Despite the accuracy of our 2018 Predictions Blog- The Perfect Storm is Here, we cannot speculate on the eccentric endeavours that Elon Musk has in mind for 2019, whether us in the UK should expect to see a second referendum, or even if we can count on having another scorching summer.
What we offer you, however, is these three things:
- A roundup of 2018- was there a perfect storm in the hospitality industry?
- Strategies for a successful 2019
- 5 Maverick questions for a stronger and more consistent business in 2019
Whether you have been following us through the year or are a newcomer to our blog or podcast, first and foremost we would like to thank you for your continued support.
Here at Hospitality Mavericks, we have had a year packed with amazing moments with our clients and partners, working with organisations in all sizes, from startups to multinational chains, providing blueprints and solutions for change — fixing today’s problems and future-proofing for tomorrow’s storms.
Was there a perfect storm?
When reflecting on the past year in our beloved industry, it is evident that blood was shed on the high street and the UK’s broader restaurant scene. Countless stories of restaurant carnage have been shared in the media and many of our podcast guests casted their unique accounts of what’s been occurring within their organisations and the broader sector.
Companies of all sizes were affected by the perfect storm and it’s fair to say that many of the difficulties did not come with a silver lining. As we look ahead into 2019, we can safely say that significant changes are going to occur in hospitality; many of which directly linked to the perfect storm’s core components.
Operators across the industry have been hit by the rising costs of staff, food and property. In our view, the biggest and most volatile factor is the rise in food costs which for some operators has impacted their kitchen with an 11% inflation. Peter Martin from CGA stated:
“The cost pressures are not going away. Prices have gone up and are staying up.”
It has always been hard for leaders to recruit and retain talent in hospitality but Brexit has made it even tougher. As a whole, the industry has become less attractive to pursue a career in and the UK’s low unemployment rate of approximately 4.1% (close to its lowest level in 50 years) signifies that there are just not enough people to fill hospitality roles.
This is particularly tough for operators as the number of hospitality vacancies continues to soar. According to Caterer, there are more than 2.35 million people working in the sector — an increase of almost half a million in five years.
This a challenge; but we also see it as a structural problem in the hospitality industry. In the UK the industry’s annual job turnover is as high as 90% or more, says Polina Montano, co-founder of Job Today- an app that links employers with potential workers. The hospitality industry is largely staffed by low-paid, low skilled young people who work unsociable hours for low pay. But the lack of employee retention also reflects hospitality businesses’ inability to engage and retain their people.
Economic uncertainty and growth challenges
The UK’s accommodation and food service sector reached a record-breaking annual turnover of £102bn in 2018, breaking the £100bn mark for the first time whilst representing a 4% year-on-year growth.
Economic uncertainty is here however and has impacted sales for operators, most of who are experiencing stagnating or declining custom. Whilst the industry revenues look promising as a whole, it does not change the fact that there is an oversupply of restaurants in a time where Britons are eating out less. Competition is growing fierce between operators and the general public are spoilt for choice.
Technology is shaping our society, changing the ways we work, and is the driving force behind the change across industries.
In hospitality, specifically restaurants, technology provides new opportunities for how we reach, serve and learn about our customers. Technology can do the heavy lifting for managers and employees and therefore contribute towards more productive, operationally efficient hospitality businesses — but this is too often where restaurants’ relationship with technology ends.
In particular, the hospitality sector was renowned for its sluggishness in adopting technologies that improve internal productivity and the employee experience. 2018 did show a turning point, however, whereby tools such as Trail, Ziik and Quinix have been more commonly integrated into hospitality businesses; helping operators save time and money through the automation of repeatable tasks and improving communication.
Whilst the functionalities of restaurant tech differ, we are seeing many with time-saving benefits; freeing up time for management so they can be out in the frontline creating better employee and customer experiences. Something that both by Joe Cripps from Trail and Soeren Iversen from Ziik discussed on our podcast last year.
The impact on established brands
Throughout 2018 the storm forced a number of established brands to either significantly restructure their business or throw the towel in the ring. Unfortunately, we do not foresee these operators as the only big casualties.
