Steven Brown: Is your F&B operation struggling due to the economy?

Tania Longmire
By Tania Longmire November 2, 2011 17:09

Steven Brown: Is your F&B operation struggling due to the economy?

I have looked at the F&B business of a number of golf clubs since the credit crunch started a few years ago. Typically the concerns I found included:

1.            Loss or lack of gross or net profit

2.            Poor stock results

3.            Horrendous wage percentages.

But worthy of note is that there is a growing number of clubs raising concerns over their F&B management structure.

Their concerns here are:

1.            Does the employment of a dedicated manager mean that we are over staffed (wage percentage)?

2.            What specific financial contribution does our F&B manager make to the F&B profitability?

3.            Does the F&B manager have a sufficient wealth of knowledge to advise and guide the F&B staff in all related matters?

4.            What examples can you find of profit generation or the reduction of inefficient practice on a daily and weekly basis directly through the F&B manager’s actions?

5.            Has our F&B manager produced an operations’ manual or operating procedures guide against which their performance can be measured?

6.            Does our F&B manager take full day-to-day responsibility for all issues that relate to our commercial viability and make telling decisions without seeking guidance, or does he / she constantly seek reassurance thus involving others in the decision making process?

Does any of this sound familiar?

If your F&B operation is controlled directly by you (that is, not franchised) then you must be in a position to be able to answer the questions posed above with sufficient confidence to know that the future direction of your F&B is in good hands.

If however there are areas or some issues that give you cause for concern then let’s now address them together.

In essence you have a number of choices for in-house F&B operations:

1.            For the secretary / owner to directly oversee both / either operation with no department heads; merely day-to-day operational staff

2.            For the secretary / owner to appoint department heads to oversee each individual operation whilst reporting directly back to them

3.            For the secretary / owner to appoint an F&B manager with direct responsibility for each department and with heads of departments reporting directly to them and they in turn reporting back to the secretary / owner

4.            Either stop the provision of either or both services or to ‘franchise’ them out.

Just for the record, let me discount the last option whilst, although I am aware that a number of clubs have reduced their level of service, (for example reduced the number of hours the service is available for) most clubs still provide one or other or both of the services (that is, bar and catering in some form). This being the case then that service needs to be properly managed.

So which is the best way, and more importantly, which is the right way for you to operate? Although the question is simple the answer is not. It is complex and every outlet is, trust me, very different. In the consultancies I have been involved with I have advised my clients to consider all or any of the following:

1.            Continue as they are but to support the current manager with additional training

2.            Source a new F&B executive to oversee and guide both operational department heads

3.            Remove the existing incumbent and promote existing F&B heads of departments

4.            Remove the department heads and resource at higher levels (for example a commercial manager)

5.            Urge the secretary / owner to be more proactive and available in providing advice and / or support to existing department heads.

In each and every case my individual recommendations are based upon both interviews and observations. My role has been to (a) assess current performance (using actual data and evidence) and (b) to make an assessment (using 35 years worth of experience but again testing people’s knowledge levels) of their future potential and capability.

Well here are my findings:

1.            I have found that many department heads of bars and catering are brilliant practitioners on day to day operations. Those same people are less effective at understanding the need for commercial imperatives or how to apply them to the business. The good new is that not only can they be trained but many of them want to be trained

2.            A number of mid-level managers (for example those that oversee department heads) are not making a measurable and positive contribution to their club’s F&B operation! Indeed the cost of employing these individuals can be a massive drain on the F&B service

3.            Again a number of secretaries / owners, once they have appointed the various people to their positions, tend to take a step back and leave them to manage their own destiny. Fine if they are competent but disappointingly there is little evidence of any continuous appraisal system in operation.

If you have addressed any or all of the above then you are to be applauded.

The word all is key here as I refer back to my previous comment stating that I often encounter great pint pullers, cellar technicians, cooks and function caterers but seldom do I find that person who can additionally calculate a wage percentage, cost a food dish out to give a required gross margin, calculate a gross profit, a gross margin or a yield, or who understands fully a stock result sheet!

I believe that your club deserves someone with that level of knowledge. I know you  deserve that level of support as you have many aspects of the club’s business to control in addition to the F&B.

So how do you resolve the issue? In essence you must go back to basics. If you have a concern then answer these questions:

1.            Is our current structure appropriate for our business?

2.            Do we have the right resources and level of resources in place? (Round pegs in round holes and in sufficient numbers)

3.            Is our current level of net profit showing a minus mainly because of either a) our inability to generate sufficient profitable turnover or b) an inability to manage our turnover into investable profit due to over staffing and inefficiency by those responsible?

Let me return to the start of my article and try to deal with the first list of concerns:

1.            Are we over staffed?

Throughout the year I have encountered the following overall wage percentages in F&B outlets: They range from 28 per cent (excellent) to 114 per cent (unbelievable!) We must understand that these percentages are merely a benchmark and that even a 70 per cent wage percentage can be justified. For example, to quote one club secretary recently: “At our club we fully understand that our wage percentage is grossly in excess of the norm, but as a club we like to provide our members with a fast, individual and very attentive level of service.” I have no quarrel with that, if that is the way you set your stall out from day one. I do have a problem with it if you discover this at the end of the year and are subsequently using this as an excuse for performing at or below break even because of it!

