specia report - london business mission
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BEST PRACTICES OF THE LONDON RESTAURANT INDUSTRY
MAY 2014
A MISSION TRIP WITH THE RESTAURANT ASSOCIATION OF SINGAPORE
INTRODUCTION
LONDON
SINGAPORE
BEST PRACTICES
IMPLICATIONS ON SINGAPORE
REFLECTIONS
CONTENTS
03
04
06
09
13
14
BDO Singapore and the Restaurant Association of Singapore
(RAS) jointly conducted a business mission trip to London
to learn the best practices of its successful F&B operators.
To promote industry improvements in capability and
productivity in Singapore, the business mission trip focused
on two of the seven pillars of SPRING Singapore’s Business
Excellence framework:
• People – The way organisations can develop the full
potential of their employees at all levels, to create a
high performance organisation
• Processes – The way organisations can design and manage
their systems to create value for their customers and
to achieve organisational success and sustainability
INTRODUCTION
ROGER LOODirector, Management Consulting ServicesBDO Consultants Pte Ltd
Singapore has been ranked as one of
the major eating capitals in the Asia
Pacific region, and with good reason.
The cosmopolitan island nation
always has something to cater to its
consumers’ ever-changing demands,
from traditional hawker delights to
international fine dining.
Despite growing at a 7.8% compound annual rate over the
past five years, the Singapore F&B industry is not without its
challenges. Market forces and government policies are making
it increasingly difficult for operators to address their manpower
and property needs.
On the face of it, these challenges are not unusual for F&B
operators in any major city. Like Singapore, London’s F&B
industry is highly competitive; good staff and good retail
spaces are difficult to find and are even more difficult to keep.
Nonetheless, London’s restaurants and bars are feted the world
over. What is their secret to success?
This report will address some of these issues, looking at the
People and Process practices that have helped London’s
restaurants to flourish. We hope you will find the report
interesting and useful for your business.
03 BDO SPECIAL REPORT LONDON
The RAS London Mission trip in May
was an eye-opening experience for
all of us. The trip objectives were
to learn best practices on Processes
and People, two out of seven
pillars from SPRING Singapore’s
Business Excellence Framework.
The learning objectives appealed
to all generations of restaurateurs specialising in different
cuisines and concepts.
During the trip, we learnt best practices from well-
established food and beverage (F&B) businesses such as
Drake & Morgan, TGI Friday’s and K-10. We heard about
companies’ approach on Human Resource practices and
process management. The sharing by these companies gave
us an overview of the London F&B scene and insights on
some of the challenges faced by their operations team.
Regardless of the years of experience in the F&B industry,
food service companies should continuously learn from
best practices around the world, be exposed to new
markets, constantly seek to innovate and improve on their
operational and internal processes for their businesses to
thrive in today’s competitive market.
ANDREW TIJOEPresident,Restaurant Association of Singapore Management Committee
Executive Chairman, TungLok Restaurants (2000) Ltd
OVERVIEWOver the past two decades, the UK has transformed itself
into a gastronomic hub with a reputation rivalling those of its
continental counterparts. According to the British Hospitality
Association (BHA), hospitality is now the UK’s fourth-largest
industry. Indeed, the F&B manufacturing industry is the largest
manufacturing sector in the UK1 . With a turnover of £92 billion
and a Gross Value Added (GVA)2 of £24 billion, it accounts for
18% of the UK’s total manufacturing. Over £350 million was
invested in research and development (R&D), which generated
more than 16,000 new products in 2013. Industry productivity
has increased by 12% over the last ten years, making UK F&B
workers nearly 50% more productive than the EU average.
1 Source: Food and Drink Federation (FDF): a membership organisation that represents and advises UK food and drink manufacturers2 Gross Value Added (GVA): A measure of the value of goods and services produced in an area, industry or sector of an economy. It is calculated as the value of an output minus any intermediate consumption and is used in the estimation of the country’s Gross Domestic Product (GDP).
