Increase F&B Sales by casey goh

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Increase F&B Sales A

Secrets to Boost Profits

(Targeted at F&B Operators and Managers)

Eric Alagan Micro Mouse Business Series LCA Consultants Pte Ltd Singapore

Copyright LCA Books First Published April 2011 Published by: LCA Consultants Pte Ltd (Company Registration No. 201008768Z) No1, Jalan Ulu Sembawang The Sensoria, # 05-11 Singapore 758930 WWW.LCABOOKS.COM

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Copyright @ 2011 by Eric Alagan Cover artwork @ 2011 by Eric Alagan Typeset and Cover design by : Rank Books Printed in Singapore

ISBN 978-981-08-7714-9

This book is an original work by the author. All Rights Reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior written permission of the copyright owner.

Condition of Sale This book is sold subject to the condition that it shall not, by way of trade or otherwise, be lent, resold, hired out or otherwise circulated without the copyright holder’s prior consent in any form of binding or cover other than that in which it is published and without a similar condition including this condition being imposed on the subsequent purchaser.

Disclaimer The author and publisher disclaim all liability and responsibility for loss caused to any person and/or organisation by any act or omission to act directly or indirectly as a result of material contained in this book. A CIP catalogue record for this book is available from the National Library Board of Singapore National Library Board, Singapore Cataloguing-in-Publication Data Alagan, Eric,1955 Increase F&B sales :secrets to boost profits / by Eric Alagan. – Singapore : LCA Consultants, 2011. p. cm. – (Micro mouse business series) ISBN : 978-981-08-7714-9 (pbk.) 1. Food service management. 2. Cafeterias – Management. 3. Restaurant management. 4. Small business – Management. I. Title. II. Series: Micro mouse business series. TX911.3.M27 647.95068 -- dc22

OCN702567438

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To My Children

Dedication

Alicia Adamson Amelia

iii

About the author

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ERIC ALAGAN has more than 35 years of international business experience in the areas of aerospace MRO, security consultancy and services, trading and logistics and supply chain. He has held several progressive positions in multinational corporations and last held the position of managing director, Asia Pacific for a European aerospace company. He has been involved in several green field start-ups, mergers and acquisitions.

Eric has managed companies in Singapore and Australia with extensive experience in ASEAN, the Indian sub-continent and the Pacific islands.

He holds several engineering qualifications, a business degree from Royal Melbourne Institute of Technology and a master’s degree in logistics and supply chain from University South Australia.

He currently undertakes business consultancy work, writes novels and self-help books for entrepreneurs under the Micro Mouse Business Series.

The first two titles released in 2011 are:

1. Staff Selection – Secrets to Employ the Best People This book targets micro businesses, entrepreneurs and those interested in Human Resource. 2. Increase F&B Sales – Secrets to Boost Profits This book targets existing cafes, restaurants and F&B start-ups. Eric has also written a novel, COFFEE SHOP, A Business Thriller Set in Singapore. Weaved into the plot is a business plan based on detailed research that Eric undertook. Coffee Shop is available in all major bookstores in Singapore. Eric is married to Lisa Chew and they have three adult children pursuing business and medicine.

preface Increase F&B Sales targets cafes, restaurants and other micro enterprises in the Food and Beverage (F&B) sector.

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There are various definitions for micro enterprises but the commonly accepted is any business that has 2 to 9 people with a turnover of under $2 million.

Hence, many of the ideas and concepts are also applicable to food courts, coffee shops and even hawker stalls.

Micro Mouse Business Series â&#x20AC;&#x201C; a play of words based on the famous Mighty Mouse, an animation superhero created by Terrytoons for 20th Century Fox. In that cartoon a mouse beats all the big boys, normally portrayed as cats. Therefore, this series of self-help management books hopes micro enterprises can hold their own against the fat cats of industry.

The Series draws on the experiences and observations of the author and presents suggestions on increasing sales in F&B outlets without raising prices, reducing portions or lowering quality. This book provides a series of simple steps to achieve measureable targets.

