Comment: What should culinary businesses to in a tough environment?
What should culinary businesses to in a tough environment?
The Middle East restaurant business is experiencing a shrink in margins. What is the remedy? It is a dilemma that although our market counts among some of the fastest growing in the world, falling margins is still a frustration.
When working despite a tough business environment, companies sometimes look for easy and often unsustainable ways to cut costs. Instead of compromising on quality or short-changing on ingredients, I would strongly recommend that they explore ways to increase revenue and enhance work efficiency to bring sustainable and better return of investment — rather than slashing budgets. In fact, astute business people will know that a 2% increase in sales is equivalent to a 10% reduction in food costs. And therein lies the solution and where the focus should be.
The imminent challenges as a result of declining oil prices, as well as uncertainties rising from the regional political equation is a significant deterrent to the business environment — and the culinary industry is no exception.
Let us explore some of the remedial measures could help us save the day.
Just as local ingredients is a wonderful proven method to ensure freshness, sustainability and reduced prices, hiring local talent in the culinary industry is a way to share the rich heritage and diverse culture of the region into the business.
Ample care must be taken that hiring the local national talent should not be for the sake of it — that is, just to attain the quota percentage. Attitude and aptitude training must be part of ongoing training, so that they become part of the mainstream workforce and are not left behind and lacking skills.
Management by Objectives
The success rate of every business is directly proportional to the motivation levels of its employees. Happiness is a prime focus — and it is truly remarkable that on February 10, 2016, UAE Vice President and Prime Minister, and Ruler of Dubai His Highness Sheikh Mohammed bin Rashid Al Maktoum announced, through his Twitter account, the appointment of Her Excellency Ohood bint Khalifa Al Roumi as the country’s first Minister of State for Happiness. Such is the commitment of the visionary leader of this country towards the resident population, which has a major portion as expats.
It would be ideal to have a management-by-objectives system, which links incentive benefits to quantifiable individual, team, and company goals, highlights the intrinsic nature of the restaurant business, and rewards the team at all levels for their hard work and commitment.
You can manage well only what you can properly measure. This ensures the success of your efforts. Especially in large-sized organisations, these systems of accurate measures are very essential. Such performance tracking systems ensure that the management team has a pretty clear, real-time bird’s eye view of the business, but also gives the opportunity for critical analysis of any lapse or loopholes in the operational structure. This information is very vital in the context of declining margins, as it catches any inadequacies and allows the top management to streamline operations with reduced lead times.
The mobile smartphone usage in the GCC is ranked amongst the top in the global charts. It is estimated that 76% of the resident population is digitally connected, and are ardent users of this vibrant hand-held technology.
Smartphones not only provide innovative ways of networking with clients via social media platforms and customer loyalty programmes — but innovators in the culinary field have demonstrated what a significant effect branded applications can have on a brand’s performance in the market, and sometimes is what ensures the competitive edge of one over the other.
Divest and Acquire
Having a trim portfolio is not just about attaining a magic figure. The management team should make acquisitions and divestments not only based on overall brand performance but also based on parameters that will shape the culinary landscape in the future: right from consumer behaviour patterns and market innovations to forecasting commodity prices and regulatory requirements.
With margins taking a hit, the easiest way out would be to reduce expenses. However this could result in compromising on quality; such measures are self-defeating and would only end up in getting a bad reputation.
Such focused efforts can result in strategies proven to push revenues and streamline the operations, both of which ensure long-term and sustainable growth, regardless of the prevailing market conditions at any given point of time.
About the Author: With more than 28 years of hospitality experience globally, Naim Maadad is the founding CEO of Gates Hospitality, which owns and operates hospitality concepts including Ultra Brasserie, The Black Lion Public House & Dining, Bistro des Arts, Reform Social & Grill, Publique, and Folly by Nick & Scott. It also has ownership of Six Senses Zighy Bay. Email: Naim@gateshospitality.com