by Matt Sweetman | Aug 9, 2019 | Blogs
Why are the small companies more successful than big ones?
In the hospitality sector the progressive small companies are outperforming the large ones to a significant extent.While of course the hospitality sector is just as much about site economics as scale economics, I have long puzzled about why this is the case. As a software supplier (and a small operator of 3 sites) who therefore gets to talk to lots of operators, my thesis is as follows:
The advantages of the large operators (for which I am defining as 100+ sites) include many things such as focused marketing, category management, menu engineering, and analysis. They can also afford to deploy many systems and processes which require the scale of many sites. In addition they can often access more capital more cheaply and perhaps still also have the pick of the sites through the strength of their covenants. So, if they can design and create better businesses why are they not more successful?
The answers to this are less easy for the spreadsheet driven VC analyst to spot, and I probably need to justify them as I am sure there will be plenty who disagree!
1 – Focus. Where you have fewer sites you can give the site more attention. When I set up my own pub restaurant I was fearful of the might of M&B nearby. I still look at their pricing, but I know we can deliver a more relevant offer to the Range Rover drivers of Harrogate. I know my customers because I see them,and talk to them. We have a more conservative customer base and we design the menu for them and also to fit the gap in our local market. Another example is that we get lots of students working with us. This is great in the holidays, but a real challenge in May when everyone is doing exams. So we don’t allow team holidays in May, which is a complete departure from my training.
2 – Trust. I think one of the gentle, and hard to observe changes that occurs when you grow a business is one of trust. A small team trusts all its people to do a good job and supports them in delivering that. The management team know their strengths and weaknesses and supports them where they are poor and releases them where they are good. It is never one size fits all. A Head Office driven culture gradually develops a control culture that removes the empowerment of the teams and strips away responsibility. This is of course corrosive but is understandable where lowest common denominator procedures start to rule the roost. And of course we all know that if you treat people like children they will behave like children – or leave.
3 – Consistency. Consistency is a real brand challenge. I once went around ten restaurants supposedly all doing the same risotto dish. Over the course of my visits I encountered a multitude of ingredients and a multitude of cooking processes, all of course swearing that they had made it even better than the core brief. But how can you run a consistent brand and an inconsistent menu, let alone expect consistency from the people on the frontline, safeguarding your reputation, every shift? Great shift leadership is the solution, and it’s something that smaller operators focus on nailing. The only way seems to be to either dumb the menu down to a cook in the bag process (it’s a long time since I had risotto from a bag), or to have a collection of sites that have an individual identity, and not be phased by each chef taking a different approach. In truth this probably depends on whether you can automate the offer. MacDonald’s is very consistent, but it does give the opportunity for others to make a better burger.
My old boss and mentor, Tony Hughes, once said to me that he thought no brand should be larger than seventy sites. I didn’t understand what he meant at the time, but fifteen years on I think I do. The balance between the tensions above either require a different way of running our business, or they in effect reach an optimal level where trust at the site level is not lost, there is enough focus so that the MD know all the sites well, and a sufficient level of consistency can be achieved. I would like to think that the improvements in technology should allow this number to grow, as we can see more of what is important without being on site. It will be interesting to see if the outperformance of the SME improves or deteriorates over the coming years.
But we still can’t measure smiles, or an attentive team, or a plate of food that makes you excited. That still comes from sitting and observing. And that comes from the other secret ingredient. Passion.
by Matt Sweetman | Aug 7, 2019 | Blogs, Sales Figures
5.4% rise in food and drink sales in July 2019.
According to analysis of more than 100 restaurants, pubs, bars, hotels and cafes that use S4labour software, sales of both food and drink were up 5.4% in July 2019 compared to July 2018.
Both wet and dry led operations saw positive like for likes, but it was food focused businesses that performed particularly well. Overall, sales in dry led establishments went up by an impressive 8.3%, the largest hike in like for like sales in 2019. The bumper month was split evenly between growth in food and drink sales, up 8.2% and 8.5% respectively.
Unlike the same period the year before, the inconsistent weather may have been enough to deter many from lighting the BBQ and opting for an out of home eating experience instead.
Improved sales figures were also a feature in drink focused businesses, however the growth here was largely driven by food sales. Sales of food in wet-led pubs grew by an encouraging 5.2% compared to a modest uplift of 1.6% in drink sales. However, overall like for likes sales growth was a welcome 2.3%.
Like previous months, food sales, particularly in food focused businesses have been the stand out performers in the hospitality sector. This month was no different, however, modest gains for wet led operations is good news for the sector.
by Matt Sweetman | Jul 5, 2019 | Blogs, Sales Figures
3.3% fall in like for like hospitality sales in June 2019.
According to analysis of more than 100 organisations that use S4labour software, sales of both food and drink across the sector took a hit this June. Tough trading condition coupled with lower temperatures, higher levels of rainfall and being compared to the same trading period in 2018 where the Fifa World Cup was in full flow, has meant many operators struggled to reproduce the same performance in June 2019 as they did in June 2018.
The story in venues where drinks make up the majority of sales was an overall drop off by 4.6%, compared to June 2018.
Food led business also saw a drop in like for like sales, however the impact was less acute. Food sales remained relatively steady with only a 0.3% decline, yet drink sales fell by 3.9%.
Food sales in food focused pubs have been quite resilient this year, while drink focused operators have experienced much more fluctuation and have been more susceptible to exterior factors.
by Matt Sweetman | Jun 5, 2019 | Blogs, Sales Figures
Drink sales drive a 1% rise in sales for hospitality revenues in May 2019.
According to analysis of more than 100 organisations that use S4labour software, a spike in sales at drink focused venues drove an overall 1% rise in sales across the sector. The latest sales figures show a resilient bounce back from Aprils sales dip and encouraging results for drink focused business going forward.
The success of British football clubs in the later stages of the Champions League this year helped push an overall 2.3% rises in sales at drinks business. While food sales slipped by 1.2% in drinks venues, there was a very encouraging uplift of 3.1% in the sale of drink.
The success in drink focused businesses was at the expense of some food focused establishments where there were slightly less positive results. A boost of 0.5% in food sales was not enough to stop an overall drop off of 0.4% in sales, owing to the decline of 1.5% in drink sales. The warm weather was possibly a factor in driving some diners to light the BBQ at home rather than eating out.
by Matt Sweetman | May 2, 2019 | Blogs, Sales Figures
0.7% Fall in Sales in April Despite Good Easter Weather
According to analysis of more than 100 organisations that use S4labour software, operators had slightly weaker sales than in the same month the previous year. Whilst the first quarter of 2019 had seen resilient figures for both food and drink, A sunny Easter bank holiday wasn’t enough to out perform April last year. April 2019 sales figures could be summarised by a weakening of food sales, with some gains being made in drink sales for dry let operators.
The sales of food plateaued in both wet and dry focused business, with a slight overall drop off of 1.8% compared to like for like sales in April 2018. However, worst hit were drink focused venues where food sales declined by 5.7%. Dry let business, while sales also dipped, only saw a 0.3% decline on April last year.
Despite this, drink sales in food focused business bucked the trend with an 4.1% uplift in like for like sales. Drink sales in wet led business slipped 2.2%.
Some of this decline can be accounted for by the slightly lower temperature compared to 2018, where the UK enjoyed more sustained periods of warmer weather.
