Four Easy Pivots For Struggling Hospitality Venues
Or "How I Learned to Stop Worrying and Love the Banter"
Melbourne is in a post-covid stasis, or perhaps more ominously, the eye of an incessant shitstorm, with much more pain to come.
Venues have ridden the initial terrible wave of the pandemic, some adapting and pivoting to other revenue streams and paddling frantically to stay afloat. Some ran such a fine line that the initial lockdown sent them immediately broke. Remember when Red Spice Road’s ill fated QV location closed dramatically after only one week’s lockdown? Such businesses, seemingly busy but cash poor and playing Russian Roulette with their COGs and overheads, are a lot more common than many realize. Problematic misanthrope chef icon Dave Chang said it best, talking to Fortune Magazine in 2020: “Restaurants are like banks. We just don’t hold onto the money and collect interest. We bring it in, and we immediately send it out”. This was the first wave, before JobKepper and the inherent rorts associated came to be. The great purge.
The second wave, one I feel we are now almost at the end of; the fake revival. Restaurants are back. A daring few are even opening new ones, or expanding existing groups. Consecutive years of trade have given the illusion of a return to the halcyon days before daily Dan Andrews North Face showcases, but now, just like our dearly departed Dan, this wave is starting to recede from public view, and a more insidious plague is on the horizon. While the RBA has stopped short of officially declaring a recession in Australia, ask any person who owns or operates a hospitality business; it’s here, and it’s about to get worse. Young families in the prime restaurant demographic of 25-40 are being mercilessly pelted by rate rises; they have no money to spend on extravagant dining, the rising cost of living now starting to filter down to our seemingly insatiable thirst for our daily coffee. In short, it’s a rotten time for hospitality, and there’s a lot more pain to come.
So, what can those operators bravely sailing into the storm do to mitigate some of this pain? And what would I, a multiple time casualty of the restaurant wars, know about running a successful business? Well, just because I copped a hook to the chin last time out doesn’t mean I don’t have a few title belts on the mantelpiece. Here’s a few ideas I’ve put into place and seen work over and over again, all with the important caveat that they cost as little as possible.
Cafes & Coffee Shops, or “how to sell more of what you already sell”
The simplest pivot a cafe can perform is to make more of what you already have in stock available to the public. If you have a small coffee shop, particularly one in a residential area, swapping your underbar fridge or back room storage fridge for a glass doored display fridge is the biggest no brainer move you can make. The markup on retail milk is small, but instantly, the connotation of your business changes. Literally one in three people will say something to the effect of “oh, you sell milk, that’s good to know'', almost always in the same convivial cadence. From there, add a few daily loaves of bread from your pastry supplier to display behind the counter. Now you’re basically a community larder; from there, test the waters. Add some nice prepackaged local cheeses and butter to the fridge. Maybe some vacc-packed cured meats, a few cases of eggs. These are all things easily repurposed into sandwiches if they don’t sell, with the added effect of creating a different perception for your business. Lean into the things that sell, the things that don’t easily re-purposed to avoid wastage. What’s more, this doesn’t require any additional staff to service it. You’ve added another revenue stream and expanded your venue’s public perception with no serious investment.
Pizza Shops, or “how to get more out of the space I’m already paying for”
Ah, pizza. Universally regarded as an unimpeachable food item, a marvel to be embraced and enjoyed, and a staple in any good community. However, for whatever reason, pizza rarely features at lunch time, and never for breakfast (unless messily reheated in between sips of berocca on a hungover morning). Pizza places almost exclusively trade on evenings during the week, with many takeaway-only venues never opening for lunch at all. Well, why not? After all, what is a pizza place really, if not a specialized bakery? Pizza dough, especially the quality fermented type, will rise into pillowy, ebullient orbs when baked without topping and crimping. Look no further than Totti’s iconic and impossible-not-to-order woodfired bread, arriving at the table almost spherical, the steam within lifting the bread into an irresistible, tearable, and highly profitable delight.
Well, dear pizza shop owner, you’ve got yourself a piadina, a sort of Italian pita, an absolute sensation stuffed with the fresh mozzarella, vegetables and cured meats that invariably already propagate your cool room. Bake the piadinas to order, split them, fill, and you have a sandwich spectacle that will put any toastie shop to shame. Invest a small amount in a Moccamaster, and serve hot, fresh, easy to serve filter coffee on a Saturday and Sunday morning; I promise you, the smell of woodfired egg and bacon, to be stuffed into the oven-fresh piadinas with a handful of basil and a spoonful of chili laced sugo, will get the neighbourhood talking. Par bake a stack of bases to be sold for punters to take away and finish at home. Bake off any excess dough and trim and make into simple cheese and tomato baby pizzettes, then give them to kids for free when their parents pop their heads in for a morning coffee. They’ll quickly make it a habit.