LONDON
Despite the 2007-2008 Global Financial Crisis and the decline of
the British high street, 25% more restaurants opened in London
in 2012 than in 2011. In London alone, there are an estimated
50,000 food businesses. Food start-up foundation Kitchenette
believes that a further five new restaurants open fortnightly in
the capital. 1.5 million people in the UK work in restaurants,
cafes and other food service businesses, with the hospitality
industry employing nearly 400,000 people in London itself.
The F&B industry’s employment growth was the highest of any
industry, creating 58,000 new jobs. Recognising the important
role it plays in the UK, the F&B industry has started a campaign
to create a further 300,000 new jobs by 2020.
TRENDSAlthough not traditionally associated with culinary excellence,
the UK F&B industry, particularly London’s restaurants and
bars, is enjoying its newfound epicurean status.
Source: ONS
BDO SPECIAL REPORT 04LONDON
Source: Annual Business Survey, 2011
Source: Zagat 2013
Value (nominal)
Value (real)
Household final consumption across restaurants, cafes etc 2007-2012
Contribution to the economy (As GVA)
Average meals eaten out per week
STATISTICS AND OBSERVATIONS
Think it is very important there will be further consolidation of brand ownership and many casualties in mid and lower tier brands
Think food brands will represent a diminishing portion of in-store sales versus private labels.
Think brands will be at the heart of the price war between retailers, putting continuing downward pressure on margins and weakening their premium in the minds of consumers.
Impact of the further brand commoditisation on the UK food and beverage industry between now and 2020
The UK economy is beginning to show signs of recovery as
consumer confidence returns to its highest levels since 2007.
The F&B industry was not as badly affected as other industries
by the recent financial crisis, with some of the UK’s larger F&B
brands experiencing growth during the downturn.
Consumers are eating out more than before, resulting in an
increase in the average spend per head.In fact, consumers
continued to eat out during the recession, with Londoners
eating out an average of 2.2 times a week.
Nevertheless, the restaurant industry is highly competitive.
In addition to the competition, rental and operating costs in
London have been rising and will continue to do so for the
foreseeable future. At least 25% of the industry’s workforce
earns minimum wage, so any increase in wages will have a big
effect on restaurants and bars.
05 BDO SPECIAL REPORT LONDON
SINGAPORE
OVERVIEW
The Singapore F&B industry constitutes about 1% of the
country’s GDP. It nevertheless plays a vital role in Singapore’s
economy with a GVA of S$2.8 billion in 2012. 36.2% of the
industry’s operators are restaurateurs and are the single largest
contributor to the industry’s GVA1.
For the past few years, the F&B and supermarket sectors have
outperformed other retail sectors in Singapore. More than 60%
of the businesses listed on the Singapore Stock Exchange (SGX)
are involved in food production or distribution. The growth
potential of the F&B industry has not gone unnoticed by foreign
operators, attracting the likes of Jason Atherton and Joël
Robuchon to set up businesses locally. The industry employs
nearly 28,000 people, constituting 6.5% of the total workforce.
1 Department of Statistics (Singapore): A government body responsible for collecting, compiling and disseminating a wide range of economic, business, household and population data
%Change 2011 2012
Establishments h32% 6,464 6,668
Operating Receipts
h81% $7,247 mil. $7,836 mil.
Operating Expenditure
h81% $6,922 mil. $7,482 mil.
Operating Samples
h77% $528 mil. $568 mil.
Value Added h107% $2,503 mil. $2,759 mil.
Table 1: Key Indicators of Food & Beverage Services
STATISTICS AND OBSERVATIONS
Fast Food Outlets
Food Caterers
Restaurants
Others
ESTABLISHMENTS
VALUE ADDED
BDO SPECIAL REPORT 06LONDON
5.2 %
51.8%
36.4%
6.6%
36.1%
40.8%
9.7 %13.4 %
It is common for Singaporeans to eat out more often than they
eat at home. Sydney-based research company, BIS Shrapnel,
estimates that an average Singaporean spent about S$1,900
at hawkers stalls, cafes and restaurants in 2012 alone. Rising
middle-class incomes and a more rapid pace of life have driven
consumer demand for a wider variety of stable and discretionary
food products.