So how can a restructuring of the management system help to reduce that concern? Here are some suggestions: a) remove the middle tier of management saving anywhere from £25k to £46k (both observed by me in 2008) in wages! The proviso has to be that the heads of department are either now, or have the potential to become, fully competent in assuring both the joint and individual responsibility for the profitability of the F&B function; b) demand  profit generating initiatives from your middle manager that will drive income up whilst, through efficient and ergonomic practices, maintain your staffing expenditure at a level that means you are not being ‘busy fools’. (For example, successfully generating turnover but increasing staff spend so as to make the increased activity futile – remember turnover is vanity, profit is sanity – in a true business that’s all that matters – the bottom line is king, not the top.

2.            How do we measure the F&B manager’s contribution?

Simply by agreeing and setting viable written targets which can be assessed on a monthly basis.

You might measure the following: a) wage percentage (say to 28 to 35 per cent) but understand the level set must bear a direct relationship to the level of service required; b) gross profit (a pounds’ figure); c) gross margin (a percentage figure say 50 to 55 per cent for a non proprietary club bar and 65 to 75 per cent for a proprietary club). For food say, 60 per cent (minimum) for non-proprietary and up to 75 per cent for proprietary.

This is not to say that the non-proprietary clubs should not aspire to higher margins! Of course they should, but I am only to aware of members’ reluctance to embrace any retail price increases in the search for increased profitability! (The margin quoted for the bars does not account for any members’ discount. This, when applied, could reduce these targets by as much as 10 to 15 per cent); d) yield – a measure of your club’s ability to purchase a product and turn it into a profitable sale (for example not to waste it, (inefficient) or lose it, (stolen or given away)). Having accounted for the members’ discount you should be aiming for at least a 99 per cent yield! Every one of the 8,000-managed house pubs in the UK is required to achieve a yield of between 101 and 104 per cent! They achieve it and they get no allowances for pipe cleaning! Golf clubs do get that allowance but I regularly see gross yields ranging from 85 to a splendid 99 per cent (encountered from one golf club at a seminar day recently). These are the key indicators that the manager can affect thus making a specific and measurable difference to the outlet’s profitability.

3.            Knowledge levels!

I have to say that I have concerns in this area. Whilst some of the clients I dealt with appointed some excellent people to post, I found that many are falling woefully short of the required standard.

I think part of the problem is in constructing the job description. We at INN-FORMATION have compiled a very comprehensive job description to cover the role identifying the key tasks, competencies and responsibility of this job. The people with the knowledge do exist but they come at a price. We have recruited these people in the past, mainly from a hotel management background, at a salary in the region of £35k to £45k. This may sound like a lot but these people bring with them the knowledge, answers and remedies needed to control an F&B operation. They know the shortcuts, business tools and tactics available and earn their money in the long run.

The alternative is of course to develop your existing incumbent in the skills needed. (You might speak to Gill Bridle at the GCMA or search our website for the training programmes we provide at www.inn-formation.co.uk).

4.            Profit generation or waste reduction

Typical examples of both would be a) the promotion of external events where prices can be ‘massaged’ to cover additional staffing costs on both bar and catering (that is weddings, conferencing, training courses and wedding anniversaries and so on); and b) to undertake reduction of any of the following: product waste (reasons previously listed), inefficient staff productivity (idle hands or, say, chefs peeling potatoes) and paying too much for products (negotiate better deals, sale or return or no price increases for (say) two years).

5.            The operation’s manual

This simply records the minute details of how the F&B operation will be run and can therefore be measured for its effectiveness.

Every F&B outlet should have a current operation’s manual. (The subject matter of this was covered by me in an earlier issue but if you require further details then do contact me).

6.            Taking full responsibility – business planning

I fully appreciate that the framework or financial constraints that the manager is required to operate in may mean that he or she is not allowed to make major commercial decisions affecting the business on their own.

What your club should have an expectation of, however, is that for each new initiative the manager puts forward it is accompanied by a document clearly outlining the following:

a)            Objective and task(s)

b)            The benefits

c)            The associated costs

d)            Those involved in completing the task

e)            Timescales

f)            Recommendations to achieve the task

g)            Measurements for the project

h)            A review process.

Remember that every club is vastly different in its ethos and culture.

There is not a ‘one size fits all’ solution to management structures in golf clubs.

Finance must come into this. If your outlet generates (say) a combined income for your F&B of £100k or less, the F&B middle management position doesn’t stack up unless you have major plans for extending your service and in that case it may in the future.

Here is the bottom line. If you are in control at your club then take no further action other than maintaining that control. If, having answered the questions below, you still have a concern then action is needed.

1.            Is your F&B losing money or not breaking even?

2.            Is that due to a lack of direction, bad management or no leadership?

3.            Do you want to turn that around?

4.            What investment is the club prepared to make?

5.            Does anyone within the club, or the F&B operation, have the necessary skills to turn things around?

6.            Do you know what your options are and what they will cost in the short term?

7.            If you already recognise that there is course for concern how long will the club wait before taking remedial action?

Tania Longmire
By Tania Longmire November 2, 2011 17:09
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