The financial landscape is changing for hospitality venues with several factors starting to affect profitability.
Should you increase your menu prices to counteract this?
The reality is that those factors are not about to be reversed, as has happened in the past, with a seasonal upswing then a recovery and reduction resulting in a balanced price average for goods.
The biggest influence at present is the diminishing ability to attract and retain good staff.
A recent story relayed to me was that a large venue was unable to attract a good Sous Chef to support the Head Chef at the current salary on offer. They increased the salary to attract a suitable chef. Great result – a qualified Sous Chef was recruited. Everything seemed fine until the Head Chef found out about the salary offered.
The new recruit was getting paid nearly the same as the long-term Head Chef so the Head Chef asked to have his salary reviewed to balance the differential. The venue refused, citing the fact that there simply was not enough left in the budget to increase his salary.
The Head Chef resigned!
The venue then had to recruit a suitable Head Chef for 25 per cent more than what they paid the old Head Chef, along with the challenges of bedding in a new chef.
This is not an uncommon story being played out across many venues at the moment, and it’s not restricted to chefs. Managers, supervisors, waitstaff and baristas are all demanding higher salaries.
Staff are accepting jobs and not showing up to start as they have received a higher offer from another employer. Others are only staying for a few weeks after being poached by another employer.
This will only get worse!
If this were the only challenge, that would be enough, but wait, there’s more.
Supply chain issues are growing from long delays for major equipment, ‘out of stocks’ on daily consumables due to overseas production retractions, logistics delays with a dwindling number of drivers; these are just a few.
Add to that the fact that the weather in both Australia and overseas has reduced production of many crops and products. Failed wheat crops overseas have put price pressure on local produce, with a flow on to all baked goods.
Beef prices are continuing to rise with strong export demand, along with oil and other commodities.
All of this is having a detrimental effect on food costs, resulting in ever shrinking margins for profitability. Add in wage costs and the bottom line for hospitality has never looked so thin.
So, what is the answer?
Will customers accept menu price increases along with all the COVID check-in challenges and inconveniences being experienced at present?
Competition is hard enough without widening the gap with your competitors.
The reality is you will have no choice very soon. That is, if you want to stay profitable.
What’s more important is how you go about doing just that.
chefpaulrifkin consulting / Club Mentoring and Fine Tuning Specialist