When I learned of the closure of The Henry Austin I wondered how a venue that was so well marketed and diverse in its offerings could not be viable.
During my 29 years in hospitality there have been a few major game-changers. I was a young chef when fringe benefits tax cut a swathe through a more genteel tradition of dining. This change meant businesses axed their expense accounts, meaning restaurants could no longer count on serving those legendary all-day lunches. Survivors went on to weather the introduction of poker machines in ’97 that enabled pubs to entice patrons with subsidised food, making it tough for independent restaurants to compete on price. In 2000 we saw the introduction of GST, an extra expense that many restaurateurs chose to absorb, hoping not to alienate customers further.
So, what’s been happening since? Food delivery services such as UberEats, Deliveroo and Menulog offer customers greater choice and convenience without leaving the house. When they go out, customers are veering away from the traditional three-course dinner to a more casual style of dining, ordering small plates and sharing them. People are more spontaneous and are prepared to wait for a table as restaurants adjust to an ongoing steady flow of diners instead of staged bookings. What were once special dietary requests are now the norm, meaning we must provide a tasty, well thought-out selection of vegan, gluten-free and dairy-free choices.
Customers now look for venues that will provide a complete experience: innovative, cutting-edge design, custom-made furnishings and crockery, and attentive but casual service. This is the age of the consumer reviewer and although the repercussions from a bad day due to absenteeism or unexpected extra trade can be immediate and can feel unfair, social media is also the biggest marketing asset of our time. Managed well, it provides genuine information about our customers and how better to please them.
So how do these trends impact the cost of doing business?
Our industry body, The Restaurant and Catering Association, publishes yearly statistics and many might be surprised to learn that in 2016, the national average net profit for a cafe or restaurant was only 3.8 per cent. That’s a very thin margin, and the association’s stats also show many cafes and restaurants fail within the first two years of operation.
Why are the statistics so dire? Firstly, the industry is largely unregulated. By that I mean you don’t need any special training or experience to open a venue, cook and serve food to paying customers – something encouraged by reality television shows that in reality have far less to do with professional cookery than psychological experimentation.
The elephant in the room for many operators is the cost of compliance; these are the host of obligations and regulations that we must abide by in order to remain trading. A common misconception is that the advertised price of a dish is representative of the cost of the food on the plate. Depending on the type of venue, the real cost is more like 20-30 per cent of the charged price. This is because we need to factor in GST, labour and other operational expenses such as rent, power, maintenance on furnishings and equipment, the numerous insurances and licenses, marketing, professional cleaning and a big one, merchant fees on card purchases. When you do things properly, it’s expensive, especially if your busiest times are Sundays and public holidays.
Labour is by far the biggest cost for the restaurant industry, with wages often exceeding 35 per cent of turnover – add on 9.5 per cent for super and another minimum of two per cent worker’s insurance and you’re looking at a big chunk of money. Having been on the other side of the fence as a employee for many years, I am, of course, completely in support of this. In fact, compared to other skilled trades, professional cooks sit on the lower end of the wage spectrum.
Industry benchmarks and statistics don’t reflect this accurately because cash payments are rife, and if you’re paying staff with cash and not declaring that, then you’re off the hook for super and insurance, too. The cash industry damages compliant businesses in other ways as well by setting an artificial ceiling for menu pricing. Someone paying less for wages can afford to charge less for food because their employment responsibilities are much less.
To survive, restaurateurs must become financial analysts of sorts. I spend an afternoon every week with our head chef going through invoicing with a fine-tooth comb and conducting “yield tests”. Pricing is highly competitive and we must ensure our dishes are correctly portion-controlled to minimise wastage. We’ve developed several in-house tools to aid with ordering and wastage control so our chefs can see how their decisions impact food costs. Saving six or eight per cent each month can mean the difference between profit and loss.
When it comes to the new food delivery services, the added cost of good-quality packaging and the 30 per cent non-negotiable commission on food to our existing menus is a hard pill to swallow. Food intended for immediate service often doesn’t travel well and, understandably, a common complaint is the loss of quality to the meal.
All this talk of cost control and saving small amounts here and there paints a pretty grim picture of an industry that’s supposed to be all about hospitality.
As the loss of the wonderful Henry Austin has shown, great ideas and publicity don’t count for much if people don’t get out and appreciate good venues. For those in the industry, it’s worth remembering that the onus is on us as service providers to remain relevant and to understand what customers want.
Emily Raven is the owner of My Kingdom for a Horse, which won Best Cafe at the SA Restaurant and Catering Awards this week.