We know that the year ahead is set to be another testing one for hospitality. The now-familiar challenges of fluctuating ingredient prices, staff shortages and cost of living crisis may feel a little less pressing than at the beginning of 2023, but they are still with us and we continue to feel their impact.

2024 comes with fresh pressures as we anticipate the combination of minimum wage increase and the new tronc regulations putting additional strain on business finances and so, to survive and then to thrive, it is vital to equip ourselves with the tools and knowledge to approach it with informed positivity. It was with this in mind that we held a panel discussion at The Hoxton Shoreditch last month, gathering industry leaders from a range of companies, roles and perspectives to share their thoughts and strategies for facing the current challenges ahead and come out stronger.

A fascinating discussion focused on understanding and capitalising on customer psychology, progressive menu engineering, new ways of thinking about rotas, streamlining costs and more, giving the attendees brilliant insight into ways of thinking and working which they could apply to their own businesses. We are delighted to share a synopsis of the discussion below.

With huge thanks to our participants:
Chantelle Nicholson – Chef & Owner, Apricity
Jay Patel – Co-Founder & Owner, Legare
Gordon Ker – Founder & Owner, Blacklock
Wayne Brown – VP F&B Development, Ennismore

STAFF RECRUITMENT AND RETENTION

Our panellists agreed that the staffing exodus has somewhat settled down, giving way to new concerns. The increased wage burden has had the biggest impact on bottom line over the previous year, more so even than ingredient price volatility, and this trend is likely to increase. This means that staff retention becomes more crucial than ever – the focus shifts from recruiting any staff, to recruiting the right staff – those who are really invested in the business and the culture – and then keeping them. The time taken to get it right can mean short term pain, but in the long term will make a huge difference to experience and culture.

There can be a significant difference between the experiences of single-site operators and larger organisations, which can benefit from a lot more flexibility and resources in terms of development offers and salary. Jay explained that, without being able to draw from multiple sites to fill vacancies, it can take two months or more to fill a position. This has forced them to hire a younger and less experienced team, which in turn encourages a smarter approach to training and ways of working. An emphasis on staff development doesn’t just benefit individual businesses and people, but it serves the whole industry: as Rav eloquently put it, staff should be trained to a level that, when they’re ready to move on, they’re “leaving good for the industry, not leaving the industry for good”.

Although Chantelle is unusual in benefitting from a large number of applications and speculative work enquiries, many of these are also from less experienced candidates. She notes that her focus on sustainability is a great draw for recruitment, adding weight to the belief that staff now are swayed by far more than just the highest pay check. She also points out that, coming from a corporate law background, the hospitality industry can get a lot smarter about ways to incentivise teams through benefits and training. Taken as a whole these points can give great hope to smaller businesses who, if they get their values and their culture right, can be equally – if not more – attractive to staff.

LEAN IN TO GROWTH

Whilst Chantelle explained that being a smaller business means that she is freed up to make decisions from a moral rather than financial standpoint, this is not always the case as economies of scale for larger businesses mean that precious resources can be invested in focusing on people and values in the longer term, rather than just the bare necessities of the day-to-day. Gordon proved that scale doesn’t have to mean ethical compromise, with the decision to certify Blacklock as a B Corp driven by the understanding that people want to work somewhere with purpose. An emphasis on people underpins the growth of the business, as scale allows for more people in their teams, which in turn allows more time and resources to deliver customer experience and staff training, which creates better reputation and – more growth.

Growth is often seen as a dirty word in the hospitality industry, not only because of the perceived ethical compromise but also because of a potential downwards culture spiral. Wayne noted the value of structuring larger organisations to create ‘micro cultures’, allowing people to feel truly invested and valued within their corner of the business. Gordon points out that profit, purpose and people need to go hand in hand every step of the way.

GETTING SMART ABOUT CUSTOMER BEHAVIOUR

The consensus is that, as customer behaviour has become harder and harder to predict, businesses need to focus on influencing as opposed to predicting – ie concentrating on the behaviours that they are directly able to control. Menu engineering must play a huge part in driving profit, particularly in smaller businesses where the margin for error and ability to recoup losses is so much slimmer. Jay emphasised that, in a small business where every cover must be maximised at every moment, value perception plays a crucial role. Restaurateurs must understand where and why customers spend their money. He gives the example of a charcuterie plate vs. a sandwich – whereas each may contain the same amount of meat, the plate can be charged at £18, a price at which the customer would baulk for a sandwich.

In terms of perception and spend, participants noted that alcohol can be priced quite aggressively, with a balance struck between wine lists engineered to encourage spend further down the list, and careful balance further up the list with price increases which encourage higher spend but do not discourage purchase of a second bottle. Staff should be trained too, to encourage “mini engineering” – even just an extra dessert, side or cocktail for each table, which can make a significant difference when applied over the course of a night, or a week.

‘BILL SHOCK’

‘Bill shock’ is the idea that you are charging slightly below what a customer would expect to pay based on the experience they have received, which means they are really pleasantly surprised when they receive the bill. That surprise means they are more likely to spread the word amongst all their friends – the best and most valued publicity there is – and more likely to return. The benefits are exponential. The ability to do this might rely on increased volume, streamlining service to speed up table turns, but it does not have to mean driving down prices; instead it could centre more around things that meaningfully elevate experience – service, atmosphere and care – and therefore alter perception. For Blacklock, which is focused on reducing spend per head for 2024, it is both perception AND volume, another example of their ability to focus on the longer term.

REDUCING COSTS

The current climate necessitates an ‘every little helps’ attitude, with much discussion about the pros and cons of weekly closures, balancing out potentially lost revenue with the wage and energy costs involved in remaining open but quiet. Chantelle noted an additional benefit to closure, tying in to her sustainability concerns, explaining that she turns off all appliances – including service fridges – moving everything to the main fridge, which is the only item which remains on. This constitutes a significant saving.

Whereas reducing quality can undermine ‘bill shock’ and therefore create a downward spiral of reputation and profit, constantly reviewing supplier pricing is one of the most crucial ways to keep on top of outgoings. Larger companies will more obviously have the buying power and resources to dedicate to negotiations, but smaller companies should also put time aside – even low-single-figure percentages can accumulate hugely over the course of the year, and amply pay for the negotiation time.