The Great Espresso Machine Fallacy, or “how to avoid $10,000 depreciating assets”
You see it everywhere you go. Every pub. Every Italian restaurant. Every cavernous bar-adjacent and soulless Southbank tourist trap. The specter of the pushy sales rep. The sad, lingering reminder of misspent capital. The Great Espresso Machine Fallacy. For some reason, every venue in Melbourne decided it needed a giant, electricity guzzling, constantly breaking down, difficult to clean, impossibly large and heavy piece of equipment that they barely use. My message is simple: to new venues, just don’t do it. You do not need a $10,000 four head espresso machine. Most times, you will barely even need a two head one. Single group head machines can be purchased cheaply from registered traders, and avoid the pitfalls of aggressive sales reps pestering you for larger than necessary minimum orders to fulfill the terms of a machine lease.
In many cases, particularly with modern and more experimental restaurant offerings, espresso isn't even a necessity. You can’t get a short mac at Attica. What you can get is a special reserve microlot single origin batch brew from Honduras, yielding much higher margins and requiring much less manpower to deliver. If you’re in the position of holding or have inherited one of these giant and largely unnecessary machines, my advice would be to sell it. Downsize, minimize the stress, and focus on your higher yielding food and beverage options. If the occasional after dinner espresso is all you’re after, and you’re not into filter, AllPress, St. Ali, Axil, Industry Beans and Padre all offer fairly exceptional capsule coffee, largely indistinguishable from real espresso to your average post-dinner coffee drinker. Plus, no requirement for plumbed in water or 3 phase electricity. Restaurant coffee doesn’t have to be Disciple Roasters-level quality, particularly when all your customer is looking for is something hot and bitter to plunge a sugar into to perk them up for the Uber ride home.
The Lost Art Of Connection, or “how to make friends and influence customer loyalty”
Imagine if you will, you live equidistant to two seemingly identical cafes. Both a similar fit out, with a similar vibe, menu, and price. At one of these venues, upon entering, you are greeted by the person behind the counter with some variation of “what do you want?”. You pay, wait for your order, announced only by the type of coffee you ordered, and leave. It’s efficient. The coffee is good, not overpriced, and arrives relatively quickly. The transaction met your minimum requirements and satisfied the majority of your expectations, and you leave.
At the other cafe, you’re acknowledged as you enter the door.
“Good morning Jay!” you hear. You look up, the siren song of validation swelling in your ears. You're greeted with eye contact and a smile. You approach the counter.
“Must be time for a strong flat white” the person says happily. Why…why yes it is. How did they know? What is this feeling? This must be how it feels to be a celebrity.
Your card hits the Square terminal. As it does, another question:
“So, what’s on for the rest of the day?” they ask. Well, funny they should ask. You’ve got a dentist appointment you’re rather dreading. You don’t mind sharing it with them though. In fact, talking to someone about it makes it all a little easier to face.
“There you go mate, enjoy your day” the person says, walking out from behind the counter and putting the strong flat white in your hand. “And don’t forget to floss!”. You both laugh, you leave. Same distance from your house, same menu, same coffee, same price.
Which cafe are you returning to? Is it really just coffee you wanted? Or was the faintest whiff of community, even acknowledgement, what you were after? Whether most people are aware of it or not, it’s a mixture of both. I have said it 1000 times, and I will say it until I expire; the simplest and most lucrative decision your business can make is to invest in and empower your staff to engage. Encourage them to show their personality, and get to know your customers. Become intimate with who your regulars are; their orders, their interests, if they live nearby, if they have kids. Give your customers, the lifeblood of your business, a reason to come to you other than the simple nourishment of carbohydrates and caffeine.
I have seen so many venues fall into the trap of the upsell. Consultants enter businesses selling a sugar hit; a manicured script for service staff to follow. A minimum number of upsells offered. Yes, selling is service, but without the lubrication of a friendly manner and an engaged connection, it can be jarring. There is no substitute for a sense of community. It cannot be built any other way. It doesn’t come from premium ingredients, exotic wine lists, or expensive Japandi minimalist fitouts. You have to roll up your sleeves, let go of the pretenses, and start making real, personal connections with your customers. The repeat trade and organic word of mouth this gains your business will far outweigh any strategically placed granola bar of scannable loyalty app.
Well, I hope you’ve enjoyed this edition. How are you, anyway? Eaten anywhere good lately? If you have any recommendations, drop them in the comments below. I’m also looking for some interesting SubStacks to follow, as I’m still getting acquainted around here. If you have any faves, particularly based in Melbourne, please share them too! I’ll be back later in the week.
These are such great reads! Really look forward to them popping up in the inbox. Forza Bureau