are to ensure it is given more money in good times and they are the last areas to be cut in bad times.

These exercises are designed for every business to use, non-dependant on size. Truly understanding, agreeing and communicating your strategy will help the whole company work towards it, whether it be 5 people or 5000.

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

Understanding Your Pain Point

David Gibson of GBI provides a snapshot of the type of organisational assessment which world class companies use to determine where the pain points are in their business – and what they needs to be done about it!

The commonly accepted elements of financial success in business are well established: good product and service, cost-effective procedures, skillful marketing and customer service, competitive pricing, visionary leadership, a highly-productive workforce, and consistent execution. In the last post, we encouraged the food industry to operate like high-performing businesses by adopting the right tools, competences, disciplines and courage to run profitably.

In this post, we’re going to examine a diagnostic which one can do in order to get a deeper understanding of your operational wastage and efficiencies.

Over the past 6 years, we have utilised an Operational Assessment Tool, which is an objective measure of organisational ability, on more than 60 public and privately held corporations, from a wide variety of industries throughout the world. Unfortunately, our research shows that management in many organisations often have a disconnected and idealised view of the operation they lead. Just as individuals who lack self-awareness often have trouble navigating the waters of life, these organisations rarely make the list of the most financially successful.

Our research reveals a strong correlation between a proactive and structured management culture and financial results. Financially successful organisations do not simply let their organisational cultures drift and evolve “organically” (as we hear all the time); they take an active hand in management. A crucial key to achieving this is to put in place feedback mechanisms, such as internal diagnostics (surveys, interviews, workshops) that allow management to maintain an up-to-date, objective view of how aligned their organisation is to the vision and strategic intent of the food group.

The importance of this clarity of perception cannot be overestimated. A high performing and nimble business will result in improved product and customer consistency, staff retention, customer service, delivery goals and performance which all result in repeat business and higher gross profit.

This in turn requires objective assessment into the operations, to understand what needs to improve and to gauge its capacity to respond as well as its tendencies to resist.

Just like a mechanic conducting an MOT for a car or a doctor running a thorough health check for a patient, an operational diagnostic is most effective when done by trained professionals, but writing and issuing a survey to a sample of your staff is a quick and easy way for you to get a sense of how your business is running:

There are 3 key elements of an operational diagnostic focusing on sustainability, speed and consistency.

Sustainability: Is the knowledge, processes and ways of doing things being captured within the organisation? I.e. what if a specialist skill suddenly walked out the door or was not able to work for a long time such as a head chef or yourself or any other key staff member? Is there an effective succession, training and knowledge capture programme in place so that the business hedges against any sudden loss of key staff, teams or processes which could put elements of the business at high risk? Can a potential franchisee or purchaser use your business infrastructure to continuously deliver consistent results? How ingrained is the key knowledge in your organisation? Ask some questions concerning the above areas.

- Speed: Does the organisation make sure people are up-skilled quickly, all share the same level of information and have the tools and support to enable them to contribute more quickly and smoothly? Is there a lot of ‘feeling around and coming to grips’ within the organisation when people start or is there a more organised method of giving the right pieces of information to the right people at the right time to help get delivering to expectations quickly and consistently? Investigate the above areas in a section of your survey.

- Consistency: Does the organisation have the infrastructure in place to support, coach and measure the performance expectations? Are all of the tools focused on achieving your scorecard measures such as consistency of profit, service, product and operational expectations? Is the process in place to execute flawless customer, staff and product consistency? It’s important to ask your staff if they perceive this to be in place.

One of a number of methods to executing a survey in your organisation could be as follows:

- Write up the survey using 3-5 headings with 3-5 questions under each heading for a total of 9-25 questions.

- Write an introduction to the survey which states that the management is committed to continuous improvement and the survey aims to assess areas in the organisation that might be improved.

- Make sure you are clear that you are committed to making the survey completely anonymous for employees or you will not receive honest feedback.

- Use paper, email or an online survey tool like Survey Monkey depending on what works for your organisational culture. Keep in mind, that online results are easier to aggregate.

- Issue the survey to a cross-section of up to 10% of your organisation and keep it simple (the survey shouldn’t take more than 15-25 minutes to complete)

- Collect the survey the following day (the longer you give people to complete, the longer they will take to return it)

- Aggregate the qualitative and quantitative results

- Once you identify some key areas of interest from the survey, conduct 3-5 interviews with random staff to bottom out and clarify the issues you’ve uncovered

- Organise a meeting with senior management to discuss the results, agree the solutions, prioritise the actions and assign accountabilities within the organisation.

- Organise a meeting with senior management to discuss the results, agree the solutions, prioritise the actions and assign accountabilities within the organisation.

- OrganiseIssue communications to the workforce to thank them for completing the survey and list the improvements which will be made in the organisation and by when in order to promote continuous improvement.

This diagnostic takes one person about 3-5 days to do (end to end), 15-25 minutes from a sample of staff members and approximately, four hours at the end of the diagnostic in order for the management team to understand the results via a briefing on the state of the organisation and 4 hours from your management team to agree on prioritised actions and assign accountabilities to individuals in order to execute improvements.

Some common areas for improvement highlighted by our diagnostics are:

- Improvements to performance structure and incentives
- Communication structure, process and content
- Training and consistency programme improvements
- Prioritised and re-worked systems and processes
- Required elements of support from management for the workforce

By conducting an in-depth diagnostic, identification of key drivers and areas of improvement can result in a prioritised action plan of what could be done in order to capitalise on missed revenue associated to operational effectiveness. Once you understand the challenges to your operational drivers, then your organisation is far better equipped to tackle any type of terrain or market conditions.

Business isn’t rocket science – it’s retailing or food delivery at the end of the day. Why can’t everybody beat McDonalds or Pret or whatever the best company in their industry is? Because it takes more than strategy and the taste, look and feel of the end-customer value proposition. It takes years of consistent execution and a solid infrastructure for a company to achieve sustainable competitive advantage by initially running an operational diagnostic to see how things are running and what to improve. The whole company needs to be focused on execution and the tools and infrastructures to achieve it.

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

The Last Tribe of Better Business

David Gibson of GBI explains why restaurant owners need to learn lessons from well-run companies in other industries – and why they need to do it now!

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