Archive for October, 2009

Another Way to Structure Corporate F&B?

First, let’s get real about hotel F&B.

If you’ve been in hotel F&B most of your career, you may be surprised to learn that all F&B at all hotels (USA) accounts for about 4% of “food away from home”. The remaining 96% of the $400-billion+ industry, which includes restaurants, institutional feeding, caterers and kiosks, is generally profitable. Those that are not profitable go out of business. Hotel F&B is generally unprofitable unless there is a lot of banquets/catering space. And hotel restaurants are never profitable, unless they are operated by an independent operator.

Unlike freestanding restaurants, hotel restaurants that are not profitable (and this would be nearly all of them – see previous sentence), do not go out of business. Nor should they, as their purpose is to support the hotel. This isn’t wrong, and it isn’t stupid. It is, well…tradition. So we accept it. And build structure and infrastructure around it.

In the last decade or two, some hotel chains have started to lease to or partner with restaurant brands (including celebrity chef “brands”). If you’re willing to relinquish control of some of your services and maybe even a portion of your image, and especially if you can retain the most profitable end of the business, banquets/catering, this can be a rewarding strategy.

But there may be another approach. It’s a paradigm shift, really. “Spin off” your corporate F&B into a separate (wholly owned) corporation. Next, lease all of your restaurants and F&B to the new corporation. F&B employees will work for the new company, and F&B Directors (they will now be restaurant “General Managers”) will report to the new corporation. And surely you will have to “beef up” the corporate F&B infrastructure.

What a mess, huh? Hotel GM’s – or whomever is responsible for the lease – will have to negotiate services and payment for services as well as lease rates and terms. All of those free meals, discounts and other bargains passed on to sell rooms will have a real cost attached to them.

And what about F&B? Well, they’ve got to make a payroll don’t they? And pay their vendors. They may have to pay for administrative and accounting services and maintenance services, and utilities – all of which can and should be negotiated and included in the lease.

Wait a minute – this is a lot of hassle! Why bother? Well, unlike a standard lease to a third party, your company is still “in control”. And this new perspective may go a long way toward making both businesses – hotel and F&B – more profitable than ever before. Oh, and now you own a restaurant company. I wonder if that makes you part of the “remaining 96%”?

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How to Sell Less Wine

You’ve managed wine sales and service in restaurants and/or hotels for much of your career. You’ve been training servers, attending wine tastings, meeting with wine purveyors and wine makers, visiting vineyards and reading Wine Spectator for years. Decades, maybe.

And you’ve been writing, designing wine lists.  Creating lists for menus. Only now do you realize, wine list elements you’ve relied upon for years are, well, ineffective. Thanks to Sybil S. Yang and Michael Lynn, Ph.D., and The Center for Hospitality Research at Cornell University we now understand which wine list attributes correlate to increases in wine sales. In their breakthrough finding, “Wine List Characteristics Associated with Greater Wine Sales”  [Cornell Hospitality Report, Vol. 9, No. 11, July 2009], Yang & Lynn detail how they meticulously studied the wine lists and wine sales of 270 restaurants spanning several major markets.

Reading this is easily an “Everything You Know is Wrong” moment (thank you, Firesign Theatre). Here are some examples.

  • There is no correlation between wine sales and the number of wines on a wine list, in fine dining.
  • There is no correlation between greater wine sales and the presence of Champagnes or sparkling wines, dessert wines, wines by the glass, or tasting flights on the wine list
  •  One may reasonably infer from the data that casual theme restaurants benefit from a greater selection of lower priced wines, however this is not so in fine dining, where increasing the selection of lower priced wines does not result in additional sales.
  • There is evidence that a wider range of prices on a wine list (or a more narrow range), whether casual or fine dining, has no effect on sales.
  • Wine list design: only two attributes were found to correlate to higher wine sales: placing the list on the menu (instead of a separate book), and not using the dollar sign ($).
  • Fan of “progressive” categorization? Think again: “In addition (and counter to conventional wisdom), wine lists that used wine style as an organizational heading were associated with lower wine sales.” (Hedge: the authors suggest, well maybe it’s just about the type of restaurants that use this list…)
  • Do recognizable wine brands matter? Maybe. This tactic can’t hurt, the authors data shows, and “more frequent mentions of some brands were associated with greater wine sales”. You have to experiment.
  • Finally, you don’t have to offload those special selections: there is a positive correlation between sales and having a “reserve” section on the wine list.

The report can be downloaded on line – register and get it. Or send me a note, I’ll happily forward the PDF to you.

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Dessert Pricing – Sugar Shock?

Maybe you read Sugar Shock!How Sweets and Simple Carbs Can Derail Your Life– and How You Can Get Back on Track by Connie Bennett and Stephen Sinatra, published nearly three years ago?