However, you should always rely on your own independent professional advice, judgment and preferences. No warranties, assurances, guarantees or representations about the accuracy, reliability, timeliness or otherwise of the information contained in this book can be given or to be construed. To the full extent permitted by law, LCA Consultants Pte Ltd and/or the author shall not be liable (including liability for any form of negligence, errors or omissions) for any loss or damage arising out of your use of this book. You must always consider the appropriateness of the information in this book (as expressed explicitly or implicitly) to your relevant circumstances. By buying this book, you have agreed to the above terms.

A PHOTO FINISH WIN

I once played a video clip of a closely run 100 meters dash to a group of executives and asked if they could identify the winner. They could not, so I replayed that video and this time some of them made a few guesses but there was no consensus about who actually nosed the tape first. I replayed it but this time took it frame-by-frame and everyone saw the winner.

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Competing in the business world is like that. You do not have to win by a mile. Put another way, you do not need a 100 great ideas – because most of that 100 had already been thought of, practiced by your competitors. You too probably know most of them.

What you need is one or two ideas no one else had thought of or exploited.

I hope and wish you could find one or two such ideas from the dozens contained in this book.

All you need is a fraction of a second – that nose length – to win.

Eric Alagan

For the sake of expedience, throughout the book, the author uses male/female genders interchangeably and where he mentions a male, it refers to a female and vice versa.

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DEBUT SELF HELP BOOK — BY ERIC ALAGAN

Employee Capability Factor – Do you know what that means?

How do you identify an employee’s Capability Factor, How do you determine your team’s Capability Factor, How do you maintain or better still improve your team’s Capability Factor.

These are some of the questions that Staff Selection addresses.

The book assumes no prior knowledge or training in Human Resource and takes you by the hand to develop your very own Human Resource Manual in the process of Staff Recruitment, Selection, Interview Techniques and Probation.

The book is filled with dozens of worked examples, samples forms and letters that – all you have to do is to simply insert your company letterhead and use. There are models and tables that help to identify and evaluate not only the Hard Skills, but the elusive Soft Skills. What’s more, the models allow you to incorporate your opinions, values and views about what’s important to you – the employer. Get the best people – but what do you mean by best? How do you decide between loyalty and diligence, between punctuality and product knowledge, between a person who has great customer relations but makes many mistakes? The book allows you to compare durians with rambutans – your definition of best.

vii

Copyright LCA Books Consistency – how do you ensure that a person employed today is good as or better than someone you employed 6 months ago? The book shows you how – using simple, numeric models. Return on Investment and Cash Flow Budgets. How do you determine the ROI when employing additional head count? Staff Selections contains simple models to develop Cash Flow Budgets and Return on Investment. For those HR people and entrepreneurs who do not have a financial background.

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These are some of the hard, hands on and practical questions that befuddle some of us. These are exactly the type of questions Staff Selection addresses. How much do you need to invest in this book? – Much less than employing a Consultant – much less than engaging an Employment Agency, even much less than a dinner.

I guarantee that you’ll not regret it. You see, I’ll be releasing up to 12 business books over the next few years. If I disappoint with this first book – who’ll buy my subsequent 11?

Why waste money creating opportunities – seize opportunities when they appear – Sun Tze, Chapter 4,

Retail Price $49.50

Buy Direct from Publisher – LCA Consultants Pte Ltd Call: 9786 1964, 6365 1464

SMS: Staff Selection <Name> space <Email> 9786 1964 Email: SALES@LCABOOKS.COM

Price $29.50 Includes Free Delivery Within Singapore C.O.D No GST (Price subject to change w/o notice) viii

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(pen name Daniel Ellsworth)

This business thriller set in Singapore provides insights of the Asian corporate world behind the squeaky-clean image of Singapore.

Roy, scion of a well-connected family, rapes and kills Edwin’s teenage sweetheart. Edwin, son of a domestic help, hides his pain, grows up and starts anew with Lucy. Roy stalks, engineers Edwin’s dismissal. At age fifty-four, Edwin, now unemployable in a country that worships youth, establishes a coffee shop chain. Roy engineers a hostile takeover of the chain. Read how Edwin prevails. At another level, the novel alludes to how suspected Thaksin money flows into Singapore and is subsequently ‘cleaned’ when a large investor steps in. The author draws on his international business experiences and portrays the business practices, cultural norms and negotiating styles of Thai, ix

Copyright LCA Books Indian and Singaporean business people. He captures the casual vibrancy of the Indian businessmen that belies their sharp business acumen. In contrast, the Thais are formal and courteous but no less ruthless. It also highlights how local family owned businesses subordinate optimal decisions in deference to family interests.