TRENDSThe F&B industry in Singapore is very competitive, with
operators both internal and external challenges to growth. As
the industry mature, consumers are increasingly demanding
experiential dining, resulting in “new” concepts are falling out
of fashion more quickly. Operators find themselves needing to
continuously develop new concepts to meet changing consumer
tastes.
07 BDO SPECIAL REPORT LONDON
Arguably the biggest challenge F&B operators face is the
difficulty in recruiting and retaining staff. Operators find it
very challenging to recruit local Singaporeans to work in the
industry, as it is perceived as having long hours for low pay.
Young, ambitious and well-educated, many Singaporeans would
rather work in more “glamorous” industries than in the service
industry, as the perceived financial and professional rewards
are more in line with their expectations. This general lack of
interest makes it even more difficult to find staff who have the
proper skills training for the job.
The problem is compounded by existing government labour
policies, restricting the number of foreign workers operators
can hire and retain. Many foreign staff with the interest and
ability to perform the required tasks are repatriated to their
home countries upon the expiration of their employment
passes. There is also a relatively low rate of adoption of IT and
technology to streamline the organisation’s operations.
SINGAPOREUNITED KINGDOM
BDO SPECIAL REPORT 08LONDON
The UK F&B industry is extremely competitive – low barriers to entry results in many new entrants to the industry
The F&B industry is a core element of the UK manufacturing economy, representing over 15% of manufacturing turnover and employment
Consumers are increasingly eating out as UK lifestyles change
There is a growing focus and interest on sustainability practices and provenance (i.e. locally sourced food)
Casual dining is increasingly popular with many new entrants to the market in the last few years
Many of the newer, successful offerings have been concept-driven
In addition to food, beverages (both alcoholic and non-alcoholic) contribute significantly to the operator’s total revenue as the UK has a strong “drinking culture”
A typical property lease is 25 years in length
Some of the challenges operators face include rising taxes, raises to minimum wage and green initiatives
The F&B industry is extremely competitive – low barriers to entry results in many new entrants to the industry
The F&B industry is an important part of Singapore’s economy, strongly supporting its tourism industry
Consumers continue to eat out frequently, due to the availability and variety of options
As yet, sustainability and provenance are not significant issues for Singaporean consumers
Cafes are increasingly popular with many new entrants to the market in the last few years
Concept-driven offerings are beginning to play a stronger role in the industry
Beverages do not contribute significantly to the operator’s total revenue as Singapore does not have a “drinking culture” for both alcoholic and non-alcoholic beverages
A typical property lease is 3+3 years in length
Some of the challenges operators face include manpower restrictions and rising property prices
The differences of the F&B markets in Singapore and UK
VS
PEOPLEWhile good service has always been the cornerstone of the
F&B industry, it is becoming ever more important as customers
increasingly demand experiential dining. Ultimately, an
organisation is only as strong as the people who contribute to
it. Recruiting and retaining good people is therefore crucial to
the organisation’s long-term success.
The company’s mission, vision and values determine the
direction it will take but it requires like-minded people to
drive it. To recruit the “right” people for the organisation, the
management team must be very clear on what the company
is inherently about. However, you do not need to be a well-
established organisation to be able to do this.
Established in 2006, British steakhouse Hawksmoor is a relative
newcomer to the London restaurant industry. Nevertheless, it
was one of the few restaurant operators to rank on the Sunday
Times 100 Best Companies list, as one of the best places to
work in the UK. Hawksmoor has built this reputation by focusing
on establishing itself as a company where its employees are
encouraged to “do the right thing”. Hawksmoor’s management
team’s philosophy is to ensure their employees are happy; it
logically follows that happy employees will be more gracious
hosts to the restaurant’s customers.
