How to minimise the financial impact of COVID-19 on your F&B business

Cost of goods sold

A word of caution when it comes to this section: any operator can reduce costs here – opting for inferior ingredients, making portions smaller, watering down beverages. These are all ‘blunt instruments’ that are likely to damage your brand and/or your reputation. Use those tactics at your peril.

Re-use: Long before millennials decided to drive the #uglyfood movement, chefs all over the globe were sensibly using ‘leftovers’. Instead of throwing out slightly stale bread, turn it into croutons or breadcrumbs; use over-ripe fruits to make jams; use good, but perhaps unpresentable green veggies to produce a pesto dip.

Localise: In my previous article, I heralded the movement towards localisation, catering to the growing wishes and desires of international travellers. Now I am talking about buying from local suppliers. While most chefs prefer the highest quality ingredients regardless of source, if you look hard enough and are prepared to work with suppliers, in many instances you will find very good locally-sourced quality alternatives for a large percentage of your ingredients list.

Don’t be afraid to challenge franchisors/licensors. If the local product is of the same quality, there is no reason why you shouldn’t be able to use it.

Menu rationalisation: More often than not, the 80/20 rule applies. That doesn’t mean deleting half the items from your menu, but rather looking at the worst performers. Remove items on the menu that are not making money (and I mean cash margin, not sales) and/or find new limited-time offers to replace them.

Don't forget sales

While the natural reaction in times of hardship is to attack costs (as they are more controllable), don’t forget the top-line. Capture rates for any F&B outlet are typically low. Even in ‘captive markets’ (like airports) the total number of people eating or drinking is around 50%. There is always an opportunity to drive patronage and footfall to your outlet.

Value offers: Bundle items to increase basket size. Yes, you will have a lower GP, but 75% of 50 is a lot worse than 60% of 100. I think this old-fashioned mindset of ‘you have to achieve a GP%’ is slowly leaving the F&B scene, but I still see some operators heavily focused on percentages, versus cash.

Ask your suppliers to provide discounted bespoke items for these bundle deals – for example a complimentary donut with coffee. Suppliers will be hurting too, so appeal to them, especially as their marginal costs are smaller than yours.

‘Signatures’: Don’t underestimate the power of a signature dish or a signature cocktail. Customers appreciate simplicity. Make the signature offer attractive enough so they feel they are getting something unique. Allow them to customise elements of it to really make them feel special.

Upselling: If you’ve trained your staff well, or you have a product offer that is customisable, this is your simplest way to increase sales and profit. I’m still always amazed that when I go to Starbucks (which is rare, I must admit) I find myself leaving with something that I didn’t anticipate buying when I went in. 95% of the time, that is because that one person behind the POS has been successful in piquing my interest into trying something different or new (reward staff for doing that).

A final thought

Successful F&B is all about memorable experiences. Eating and drinking is sensory. Ultimately, guests return to restaurants, bars or coffee shops because the product, environment or service met or exceeded their expectations. Virus or no virus, this does not change. What are you waiting for? Remember, those who act early, win.