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Whether you are a casual reader, a romantic, an experienced professional, a seasoned entrepreneur or a politician accustomed to deals and double crosses, Coffee Shop will not disappoint you.

COFFEE SHOP - A Business Thriller set in Singapore Paperback, 429 pages, LCA Books Call: 9786 1964, 6365 1464 SMS: Coffee Shop <Name> space <Email> 9786 1964 Email: SALES@LCABOOKS.COM

Price $25.00 C.O.D No GST Includes Free Delivery Within Singapore

contents 1 2 3 5 5 6 7 8

Chapter 2 – Evaluate Current Situation 2.1 Quality of Location 2.2 Rental Cost 2.3 Profit & Loss Statement

11 11 14 16

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Chapter 1 – Introduction 1.1 F&B Manual 1.2 Life Cycle of Business 1.3 Anecdotal Overview 1.4 Start with Basics not End with Basics 1.5 Time Required to Recover Your Current Situation 1.6 The Givens 1.7 The Key, Mother’s Cooking

21 21 23

Chapter 4 – Factors that Limit Sales/Profit Growth 4.1 Limiting Factors – Overview 4.2 Limiting Factor – Operating Times 4.3 Limiting Factor – Meal Times & Table Sales 4.4 Limiting Factor – Dining Area & Furniture 4.5 Limiting Factor – Kitchen Area

29 30 31 35 36 42

Chapter 3 – Determine Which Item Generates the Most Profit 3.1 Unit Cost and Profit 3.2 Cost of Labour and Leasehold

Chapter 6 – Kitchen Loading & Waiting Time 6.1 Shortest Waiting Time & First-Come-First 6.2 On-the-Spot Promotions 6.3 First Start First 6.4 Longest Start First 6.5 First Start First vs. Longest Start First Methods 6.6 Why Meals Have To Arrive Together

53 54 59 64 64 67 71

Chapter 7 – Communication 7.1 STAFF SELECTION by Eric Alagan 7.2 Verbal & Non-Verbal Communication

75 75 76

Chapter 5 – Determine Current Sales vs. Potential Sales

Chapter 8 – Mistakes & Accidents Recovery 8.1 The Key 8.2 Possible Recovery Actions 8.3 Determine Root Cause 8.4 Scenario Chart

87 88 88 89 98

Chapter 9 – Staffing 9.1 Part Timers 9.2 Financial Benefits of Employing Part-Timers 9.3 Other Benefits of Employing Part-Timers 9.4 Multi-Tasking 9.5 Staff Retention and Sales 9.6 Pairing Waitstaff and Customers 9.7 Determine Potential Number of Regular Customers

101 101 103 105 107 108 111 114

Chapter 10 – Sales Strategy 10.1 Sun Tze’s Strategy 10.2 Review of Preparations to Date 10.3 Overview of Method 10.4 Preliminary Budget for 6-Week Period 10.5 Sales Target 10.6 Target Market

119 119 121 122 122 124 126

Chapter 11 – Action Plan 11.1 The Ten– Action Plan 11.2 Controls on the Ten-Action Plan 11.3 Walk-In Customers

129 129 138 138

Chapter 12 – Budget and Controls 12.1 Recover the Promotion Cost 12.2 Recover Advertisement Cost and Calculate BEP 12.3 Scenario with 1-for-4 Promotion 12.4 Tweaking Advertisement Cost 12.5 Growing the Business 12.6 Monitor and Control

143 143 145 148 151 153 154

Chapter 13 – Conclusion & Review

157

List of Examples

160

List Tables

161

Abbreviations

162

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7.3 Presentation – Dressing & Mannerism

xii

Chapter

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Introduction

One report says that more than 90% of all businesses in Singapore are one-man-operations (OMO) and/or micro enterprises (defined as one with 2 to 9 people with a turnover of less than $2 million per annum).

Many micro businesses are in the food and beverage (F&B) industry, though the nature of the F&B operations makes it unlikely to be an OMO.

