Bite Online

In these austere times we are often asked by clients how they can go about saving money.

Here is the transcript from an article for a trade magazine that I was asked to write recently.

Workplace catering is different from most other FM disciplines: it uses the concepts of profit & loss since there is an income aspect as well as a cost aspect. The success in cost reduction is dependent on being able to recognise and work this difference: maximise income, minimise cost.
The majority of workplace catering require subsidies.  The routes to reducing these (a loss in P&L terms) are the same as universal business principles. And there is an importance to the order in which you tackle these principles:

1. Sell more
• Assuming that your service includes feeding your work colleagues, then reaching more people in your building has got to be the priority. More satisfied customers means that your catering cost per head goes down. This might be achieved by better marketing.

• Of course selling more to the same number of people works too: giving existing customers more of what they want is the cheapest way to increase business. Contrary to most outcomes, most people are looking for increasing quality (not cheaper prices if this means poorer quality) , so investing in fresh food can actually reduce your subsidy.

• Conducting a customer survey might reveal that you are selling the wrong foods. Sell more might simply mean, simply selling more of the things that your customers want. Of course, this varies with the seasons, so move away from the hot heavy roasts in the height of the summer.  Obvious, but surprising how few actually do it.

• If your service includes the provision of hospitality services to the rest of your business, then sell more of it. There is more to it than simply transferring costs to other cost centres in the business. You will be saving money for the overall business compared to buying services from outside (assuming the same tariffs) because the profit margin of each transaction is retained inside your business.

2. Charge more
• Often an unpleasant task to contemplate, but is it time to use the current economic environment to force through those tariff increases for the sake of reducing company costs? Food inflation has crept up behind people without most realising.

• And should all your customers be paying the same? Look to introduce a 2 tariff system if you have a customer group who are not entitled to the same subsidy support as others. Introduce premium ranges for higher paid workers.

3. Increase efficiency
• Monitoring productivity is critical (£ sales per £ labour, or labour cost per meal, for example).

• Selling more food with the same staffing structure would be the ideal. Coupled with selling more food comes with more administration so invest in back office systems (eg online ordering and hospitality booking systems).

4. Reduce costs
• Low hanging fruit are the ones to go for first, for obvious reasons. Can you really afford free fruit, free coffee or free lunches anymore?

• Change the menus, but be inventive. Pasta (low food cost) every day is not an option.

• Increase your training spend. Although this might seem the wrong thing to do, recognise that the biggest cost in any business are the people costs. So reducing the labour turnover in the catering team by investing more in the existing team saves on recruitment fees and more besides.

Your approach to cost reduction

In the search for subsidy reduction opportunities, you need to consider the following:

1. Like all journeys, what is your starting point and where are you trying to get to? Are you looking for a 5% subsidy reduction or a 50% reduction. And if you only have one month in which to achieve this, your options are very limited compared to if you had 1 year.

2. What are the sacred cows that must not be disposed of along the way?
Many companies see catering as an employee perk. Reducing your costs by making your chef redundant and replacing a handmade offer with cheap prepacked bought in food does not go down well with your staff.

3. The greater the degree of change the greater the level of communication required.
Food inspires human interaction. The more you change the food the more you need to interact with the people who eat it. Unfortunately humans tend to jump to negative conclusions first and if you do not fend these off with an overload of positive news, customers will take the hump and take their business elsewhere.

4. Make the exercise self energising
Good business management should not be a feature of credit crunch. It should be practiced all the time. Hence the savings that you are looking for now because of the renewed focus depend on how efficient you have been running the business in the past. To make good business a long term business, look to add an incentive to your catering contracts in order to get your caterer to be rewarded by subsidy reduction.

5. Be wary of undoing what you have just done or what you stand for
Increasing your sales (thereby reducing your subsidy) by increasing the amount of fresh food on sale is quickly undone if you then want to save more by halving the costs of employing craft trained chefs.

Happy to discuss any views, contrarian or otherwise.

Nick Parker
August 2009