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October 26, 2023

The New Hospo Hustle

Tips on running a profitable restaurant in tough times.

Words: Dani Valent
Animations: Greta Larkins

Household budgets are squeezed. Food costs keep increasing. Wages are up – and that means workers’ compensation, insurance and superannuation spike too. Power prices are spiralling. And let’s not even talk about interest rates.

Whichever way you look at it, it’s ever more challenging to run a hospitality operation, or any small enterprise. Xero reported recently that 34% of small business owners aren’t paying themselves because of cashflow challenges.

We talked to four experienced operators who are working the angles, wrestling the balance sheet and finding a way through.

Damian Brabender is a chef, restaurateur and consultant. He owns OTIS Dining Hall in Canberra.

Lie Lie Tjoa is a restaurateur with 20 years experience running her own Indonesian restaurant. She’s now an integral part of her son Dion Sanusi’s restaurants YOI and Kata Kita in Melbourne.

Sean Flanagan is the owner of Wildgrain Mornington, an hour from Melbourne.

Chef Shannon Kellam owns Montrachet, a French restaurant in Brisbane, as well as an event business, cooking school and bakery.

There’s no quick fix or magic bullet: running a successful food business is hard and demands constant attention and adjustment. But here are five strategies (and dozens of tips) to track towards success.

There’s no quick fix or magic bullet: running a successful food business is hard and demands constant attention and adjustment.

Build and maintain authentic connections with community

“Everyone will say they’re a community business,” says Brabender. “But what are they really doing to create connections with guests and brand alliances with neighbours?” He encourages restaurateurs to have a meal at the place around the corner, buy a sandwich across the road, have a haircut down the street. “If you want people to say good things about you, then say good things about them to the local hairdresser,” he says. Social media is a simple, time-efficient way to get started. “You might think of the restaurant next door as competition, but I celebrate them, mention them in my posts – it’s all part of creating a strong local network,” he says.

Regulars are lifeblood. “Cafes will have 75% regulars, destination dining will have 10% but for most restaurants, 25% is what you want to be hitting,” says Brabender. “Regulars help with cost control because you have a customer base that is so consistent and so real, they become part of the furniture.” Regulars might not be the highest spending customers, but they’re invested in a way that other customers are not.

Some businesses are in a constant conversation with their community, explaining their offering and building understanding. A large part of the Kata Kita project is to elevate ideas of Indonesian cuisine. “Indonesian food is not highly regarded,” says Tjoa. “Customers don’t regard it as highly as Japanese or Thai or even Malaysian or Indian. That’s a challenge for us.” The team invests in community by building understanding, and building understanding in turn builds customer excitement and loyalty.

“We are marketing Indonesian cuisine as well as our restaurant,” says Tjoa. “We have a picture menu in the restaurant. We train the front of house team to explain the care that goes into our dishes. We spend on the interior to create an attractive environment, so people feel comfortable to invite their friends and spend time in the restaurant. We want everyone to be able to regard Indonesian food more highly.”

Have a meal at the place around the corner, buy a sandwich across the road, have a haircut down the street.

Damian Brabender

Structure your menu with care

“It’s crucial to have a menu that balances the cost of produce,” says Kellam. “At Montrachet, we pride ourselves on our ingredients, and some of them are expensive. But if foie gras is $240 a kilo, we balance it out with beef cheeks and coq au vin that uses chicken legs, dishes that sit at 14 or 15% food cost.” Kellam also emphasises second sales from one product. “If you have an expensive line-caught coral trout, you make sure you have a fish broth that helps make it back.”

The menu must speak to what the restaurant is about. “What is our product? Who are the clientele we want to attract?” says Kellam. “Owners need to make sure chefs are working towards the same thing,” he says, emphasising that chefs and owners need to have similar visions and goals for the restaurant.

More ingredients and processes mean higher costs. “Produce is so expensive now for anything that’s a decent standard,” says Kellam. “Long-winded menus mean you’re holding lots of stock. It’s better to have a shorter menu and to rotate plates so it’s interesting for people to come back. At the same time, identify meals that are unique to you, have your classics, know what they are by getting on the floor and talking to people. You might end up rotating 50–60% of the menu every three or four weeks.” 

Structured menus have become more popular post-Covid. Brabender moved from a la carte to a three-course minimum for $95 across a small menu. The benefits have been many and varied. “You can choose four or five entrees, mains and desserts which massively decreases the likelihood of preparing dead stock, wasting dead stock and paying wages to prepare dead stock,” he says. “It means we can put more focus on each dish and make five cracking good dishes.” The dishes are pared back too, with one protein and sauce on a plate and shared sides for the table. “You can make the side dishes phenomenal,” he says. 