This book targets the retail level of the F&B industry, encompassing small cafes, coffee shops and even restaurants. Much of the information will also be useful for hawker stalls. Therefore, the term F&B used in this book refers primarily to cafes, coffee shops and boutique restaurants. Nevertheless, larger organizations and even restaurant chains might find some of the snippets useful. This book addresses the all-consuming issue â&#x20AC;&#x201C; How to increase sales?

Increase F&B Sales

The market is flooded with thick academic books expounding theories behind marketing and sales. These books have their uses, but quite useless for the humble operator of a coffee shop or even a boutique restaurant.

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There are also many self-help books but these usually skew towards small and medium enterprises (SME) â&#x20AC;&#x201C; businesses with fixed assets not exceeding $15 million, a workforce of less than 200 people and a turnover of $2 million and more. Moreover many of the books available in the local bookstores are foreign publications and of limited value to the local entrepreneur operating in Singaporeâ&#x20AC;&#x2122;s unique environment, opportunities and challenges.

This book hopes to fill that void. It presents an easy to read format with a systematic process that points you towards increasing sales. It also allows leeway to accommodate your personal preferences and situation.

1.1 F&B Manual

This book will help you to develop a comprehensive manual tailored for your particular operation. Henceforth, we shall refer to it as F&B Manual in bold. This F&B Manual will contain all the financial computations, tables, forms and samples you would ordinarily require for your business. This F&B Manual would be flexible enough for you to modify and expand as your business grows. This will also help in the training and orientation of your employees. It would form a solid foundation to build up your procedures and policies.

Copyright LCA Chapter Books1: Introduction This book will take you through the steps to develop your very own F&B Manual. Please pay attention whenever F&B . It means you need to add you come across the icon Manual another piece of the jig saw to completing your very own inhouse F&B manual.

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1.2 Life Cycle of Business

But there is one major challenge for you. It calls for a radical change in your mind-set. For one very simple reason: How do you stand out if you insist on following the herd?

The above is a typical life cycle graph â&#x20AC;&#x201C; used to chart sales and product life cycles. It is my believe that all businesses, products, sales and even the performance of staff can be shadowed by the life cycle graph. Briefly, product or business life cycles go through four phases: 1. Introduction â&#x20AC;&#x201C; business start-up (sorting out problems, create market awareness)

Increase F&B Sales

2. Growth – phenomenal growth in sales (Phase 2 above) 3. Maturity – sales flattens out (doing more of the same) and competition bites in 4. Decline – unless new products/services introduced and business re-invented You know best, which phase your business is in. As noted above, if you are in the Growth Phase, you probably do not need this book.

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It is impossible to replicate a specific situation that fits any one operation, unless of course we study/evaluate that particular F&B operation. Therefore, throughout this book, I shall use basic examples and draw fictitious scenarios. The purpose is to provide you with ideas and models you can adapt to your particular situation.

For example, I had used a seating capacity of ten tables (as in table & chairs) as a guide but your establishment might accommodate twenty; four chefs but you might have two chefs, ten operating hours versus your twelve hours and so forth.

In Chapter 12, Budgets & Control, the examples show a break-even-point (BEP) of five weeks but your situation might throw up longer or shorter BEP. In the tables and examples provided, simply plug in your numbers. One final word – though this book points out a systematic method for generating sales, no book can guarantee success. Success, as you know, depends on many ingredients – the method contain herein provides one condiment.

Copyright LCA Chapter Books1: Introduction 1.3 Anecdotal Overview I recently enjoyed my best Christmas lunch ever in a 5-star hotel restaurant. The food and presentation was excellent, the ambiance enchanting and the waitstaff attentive. Even the crockery and cutlery were exquisite. To top it all off, the price was extremely reasonable – with a bottle of Champagne, the 5-course lunch for two was about $230.00.

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But even with a full time marketing department, the 150seater restaurant had only seven diners!

So, for those of you F&B operators lamenting the empty seats in your outlets – take heart as even the professionals get it wrong!

