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Industry InsightsIndustry Trends

What’s Cooking In The Restaurant Sector?

By April 4, 2016 No Comments
What’s Cooking In The Restaurant Sector?

There is something timeless about sharing food with friends and family. But while the restaurant industry may have its old-fashioned qualities, it’s still influenced by changing public tastes. The big food fads are set to be South American flavours, worldwide takes on the all-day breakfast, and greater prevalence of ‘secret’ or off-menu dishes. Away from the trends on the plate, there are several administrative issues on the horizon, as well as shifts in customer behaviour, that should give restaurateurs a lot of food for thought in the coming months.

Keep The Change

Last year, a number of the restaurant chains, including Pizza Express, Strada, and Prezzo, were exposed as levying charges of up to ten per cent on any service charge paid by card. In essence, this means staff receive less than customers intended, while employers benefit. The ensuing uproar caused Sajid Javid, the Business Secretary, to launch an investigation into tipping practices, which has yet to deliver its findings. However, it holds the possibility of more regulation for business owners to ensure workers are fairly paid.

At Boost Capital, we already help large numbers of hospitality firms, with cashflow and staff costs being common reasons restaurant bosses borrow. Different establishments take varying approaches to tipping, with some giving everything to waiters, while others ask front-of-house staff to make a small contribution to chefs, sous chefs, and pot washers. Another choice is to pool tips for even distribution between those waiting and behind the scene through a tronc system. But less scrupulous operators have pocketed funds themselves, or even used tips to top-up pay in line with the minimum wage. Make no mistake – this latter practice is illegal since 2009, even if the distribution of tips remains the choice of the business owner.

In the US, famous chef Danny Meyer banned tipping in his New York restaurants, instead raising prices and employee wages, and others have followed suit. It’s yet to be seen if this strategy works, though some customers seem attracted by the no-tip-fair-pay policy. An independent could take a similar approach, or advertise the fact it pays all tips to staff, making either a selling point. Fundamentally, treating workers well should mean less staff churn, better service, and greater productivity, which has to be good for business. However you address tipping, be above board and fair to employees regardless of the law. If nothing else, consider the reputational damage of being exposed as a skinflint employer.

Living Wage Changes

Still on the topic of fair treatment of employees, April sees the introduction of the new National Living Wage, increasing the minimum rate over-25s can be paid to £7.20 an hour, rising to £9 an hour by 2020. Hospitality firms have high staff costs, and are expected to be the worst hit industry, the Resolution Foundation calculates. Hotels and restaurants could see their wage bill grow by 3.4 per cent over the next four years, the biggest rise for any field. The reality is company coffers could look less healthy while businesses adapt. Restaurant owners may consider borrowing from funders with experience of helping SMEs with cashflow, such as Boost Capital, to see their enterprises through this transition.

Bosses are threatening an increase in prices, freezing hiring, and scaling back rewards for existing employees to manage the greater wage bill, according to the Confederation of British Industry. But there could be some positive effects, too. Staff retention is expected to improve, a boon in an industry with a transient workforce. Experts also predict better-paid workers will be more productive, offering improved service to customers.

Whatever the practical outcome, sensible restaurateurs will have calculated their current staffing costs, and run the numbers to see the difference the April rules will make. Once you know any shortfall, it’s possible to plan, whether for bridging finance, cutting running costs, or drumming up money from personal savings or elsewhere. Just don’t put your head in the sand.

A Growing Digital Diet

One sight that’s ever more familiar in cafes, restaurants, and gastropubs across the UK is the use of technology in the workplace. Waiters employing handheld devices to take orders, communicate with the kitchen, and process payments is becoming commonplace, and increasingly digitally smart customers seem to love it. Some restaurants, such as Imano in central London, are even using touchscreen menus embedded in the table top to entertain visitors, and speed up service.

Boost Capital’s own study into attitudes towards technology in the restaurant industry shows diners expect eateries to have up-to-date websites and preferably a social media presence as a bare minimum. People still care most about tasty food, good choice, cost, and customer service, but speed and convenience are also important, things technology can facilitate.

Then, there’s the boom of app-based restaurant delivery services, such as JustEat and Deliveroo, a reflection of tech-savvy consumers’ growing desire to have fine dining in the comfort of their own home – all with a few taps on their smartphone. Independent restaurants looking to increase sales would do well to research this possible avenue for business growth, even if it means further investment in technological infrastructure or increasing the capacity of your kitchen. Where the big chains and high-end restaurants are leading, smaller restaurants must follow, and they could be ahead of the pack if they get their offering, marketing, and use of technology right.

The fundamental recipe for restaurant success may not change – good food served by friendly staff in attractive surroundings. But there are many factors influencing how you achieve that magic combination, so keep abreast of the law, best practice, and customer demand to ensure you have all the business ingredients for a bountiful year ahead.

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