Brabender also suggests you look at systemic changes rather than opportunistic savings. Getting $100 off a beef shipment is nothing compared to taking 1% off total food costs ongoing. 

Part of knowing your clientele is understanding how much they’ll spend. Rather than trying to increase spend per head, Kellam suggests working back from average spend to design dishes that work. “Put boundaries around costs,” he says. “The old model of 30% wages, 30% food, 30% costs and 10% profit is long gone. When profit is 2% there is no room for error. Don’t be afraid to change things around to bring running costs lower.”

Being nimble is essential. “Don’t write a menu to last three or four months,” says Flanagan. “If an ingredient coming out of season doubles in price, you have to react.” That might mean negotiating with a different supplier or changing the dish. “It’s more work for head chefs who are already time poor, but it’s a necessity,” says Flanagan. “You can’t just wear it.”

Knowledge is power

Restaurants are ferociously hands-on businesses and all our experts stress the importance of rigorous oversight. “Always keep checking on the price of what you buy,” says Tjoa. “Choose reliable suppliers but always keep looking.”

“You can’t be on autopilot,” says Flanagan. “You need to check every single bill on a weekly or monthly basis. Insurance went up 20% last year. Why? Ask the question. Can we do better on linen? We check and compare electricity and gas every month. The difference in the rates is astronomical.”

Don’t be afraid to call a meeting with your landlord. “You might have set your rent in place years ago,” says Kellam. “The world’s changed. Is your landlord happy to see you go broke? Have the conversation but have your facts and figures in front of you. Show them. Reset the bar. If they say bugger off, at least you know.”

Every spend is up for assessment. “We reduced our general waste by 50% by composting and taking our own cardboard to the tip,” says Flanagan. “We started printing menus in-house rather than going to Officeworks: it’s 10% of the cost and we can change the menu and the prices every day.”

It’s hard to raise coffee prices, but how about reducing the cost of production? “We took out our three-group coffee machine and put in a two-group machine,” says Flanagan. “The difference in our electricity bill was hundreds of dollars across a month.”

Behavioural changes make a huge difference. “If you have a dishy who continually has a tap running, stop that,” Flanagan says. “We are charged for every litre of water.” Does every part of a restaurant need to be opened, heated and cleaned? “Unless we can seat an area one and a half times in a service, we don’t use it.” Kitchen practice can be rethought too. “Do we really need to have a stock reduced for 12 hours? That’s a serious cost to that dish. Could it be a salsa instead of a sauce? Or can we have one base sauce to trick up for different dishes?” That’s where skills and creativity come in. “You need a really good chef to be able to make something magic.”

It’s better to have a shorter menu and to rotate plates so it’s interesting for people to come back.

Shannon Kellam

Train, retrain and retain

Kellam has 130 staff across his group, including 25 apprentices. “You need a really good training structure,” he says. “There are no real training wages anymore, so you have to be sharp and efficient with your training for juniors: if they can’t bring much to the table for the business, they add a fair whack to your wage cost.” But, he adds, training needs to be continuous. “It’s also about training people to be qualified so they stay interested. No one teaches highly skilled people to be a good trainer: you need to invest and spend time with your qualified people so they can train others.”

Kellam is a big believer in cross-training, too. “Move people around,” he says. “Teach someone in the kitchen how to greet someone, serve someone. There’s no use having a chef that isn’t comfortable talking to a customer.” He believes that all staff should understand every part of the business. “If everyone can help with everything, it’s much easier, and the more you teach them, the more they feel they have a career.”

Retaining staff avoids costs associated with rehiring and retraining. It should also lead to a better customer experience. “We try to be a workplace that is a really good place to be, where people feel valued, not just a number,” says Flanagan. Hiring well in the first place is a huge factor. “We are very selective from a personality point of view, whether it’s washing dishes or a section waiter,” he says. “Like-minded people work better together, people not on the same page create havoc. It’s worth paying a bit more to have the right people.”

Good service and good food and consistency are going to win every time.

Shannon Kellam

Keep fit-out costs under control

Keep it simple. It’s not necessary to spend big on a fit-out. “People invest millions of dollars into fitting out restaurants and the value crashes as soon as you open the doors,” says Kellam. “You are never going to get that money back.” He suggests finding something pre-existing and giving it a spruce. “Freshen it up, but you don’t need to pay a fortune for people to come. Good service and good food and consistency are going to win every time.”

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