1.4 Start with Basics not End with Basics

Many people plunge into the F&B industry with scarcely any thought about marketing and sales. They think

(i) They (or their partners) are good cooks as all their friends and relatives have commented favourably; (ii) The location is great because they know or a friend in marketing has told them that location is the key; (iii) The rent seems reasonable; and (iv) The list goes on. So when people (even executives) lose their jobs; do not want to work for others; do not want to drive taxis or find other alternative employment – they think hawking or food stalls is a convenient fall back option. They are convinced they can do better than the hawkers and café operators. Occasionally the media reports that professionals, managers, executives

Increase F&B Sales

and technicians (PMET) who had taken the plunge and seem to be doing very well. It is a cinch! On the other hand, is it? More than 80% of new businesses collapse within 5 years. I believe more than 80% of new F&B businesses fold up within 2 years if not sooner.

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There may be another group of F&B people: those already doing well and seeking tips to improve; those simply carrying on the family F&B business and want to do better; and yet others (the cleverer or more cautious ones) who are toying with the idea of taking the plunge but want to learn as much as possible upfront.

1.5 Time Required to Recover Your Current Situation

Whichever category you fall under, there is time to address the situation.

Obviously, the more time and staying power you have the better your chances. Each businesspersonâ&#x20AC;&#x2122;s situation varies and this book will help you to determine the time. For a given situation, it could be anything up to 3 months to realize the ideas contained in this book, provided you start now. In the fictitious F&B outlet we use in all the examples in this book, it takes 10 weeks. How long it actually takes depends on several criteria:

Copyright LCA Chapter Books1: Introduction 1. How good your record keeping is – this is key. 2. How motivated and hardworking the owners/operators of the target F&B are. 3. What the current situation is in the target F&B.

5 6 7

9 10

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Step One: Simple Gantt Chart to Plan Target Dates

Step 1 to build F&B Manual – Generate a simple F&B Manual Gantt Chart (Target Week 1)

Step 1 - Generate a simple Gantt Chart Step 2 -

Step 3 -

The top row gives the weeks – 1, 2, 3 and so forth. The cross in week 1 indicates you should carry out Step 1 in week one.

1.6 The Givens

First, let us catch the real reason most F&B outlets fail.

Contrary to what your friends and relatives said about your excellent cooking and what your marketing friend said about location – mind you they are all right – it is about not only the food, location or even affordability of the rental expenses. These are all givens. What do I mean by givens? To put it simply, if you are racing in F1 it is a given that you have a fast car, a technical team and lots of money; if you are operating a taxi it is a given you have a vocational (taxi) license and so forth.

Increase F&B Sales

Having all the givens such as good food, excellent service, convenient location and etcetera does not guarantee success.

1.7 The Key – Mother’s Cooking It has everything to do with your customer – and more accurately the customers’ needs, wants, habits and comfort zones.

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Nice words but what does all this mean and more importantly what is the relationship and relevance to your business?

That is a good question. Perhaps we can approach it another way.

Do you like your mother’s cooking?

Chances are most people will say yes. Do you realize almost everyone’s mother cooks the best food?

I have visited friends, relatives and frankly, some of their mother’s cooking sucks but their families swear by it. So what do you do? You compliment your friend or relatives’ mother/wife on her cooking. The myth propagates perhaps. But the husband and children are not simply being nice to their wife/mother. They are sincere with their compliments. Why is this? Because the style of cooking you adore is an acquired taste. Taste is habit forming and it creates needs, wants and most importantly evokes comfort zones.

Copyright LCA Chapter Books1: Introduction To increase your sales you need to create these emotions (needs, wants, habits and comfort zones) within your customers so they keep coming back and more importantly bring their friends along, widening your net. Repeat visits help build habits and comfort zones – makes your food taste like mother’s cooking. How do you accomplish this?

Well that is what this book shall attempt to address.

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Step 2 to build F&B Manual – Grade the Givens F&B Manual (Target Week 1)

Date: Excellent V Good Good Fair

Graded by:

Determine the current situation of the Givens – this is highly subjective and a start point for you. Place this table in a folder – your F&B Manual.

Quality of Food Quality of Beverages Presentation of Meals Service Quality Covenience of Location

Poor

Increase F&B Sales

Summary Quality food and service, good location and affordable costs are givens and do not by themselves provide any unique competitive advantage.

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The key is to help the customer acquire a taste for your offerings and build habits and comfort zones. You do this by enticing repeat visits â&#x20AC;&#x201C; until the customers love your food as much as their mothersâ&#x20AC;&#x2122; cooking.

This sounds simple and the rest of the book takes you step-by-step on how to attain this, thus generating higher sales.