But who’s to blame… The perfect storm? The increasingly competitive market? The operators perhaps? As Mark McCulloch, CEO of the London-based marketing agency We Are Spectacular voiced on our podcast:
“Maybe some chains have no right to have 80 units.”
During the last 5–7 years there has been a significant over-expansion occurring in our industry; often driven by hungry investors looking for a quick return on their investment. Sometimes failing to understand that some concepts are not designed for rapid expansion.
Too often operators look to ‘roll out’ their concept, struggling to see the sense in taking a deliberately slow route to expansion. In the words of Sticks ’n’ Sushi Andreas Karlsson:
“If your model needs adjusting before you expand internationally then you should reconsider.”
Those who think they have a scalable model should examine their successes with a fine tooth comb to find out what exactly it is that the first unit is doing right.
On a more positive note; we are in a time where there is an increasing number of high-calibre, smaller operators who are perfecting their niches whilst building meaningful relationships with the local communities.
Prime examples of these include The Grand Brighton, Moshimo, Bagelman, Yard Sale Pizza, Hi Coffee, Friska, Sticks and Sushi and many, many more. We believe that will see these type of operators in the coming years having great opportunities due to their relevance and also ability to change and adapt faster than the larger chains.
There are tough times ahead and our prediction is that more operators will fall in 2019. There is nothing to celebrate about this; it’s very sad, especially for the many people who will lose their jobs and livelihoods.
The probability of a tough 2019 for hospitality has ignited debate amongst industry leaders and experts. Here at Hospitality Mavericks, we believe that the main hindrance to industry success is the lack of profitability.
We all know that profitability trumps everything- it is the energy behind great organisations that hire great people and serve great food to their customers, as underlined by Ivan Brewer during our interview last year.
Profitability in 2017 was bad. But profitability in 2018 has been worse, with the top 100 restaurant groups reporting an 80% fall in profits since last year.
This is not unique to the UK, Australia and the US are also under similar pressures. Over the past few years, we have seen that independents and smaller chains have actually had better margins than the large chains, whilst also having more room to adapt and navigate the storm.
This poor outlook on our industry has led us to these two questions:
- Is all this telling us that we might have some deep structural problems in our industry and the way we run it?
- If yes; how do we turn this declining industry performance around?
We believe many operators would agree that they are already are very lean and efficient when it comes to operational costs. They are already operating on a knife edge when it comes making ends meet.
We have noticed that many operators start to squeeze the lemon harder and harder during tough times in hospitality. What we mean by this is that they are trying to save pennies on labour, food and other key areas of operation which actually have a massive impact on the employee and guest experience.
In the past, people within the Hospitality Mavericks team have admitted to being guilty of this themselves. But the problem is when we do this we end up taking a short-term approach to creating profitability and therefore not setting the business up for long-term success.
Cutting costs on the frontline has a number of consequences; one is the extreme pressure it puts on management and employees to work harder and faster which often makes the good people leave. Loyal customers will inevitably follow suit and the hospitality card house really starts to fall.
Basically we don’t believe that you can squeeze yourself to growth or success…
So what is the solution? In our view, we need to radically change our mindset when it comes to how we design the organisational blueprint and how we lead and manage our businesses. As Albert Einstein said:
“We cannot solve a problem using the same consciousness that created it.”
We have to go away from the industrial age paradigm, where leaders are viewing the organisation and its people as machines to only achieve profit as they have done for decades, where leaders only think about profitability, growth, efficiencies, productivity, goals and being in total control was going on.
We need to embrace the paradigm where trust, information flow and power is decentralised. Decisions are made by the front line, the people serving the customers. Redundant layers of the hierarchy should be lost.
At the end of the day, hospitality is simply about great people, giving customers great experiences and serving amazing food.
So how can hospitality leaders build such an organisation and make a profit?
This year we have worked with many operators, interviewed 17 industry mavericks on our podcast and analysed what the best have done in our industry over the past decades.
We have taken direct inspiration from great thinkers who have created outstanding works such as The Service Profit Chain, Turn The Ship Around, Change to Strange, Leaders Eat Last, Rethinking Organization, Start with Why, and Good to Great (all must-reads for any hospitality leader).