Having recruited the “right” people to join your organisation,
you must engage them so they remain with the organisation.
The Harvard Business Review found that companies with
highly engaged employees generated three-year returns
to shareholders that were 200 percent higher than low-
commitment companies between 1999 and 2002.
In a survey conducted by Purple Cubed, the top five factors that
motivate people in their careers are:
Communication
Providing ongoing consultation and communication across all
levels of the organisation
Inspirational leadership
Ensuring that strong leadership occurs at all levels of the
organisation, from middle management onwards
Career path
Having the flexibility to properly provide for the career
aspirations of the organisation’s employees, accounting their
changing priorities
BEST PRACTICES
09 BDO SPECIAL REPORT LONDON
People are more likely to actively contribute to an organisation
if they have an interest in it. It is therefore unsurprising that
some of the more successful F&B operators have created
careers, not just jobs, for their employees. With the F&B
industry increasingly being seen as a viable career path, this
trend will likely continue.
Many of the top employers encourage promotion from within
the organisation as and when the positions become available.
Promoting from within has several advantages.
Firstly, it ensures the employees who take up these positions
are already familiar with the organisation’s culture and values
and will continue to uphold them. Secondly, these employees
will be familiar with other parts of the organisation. Thirdly,
it demonstrates to the rest of the employees that they will be
rewarded for their contributions to the organisation.
Training & Development
Providing employees with ongoing and relevant training that
contributes positively to their growth and development
Values/Aspirations
Aligning the values of the organisation and its employees so
they can collectively work towards them
It is interesting to note that “Money” ranked ninth (out of ten)
on that list. Once employees are earning at least a fair wage,
other factors take on a more significant role in influencing their
engagement and satisfaction with their organisation.
Knowing what these factors are and duly addressing them has
proven to be elusive for many organisations. Companies will try
to implement initiatives to promote these five factors but will
do so in a piecemeal, discrete manner. Instead, these initiatives
should be should be integrated into the organisation’s functions,
making it part of the organisation’s processes.
An engaged workforce will result in increased productivity, but
will also positively impact an organisation’s bottom line. The
unseen costs associated with high attrition rates are often not
taken into consideration high staff turnover.
PwC Saratoga, one of the world’s leaders in workforce
measurement and employee engagement, conducted a study
to determine the direct and indirect costs of attrition on an
organisation. They estimate that losing a middle manager will
cost an organisation five times that middle manager’s salary to
replace them, whilst losing a director will cost an organisation
10 times their salary.
BDO SPECIAL REPORT 10LONDON
Senior management should review existing processes regularly
to determine if they are still value-adding to the organisation.
Without regular reviews, organisations may soon find that their
processes are more of a hindrance than a help. Oftentimes, an
organisation’s processes become cumbersome because:
Too many processes
Too many processes have been created to address issues as
the organisation grew, but there has been no subsequent
differentiation between processes that are essential to
creating value, to the customer or that do not need to be
standardised at all
PROCESSESOrganisations of all sizes and maturity stand to benefit from
standardising their processes. However, F&B operators with
more than fifteen sites will find Standard Operating Procedures
(SOPs) necessary to ensure the consistency of their products
and services.
Standardising the organisation’s processes does not have
to be a major undertaking. In many cases, small changes or
adjustments to existing procedures should suffice to make the
system more efficient.
11 BDO SPECIAL REPORT LONDON
Overstandardisation
In an effort to standardise procedures, processes become overly
rigid and are unable to accommodate for unplanned events
Resistance to change
The people responsible for implementing the changes in
procedure may be hesitant to do so for a host of reasons
More specifically, F&B operators should look at maximising their
throughput when faced with space and manpower limitations.
One way to achieve this is through the effective use of
technology to streamline various back-of-house and front-of-
house processes.
For instance, Domino’s Pizza was able to increase the throughput
of its kitchens by increasing the capacity of its ovens and by
reducing the amount of time the oven took to cook the pizzas.
