What am I getting myself into?

What degree of skill is necessary to run a good hospitality business? It’s an interesting question. To resolve it, you should stand back and have a good look at what the industry is all about. Many prospective entrants take a naive, simplistic view (‘mum can cook, we’ll start a restaurant’), and plunge in, often risking all that they have saved.

To focus your thoughts, let me tell you what I tell the people who come to our training workshops:

The true nature of the hospitality industry

Are you making an emotional or a logical, intelligent, informed decision?

Are you making an emotional or a logical, intelligent, informed decision?

You are in the entertainment industry, and simultaneously, you are selling food and beverage products that are judged emotionally by the public. Your business is governed by the whims of fashion. It is open long hours and you are working when the rest of the world are enjoying recreation.

Your staff are a volatile mixture of artistic and logical people, with varying working hours and degrees of commitment to what they are doing. Most of your daily trade is unpredictable and done in two short bursts where the pressure on everyone is unrelenting and intense.

You carry anything up to two and a half thousand different items in stock. They all have to be stored at critical temperatures, used in strict rotation, are all decomposing at different rates, and have to be sold before they end up in the waste bin.

Your customers come and go when they feel like it — with no consistency or predictability, and are unlikely to tell you the truth when they leave. Their perceptions of reality and their emotions are twisted by alcohol. Your staff are on drugs and are sleeping with each other.

You are running a bizarre custom manufacturing facility with a sales office attached and your customers use your product in your presence.’

Now, what skills do you need to prosper? A list as long as your arm, I’d suggest. Over the years I’ve been a management consultant I’ve been asked to work in many different industries outside hospitality, including retail, manufacturing, transport and finance. I found them all easier to manage than hospitality. One of the main reasons I love this industry so much is that it’s such a challenge.

Are you running away from something (your current job),

or toward something?

The irony is — it looks so easy from the outside. I talk to people at parties and social functions and they treat you as if you’re in some sort of unskilled occupation (‘Why don’t you get a real job?’). There are those who tell you they are going to buy or start a restaurant when they retire; something to ease the boredom and occupy their leisure time. Worse, there are those who regularly spend a whole day preparing a dinner party for six and think that cooking for two hundred a day is a piece of cake — it’s just a matter of buying bigger saucepans.

Dad can cook and mum runs great dinner parties. We should start a restaurant

Dad can cook and mum runs great dinner parties. We should start a restaurant

It’d be funny if there wasn’t so much at stake. Some of these people will follow thousands before them and indulge their dreams by putting their homes and savings on the line. A very small percentage will be successful (less than five percent), the rest will fade away quietly. It’d be different if there was as much publicity when a restaurant went broke as when it opened. The perception of the public would be balanced. All they see is the glory—the pain is hidden by circumstance.

Small is not good

I’m particularly concerned about this problem at the moment, because new entrants are flooding into the industry at an alarming rate. Most of them are going into smaller premises at a time when a disproportionate number of smaller operators are struggling. They seem to have everything against them — the economy, the Government and fashion trends.

The GFC caused many operators to pull back their prices and we’ve never recovered. It’s been great for the customers, but all it’s managed to do for the majority of operators is wipe out their already meagre margins. In the meantime the prices of raw materials, support services and labour have been climbing steadily, while food prices have not risen to match. The net result is to increase the number of restaurant seats necessary for a viable business from about sixty five up to one hundred; thus leaving a large number of operators out in the cold with marginal businesses.

There is no economy of scale in a small hospitality business. You’re buying yourself a poorly paid jobBe careful

There is no economy of scale in a small hospitality business. You’re buying yourself a poorly paid job

And the fickle hand of fashion—what’s it doing? It’s favouring the larger, modern, somewhat austere ‘places to be seen’. Smaller, more intimate restaurants are having to fight desperately for their trade — at a time when, like the corner milk bar, the local butcher, the neighborhood garage and the small grocery store, smaller hospitality businesses are being overtaken by larger, more efficient operators who can make money out of volume trade.

So the naive, under capitalised new entrant doesn’t stand much of a chance. They’re inadvertently trying to run one of the hardest businesses

during one of the most difficult times — and statistics indicate that they will invariably fail. I think the industry associations and representative groups should highlight the problem and do their best to steer the unprepared away from inevitable disaster. It’s not a problem that can be cured by regulation — it needs education and publicity.