We have a depth of experience in running and managing a range of hospitality operations ourselves and have designed a roadmap, which can help you as an operator to navigate short-term storms in addition to creating long-term sustainable businesses. We call this the Maverick Path.
The roadmap basically states that strong growth and profit start at home. If you are able to create an amazing employee experience by delivering excellent leadership and ensuring that your staff are supported to do their jobs then you will achieve a strong customer experience. Logically, this translates into improved customer loyalty and fuels growth and profit.
What we are saying is that strong profitability starts at the heart of your organisations — with strong leadership and engaged employees.
So now you are properly thinking — ‘what’s new about this?’ Well, nothing, but few leaders are completely honest about whether their organisations practice these principles.
Of course, this is not just our view at Hospitality Mavericks. If you ask the senior hospitality people in the UK as well as many experts — they also know that having engaged people crucial for future success.
The extent to which hospitality leaders believe that they have employee engagement nailed in their organisation is low. And if engagement is not being achieved then it must be our responsibility as leaders to make the Industry a better place to work.
You are probably now asking yourself ‘how do we bring the Maverick Path to life in my organisation- in the real world with the daily challenges and demands of a hospitality business.’
Well It starts with a new worldview and approach to organisational design
Over the years we have built the ‘The Power of Consistency’ framework which highlights the foundational pillars that hospitality businesses should focus on in order to thrive. It may seem rudimentary at first glance, but the ways in which these pillars support one another and operate synergistically is what leads to your unique blueprint.
Why is consistency so important?
We are operating in a world of change and uncertainty. Maverick leaders have learnt that there are four areas their organisation must consistently thrive in, no matter the external conditions.
This is not to be seen as a strategy or new tactical initiative (of which must be specific to an operator’s particular situation), the “The Power of Consistency” can be applied across of a number of circumstances, in a range of contexts by a diverse range of hospitality businesses. The Power of Consistency is a framework for creating your own unique organisation; helping to turn a strategic food concept into reality.
Overall the framework tells you that Maverick leaders always focus on communicating their purpose and values and are great at bringing them to life in the organisation. They set high standards in leadership, people and operations; ensuring that the purpose and values of the business are woven into every decision and practice.
Purpose and Values
Mavericks understand that consistency starts with the organisation’s ability to live its Purpose and Values- day in, day out — which creates clarity for everyone in the organisation. Maverick businesses are built for people, by people. Purpose and principles are used to build communities where they use these to empower and inspire their staff to make decisions that lead to great results and meaningful impact. Maverick leaders understand their core job is to find a way to express the organisation’s impact on the lives of people, the community and the planet. They are constantly focusing on making their employees see and feel it — creating clarity.
Standard of Leadership
Mavericks understand that great hospitality leadership starts with their own standards and being visible and present in the whole organisation — they don’t lead from the office, but from the frontline. They spend most of their time listening to the heartbeat of the organisation (their people) to ensure that they are fully engaged.
Standard of People
They understand that a great hospitality business starts and ends with the frontline employees. They hire for attitude and values then train for skills. Their long-term aim with their people is to create leaders — not followers.
They focus on giving autonomy to the front line — this is also called self-management and is characterised by less top-down control and fewer management layers. Andrew Mosley, GM of The Grand Brighton accredited this approach to the successes of The Grand Brighton on our podcast a few months back, highlighting that empowering employees is the best way to not only boost the customer experience but also make employees feel part of the success.
Standard of Operations Systems
Mavericks understand that the design of their operational processes, including the use of technology and other support systems, is key to making their people feel confident in giving great customer experiences. A big part of this is minimising bottlenecks in the operation that do not directly add to the customer experience; enabling employees to focus on the activities that create genuine value for the customers and the community.
When these elements become stronger and interact harmoniously with one another then you have a blueprint that not only will ensure better business results but also help your organisation to grow with less friction and more certain that what you are doing is the right thing. Your organisation will be able to navigate the industry storms that will always come and go.
Mavericks don’t only achieve a profit; they create impact
Mavericks do not only create better financial results. They also want to make the world a better place.
Across the industry, more and more companies are using the profit motive to help the planet and tackle social and environmental problems. We expect this trend to become increasingly commonplace, with the hospitality and restaurant industry taking direct inspiration from other sectors.