In Singapore, some F&B operators have already started using
Artificial Intelligence Cooking Machines (AICs) to reduce the
responsibilities of the chefs in the kitchens.
Processes involving the organisation’s staff also stand to benefit
from a technological solution. All of TGI Friday’s eighty outlets
in the UK are connected to “Hot Schedules”, an online staff
scheduling application.
The application enables employees to change their shifts with
relative ease. It also provides managers with accessible and up-
to-date information on the productivity of their staff and their
restaurant for any given time frame.
Nevertheless, the efficacy and consistency of any implemented
processes are contingent upon the training the organisation
provides its employees. Employees therefore need constant
training to ensure the implemented processes are followed for
the best results.
BDO SPECIAL REPORT 12LONDON
As mature markets, both the London and Singapore restaurant
scenes share several commonalities. Eating out is commonplace,
creating the demand for good quality casual dining offerings.
Consumers are constantly looking for new concepts and new
experiences, searching for alternatives more quickly than ever
before. This dynamism has created very vibrant F&B industries
in both cities as operators strive to meet the needs of their
customers.
The biggest problem Singaporean operators face, however,
is their inability to recruit and retain people. As much as the
operators try to implement integrated talent management
policies to keep staff, there is little they can do about existing
government policies that prevent them from hiring foreign
talent.
Using technology to streamline operations may alleviate some
of these difficulties but it will not solve the underlying problem.
Furthermore, Chinese cuisine often requires a lot of preparation
that cannot be performed by a technological process. Certain
dishes simply need the skilled hands of a chef to prepare them.
Fundamentally, the hospitality industry is about people.
Customers build loyalty towards certain brands in part because
of the way the brand has been presented, but often because of
the people who carry the brand message. The UK is slowly but
surely cultivating a culture of service, with people now seeing
viable careers in F&B, not just transient jobs.
Singapore has some ways to go in this regard. However, much of
the challenge lies in getting both the government and the public
to recognise the value in pursuing a career in the F&B industry,
in which great service is critical to the customer experience.
IMPLICATIONS FOR SINGAPORE
13 BDO SPECIAL REPORT LONDON
CHOONG MING SIENSenior Analyst BDO Consultants Pte Ltd
IMPLICATIONS FOR SINGAPORE
“It was a privilege to hear the premium F&B companies generously share with us their HR best practices. It was indeed an eye opening experience and there were many valuable takeaways from this trip that inspired some thinking, that which we could apply to our own organisation.”
CHRISTINA KONG | Senior Director, HR & Corporate Affairs, Jumbo Group of Restaurants
“The trip provided an opportunity to bond with industry peers through shared experiences in a vibrant environment like London. For me, the highlight of the trip was meandering down Soho full of emerging trends, looking at new F&B concepts and seeing street food of the city come alive. ”
ANDREW KHOO | Director, Business Development and Operations, ABR Holdings Limited
REFLECTIONS
“It is a rare occasion whereby industry colleagues can have a “retreat” in a far away country. We learnt new things and share our thoughts together, we may not know each other well before the trip, but we developed friendship as we braved the rain and jogged at Hyde Park. ”
ANDREW TJIOE| Executive Chairman, TungLok Restaurants (2000) Ltd
“ThetriphelpedmetoreaffirmourowncurrentHRpracticesthatweareontherighttrackofabestpractice. The people solution to ensure staff are happy at work and other HR practices to help with long term solution to our manpower problem were very useful. ”
ANTHONY SAY | Chief Executive Officer, JP Pepperdine
BDO SPECIAL REPORT 14LONDON
“The companies we visited were very willing to share on their success tips. Exposure to new concepts & the success tips inspire thought-provoking ideas that we could inject into our company operations. The networking session is another great takeaway.”
RACHEL CHONG | Chief Executive Officer, Sweetest Moments Pte Ltd
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CONTACTFor more information please contact:
ROGER LOO t: +65 6829 9604 e: [email protected]
www.bdo.com.sg
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