This isn’t another health blog. I’m just trying to find an explanation for a common dessert pricing practice, and so far I have none. So, I was thinking that when chefs, managers or owners price the desserts for their menus, maybe they do so after tasting them, all of them, and they’re suffering from “sugar shock”, unable to think clearly. I’m open to other explanations.

Let me try an analogy. You walk into a busy, nice looking restaurant, you’re seated promptly and an open menu is expertly handed to you, along with a cocktail list. You notice that every wine offered by the glass, and there are several, is the same price. Hmmnnn. Then you look at the dinner menu and are surprised to discover that every appetizer is the same price. Unusual, but OK. Your biggest surprise occurs when you discover that every entrée is the same price. What’s up with that?

Is this a good idea? An amazing new strategy for…higher check? Ensuring return visits? Creating buzz (well, maybe)?

But in fact, we don’t price all of our items the same. Why not, then? The simple answer, thank you Ockham, may be that uniformity in pricing doesn’t meet the needs of the customer.

Not every customer wants the same thing. Even “like” customers may order differently depending on the occasion (celebration, expense account business meal, dinner with the family to name a few occasions). Some customers may be seeking value. Some may restrict themselves to entrees that are naturally lower in cost (e.g. vegetarians). Others may wish to order something very expensive. Or, their dining preferences lean toward high-end beef or lobster. How do restaurateurs react to this myriad of occasions, needs and preferences? Again, simplicity: a variety of offerings accompanied by a range of prices. Often, a wide range.

Or, put another way: how do I react if the Vegetarian Plate, the Chicken Entrée, the 12-ounce Filet Mignon and the Broiled Lobster Tails are all the same price? Even prix fixe menus often provide an opportunity to “trade up”.

So, let’s go back to sugar shock: why are desserts often all the same price? Which is the finest dessert? Which has the finest ingredients? Which is the best value?

This isn’t about food cost, it’s about profit. And repeat business. Why not offer a dessert so special, so remarkable that it carries a higher price? Chances are, you already do so, without charging the price the item commands. Why not offer a value item, perhaps smaller in portion than the other desserts?
You price your menu strategically, thoughtfully. Don’t stop the process before you get to the dessert menu.

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Are Your Guests Snacking While You’re Offering “Lunch” & “Dinner”?

Here’s a question for hotel F&B’s: am I offering services today that are significantly different from the standard hotel offerings on the day I was born? A restaurant with table service? Breakfast, lunch, dinner, maybe Sunday Brunch? A bar with bartender? Room service? A “gift” shop? No, these were around.

There is nothing wrong, per se, with these venerable services. And you’ve seen innovations like minibars, coffee kiosks, delis and mini-QSR’s in some hotels, especially larger hotels. But what if consumer habits have changed, and your services haven’t?

Listen up: according to a recent NPD study, as reported by Fern Glazer in Nation’s Restaurant News, the line between dayparts is beginning to blur, snack related visits now account for nearly 25% of QSR traffic, and this “discretionary meal occasion is not one operators can afford to ignore”.

Perhaps you’ll think of this as QSR data that doesn’t apply to hotel F&B, but really it’s about consumer behavior – consumers snacking when and where they can – in this case where snacking is encouraged. And by “snacks” I don’t mean peanuts or chips. In our hotel world, we know this as the growing popularity of tapas or “small plates”. And sliders. Skewers. Personal Pizza.

Listen up, Part II: this isn’t about dollar meals; in fact, in this same study “value” ranked fifth or sixth among the many reasons consumers snack.

Let’s face it – the traditional hotel restaurant approach is anti-snack. The lunch buffet is a primary anti-snacker weapon, followed closely by a menu which often promotes the same salad-entrée meals from our dinner menu, for a reduced price. Then, to reinforce the strategy, should any snackers try to get past our standard snacking barriers, we close the restaurant during prime snack time – the afternoon. At dinner, we close as early as possible, in case late-night snackers have infiltrated our guest rooms.

Does this mean that our restaurants, menus and hours of operation should become snack oriented? Not necessarily. Here are some other approaches:

  1. Your bar should be snackers central. Test this 4-pronged strategy: a) open the bar during lunch and dinner and during snacking hours (between lunch and dinner, after dinner). b) Ensure that decent snack options abound c) implement systems and procedures that make it easy for the bar team to sell food, and d) provide easy-to-spot visual cues for the customer: posters and table-top menus, for example. E-marketing if you cater to local customers.
  2. Re-evaluate your gift shop. Who runs it? Can you take it back? Consider, if its yours, or could be – what if it were an F&B  operation specializing in snacks (you can still sell gifts and other retail)?
  3. No gift shop? Test the waters with a strategically placed kiosk.
  4. Is your room service menu “snack-friendly”? Perhaps you’d rather not risk cannibalizing entrees, losing that $32 steak sale. Or maybe a prominent, dedicated “snacks” page (not buried in the “All Day Dining” section) would promote more sales? Print a new page and test it.

Don’t forget to measure any test carefully. Now, go enjoy a snack.

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