The price might not be right

As a food and beverage consultant to the golfing industry, I have never been as busy in the last 10 years as I currently am! So what is causing the interest from my clients? Without doubt it’s the combined factors of the rising cost of utilities, the staffing crisis and the spiralling wholesale cost of food and beverage prices, with each of these issues eating into the sometimes slender profits of the clubs in question, or worse still, making the need for clubs to subsidise their units to an even greater degree, turning once profitable outlets into a drain on the clubs resources.

In all honesty, and in over 20 years of visiting clubs to advise them on issues such as franchising out or taking food and beverage operations back in-house, I have never seen such extreme levels of unprecedented pressure on clubs’ food and beverage units.

So we know the cause of the problem, the question is, what are clubs meant to do to combat these issues? One thing is abundantly clear, which is that all of the above mentioned concerns will ultimately have implications to clubs regarding their financial standing.

The bottom line is this – do clubs simply ‘absorb’ the increases and continue to lose money, or do they address the decline, and if so, then how?

What options are available to your club?

To absorb the rising costs because the club is ‘cash rich’ and can afford to do so? If that is true of your situation, then you are in a very fortuitous position, but how long will your reserves last for before the rising costs either exhaust your reserves or they start to take money away from other areas at the club that urgently require investment?

Some clients are reporting to me that rising utility costs alone have more than trebled and even quadrupled in the last 12 months. That’s a hefty load to carry, and, of course, the food and beverage operation, even if franchised, will be a major contributor to that increased cost.

If you have any part of a franchised or out-sourced food and beverage operation, have you approached the franchisee with a view to increasing their contribution to the club to help cover the rising costs? (That is of course if you receive a contribution in the first place!)

If the club operates these services internally, I have no doubt that you will have expended a great deal of time and energy in trying to obtain a better deal from all of the energy suppliers available, but what are bar managers, and particularly chefs and cooks, doing to reduce the use of energy – are they still turning on every electrical unit in the kitchen upon entering at 7a.m. when service doesn’t start until 11.00am?

The staffing crisis (not an over exaggeration by the way) is causing major problems for virtually every hospitality outlet in the UK, not only in the resourcing of ‘competent hands’, but in dealing with the extraordinary hikes we are experiencing in the cost of retaining existing staff.

I am constantly regaled by stories of wage increases at clubs ranging from a minimum of 10 to an incredible 50 percent or more and even of loyalty payments exceeding £1,000.

Little option is given for the club other than to try and keep pace with market forces here in an attempt to retain ‘worthy’ staff and, whilst I for one would acknowledge that the hospitality industry has, for decades, undervalued and indeed underpaid many of its junior staff, we need to address the issue of what can we do to reduce the impact of these costs which, in many cases were not budgeted for, or certainly not budgeted sufficiently for.

Be prepared for this level of attrition where this issue is concerned, for at least the next two years, if not more.

What impact will it have on your business? Will your members be prepared for a reduced level of service? Will your existing staff be prepared for higher stress levels and ever-increasing demands on their time when you are unable to recruit more staff? How many more people will we lose to Asda or Aldi who are offering shelf stackers career opportunities that pay better? Will you try to recover the increased wage cost and, if so, from where?

As if all that wasn’t bad enough, what on earth is happening to the rising costs of wet and dry goods? A chef told me recently that they were paying 62p for an egg! So do you take eggs off the menu or go with powdered eggs?

Rising wholesale food and beverage costs are a major problem for all clubs, and one that affects every single one of you to a greater or lesser degree.

I have no doubt that you have attempted to arrest the rise in prices by re-negotiating better supplier deals, or even changing suppliers, but it’s tough out there for suppliers too, and price rises are inevitable – the problem is that they are becoming more regular, so have you built in a buffer into your pricing policies to counter any future increases so that you do not have to constantly keep going back and increasing your prices?

If you are not cash rich, and even if you are, your option is simply to increase the retail price to the end user, namely your members, and perhaps, if you allow them, your visitors (playing and non-playing if your licence permits that).

Good in theory and ultimately perhaps the only choice you have. However, we can all visualise the scenes of riot and carnage as your members queue at your door to register their ‘concern’ about being penalised with more price rises – again!

I have no doubt that some members will respond in this fashion. Others simply won’t notice.

Incredible as it may seem, two of my clients, who have adopted this policy of increasing prices some six months ago, report that not one member had even noticed! Lucky I guess, and the beauty of the members’ card system, but could this be true of your clientele? If so, then press ahead.

Your members have to acknowledge that the club is, whether they like it or not, subject to the same financial pressures of that of any high street business, and whilst I accept that your constitution and the trading laws of the UK may preclude you from making a ‘profit’, it does not exclude you from trying to reduce any losses either!

You surely have a duty to all of the clubs’ members to safeguard your food and beverage units by ensuring that, if possible, they make a positive contribution (or at least break even), and not to drain resources from other income streams and mainly from your annual subs.

On the topic of annual subs, and second in our list of possible remedies, will you be increasing, by more than the rate of inflation alone, the cost of your annual subs to cover all or some of the price increases you are suffering?

It’s a legitimate thought in that it spreads the increased costs across the board to all members and not just those that use the food and beverage units. Others of course may argue that, as a non-user of the food and beverage unit, that they are being penalised.

Not an easy sell with your existing members I grant you, and indeed some of the influx of new members that many clubs experienced during the pandemic may fall by the wayside due to a rise in their annual fees, but hopefully your staunch, regular members, will both understand the need for an increase and continue to support you.

These are indeed challenging times for golf clubs and in reality there is no ‘one size fits all’ solution.

Every time I visit a club to discuss these issues, together with falling margins and the age-old question of whether to franchise or not, there is a different resolution dependent upon the circumstances prevailing at the club, but in this instance highlighted in this article, there is one common thread – you cannot, cash rich or not, ignore the impact that rising prices will ultimately have upon your business.

What you need to do is to be aware of what options are available to you and of which course of action will lead to the best result for the club and its members. Doing nothing is not an option.
I have recently visited two clubs where no price increases have been imposed since 2016. They are suffering badly now as you can imagine, and all because the club feared an angry reaction from the members about paying more. Do these same members fully understand the implications of not addressing the issue of rising costs, and how long will it be before the clubs are placed in peril by their reluctance to address the problem?

Whether we like it or not, golf clubs are businesses! Now is the time, in my view, to operate them as such.

My proprietary golf club clients have, in my experience, not faltered in increasing prices when needed to ensure that the business survives.

I think we all acknowledge that some kind of action, however large or small, must be taken to ensure that your members receive the level of service that their fees demand, but financial resources are not a bottomless pit even for those cash rich clubs, and a sensible but fair approach, needs to be applied to this issue.

For my part I will be working with many more clients to assist them to make the right moves. Some will be easier than others to resolve, and naturally some won’t, but at least, whatever the outcome my personnel recommendations will be for them, at the very least, they are acknowledging that now is the time to react before it is too late.

Steven Brown FBII, tp is from food and beverage consultancy INN-FORMATION.

Contact him on 07785 276320 or 01604  843163, or email herinn@aol.com. Search Steven Brown – Inn-Formation on YouTube to watch his industry advisory videos.