Also, customers are becoming very aware of how they spend their food dollars — they want to support food operators who are here to offer great food and experiences, and they also want to support and love businesses that make an authentic and positive impact on their community and the wider planet.
There are already a number of operators in the industry who are having their impact on their local community and the planet.
A prime example of this is Brighton-based Moshimo, where Karl and his team have created Fish Love; a charity that is tackling the overfishing activities that continue to occur across our oceans. Moshimo is only a single restaurant operation but has already raised a great amount of awareness across the globe with the likes of Richard Branson, Judi Dench and Lenny Henry all publicly supporting the cause.
Another great example is Scottish café chain Social Bite which employs homeless people and runs a scheme to provide free food to rough sleepers. They even took their activities a step further and built a village of 11 houses in Scotland.
Be patient and play the long game
Following the Maverick path is just not a quick fix or a tick in the box exercise- you are now entering a new way of doing things. You are setting new, higher standards and performance targets — this demands patience as Michael discusses with Mark McCulloch on The Spectacular Marketing Podcast.
Becoming a Maverick means to set you out on a journey where improving the four elements of “The Power of Consistency” must become a top priority for your business. A constant focus on achieving excellence is a must. There will be times where you will question if this can work in your organisation, or you will be intrigued to jump on something new — that is where you need to say no and focus on the long game.
There’s no doubt that changing how an established organisation operates is complex. There will be many opinions on how you should do it and every company has their own unique way or claimed ‘secret sauce’ to success.
A common feature of successful hospitality businesses is a leadership team who are highly competent at creating a clear sense of purpose within the organisation that goes beyond making a profit. An ability to put people first, lead with the heart and consistently operate in accordance with a defined set of values builds trust with all stakeholders. These are the foundations of a truly remarkable organisation- one that can really have a significant impact on the lives of many.
Still strong headwind to face in 2019
To sum up and get 2019 kick-started. Our view is that one of the main reasons that our beloved industry has challenges is due to the structural problems that have been facilitated by poor leadership. Specifically, those who think their food businesses should be designed, managed and run like machines.
External pressures have forced many operators to adapt quickly but those should not perceive the perfect storm as the be all or end all to their success. We don’t see this as doomsday for the hospitality industry but as an opportunity to hack the old and dusty ways of doing things — dare to be different.
Here at Hospitality Mavericks, in 2019 we will continue to follow the trail of innovation wherever it leads us, to better understand and help and support maverick leaders and entrepreneurs to find out what makes them and their businesses tick. Yes, we know it is not easy. The reality is that there is no quick fix formula to create a sustainable, unshakable business that lives by the “Power of Consistency”.
But you can make a start in future-proofing your business today by grabbing a pen and dedicating the next 30 minutes to reflect over these maverick-inspired questions. You and your team can kickstart the journey to a stronger and more consistent business in 2019.
- If there was a newspaper headline describing your business as it enters 2019, what would it say?
- What do you want your organisation to look like in one year, three years, or five years?
- What purpose, values and beliefs defines your organisations?
- You have a clear vision in writing that has been properly communicated and shared by everyone?
- On a scale of 1 to 10 how consistent is your business when it comes to: - Purpose and Values - Leadership - People - Operations
And last, remember as Peter Drucker said;
“The only thing we know is that the future is that it will be different. Trying to predict the future is like trying to drive down a country road at night with no lights while looking out the back window. The best way to predict the future is to create it.”
Claire is an organisational development and L&D whizz who creates bespoke learning ecosystems; from strategy through to implementation — to amplify your team’s skills and energy so your people can deliver your business goals and unique customer experiences.
Oliver is a business graduate with over five years experience working for globally recognised restaurant chains. Besides when surrounded by food, Ollie is in his element when he’s rethinking operational systems with the primary focus of maximising employee and guest experiences.
Michael is a heart-centred operations pro, who believes and lives by building hospitality and restaurants businesses from the inside out. When your employees love your company, your customers will love you — brand nirvana. He helps leaders and operators to build unique blueprints and business systems that create strong employee and customer experience, which translate into improved sales, profits and positive impact.