Interview with Prof. Frank Schuetzendorf, on F&B cost control

On the 12th of February 2018, in Bucharest, Leading Choice – The Global Hospitality Counsellors and FIHR (The Federation of the Romanian Hospitaly Industry) held a course on food & beverage cost control, dedicated to the HoReCa professionals in Romania. Since we supported the event and got curious to learn more on this matter, we interviewed Professor Frank Schuetzendorf, Senior Lecturer at the famous Ecole Hoteliere in Lausanne, Switzerland. So, here we are sharing all the meaningul information with you. Enjoy!

1. How was this first class in Romania? Were the attendees interested, engaged?

You know, when I do these outside workshops, it is generally very difficult to find a connection with the participants in the beginning. You don’t know them, they don’t know you and you present all of your story but you only have a very small fraction of theirs. So it’s always a bit difficult to find a connection, also because as the professional in your field of expertise, participants are expecting to learn something, although it’s also the teacher that is learning a lot from the participants. And so I always tend to like to say in the beginning that I can teach them the content but they make the quality, based on the exchanges we have. So that was also my first comment when I opened the door to meet the class this morning. I was amazed by the mix of people and their backgrounds, which provided for a rich landscape of participants and their competencies. Of course there always will be people that hold back more, that are more introverted and there will always will be people that contribute more, so I thought to myself: embrace the new culture, the new environment, and what I found was a very warm and welcoming atmosphere that proved very constructive and very productive. So much in fact that I am looking forward to my next visit to Bucharest.

2. Which are the most important things that must be taken into consideration when opening a restaurant?

This is a big question. I think a critical thing when opening a restaurant is that you have to create a business plan, a road map. You have to create a critical path and the critical path starts probably 6-12 months before you open up, depending on the size and scope of the operation.

For F&B within a hotel this is more likely to be one year. So, get your critical path right, get all the administration with their policies and procedures right, then you start hiring the key people such as the executive chef, the sous chefs, the restaurant manager and the sommelier. These will provide for your operational pillar. Then, obviously, all physical aspects of the restaurant design elements have to all come together in time. But if you ask me what the most important part of a restaurant opening should be, I would sum it up in saying that you really need to set your staff up for success. So don’t get sidetracked with the physical product, but rather focus on developing the staff to get them ready for the big day.

One thing about openings is that you will never be 100% ready, so at one point you have to push open those doors. Thereafter it’s learning by doing. That’s why staff selection and training should be top priority.

Then you also have to have a clear philosophy of what you want to do in your restaurant, where you want to go and be very true to your product. I believe the big mistake we have today is that a lot of restaurants are opening up and they lose their way, their identity. They start looking at what the competition is doing, and they adapt to whatever that competition is doing well, sometimes to such an extent that they copy paste the others’ ideas, to the detriment of their whole identity. Staying true to your unique idea, to your niche, requires courage and discipline – but it will differentiate you. Discipline and perseverance requires quite some energy in the early stages, because opening up a restaurant is always exposed to thousands of variables that happen and that can and will go wrong. Mistakes will happen so you have to make sure you are well rested and manage your energy level beforehand, because once the door is open – you’re open for business. Make sure that you have the time and commitment from the family as well, they need to understand that for at least the next three months your life is going to be very intense.

Don’t forget to be generous with customers so it would be wise to budget that in, as things will go wrong and you never want your customer to leave on a bad note. You shouldn’t be too focused about the profits in the beginning because it’s all about creating an experience, and once your customers get that experience, its word of mouth and the profits will flow. But again, never forget that it’s all about the soft skills and the soft components, i.e. your people. So take care of them and hire the right mentality. From a service – hospitality point of view you need to focus on the relationships between the customers, the staff and the ownership of the restaurant. I like to compare this tripod relationship between customers, employees and owners to a stool with 3 legs. All 3 legs have to be the same length, because if one leg is shorter, than the whole thing will collapse. So people! Always people!

3. I know you talked about this during the class, but taking into consideration that this interview will be read by many people who were not here today, could you please briefly tell them which are a restaurant’s KPIs? Or at least the most important ones.

Ok. so, we need to have targets, realistic targets. One target is, as I mentioned in the class, that we should be realistic when we set the budget. You really need to understand what profit you need to make, and I call this the desired profit. You cannot compromise on the desired profit, as it’s what you and your operation need to survive and flourish. Understanding where the revenues are coming from, understanding your markets, your catchment area, your competitors, their value proposition etc. What are they doing and how will it affect your business. Once you have identified the revenues and deduct your desired profit, you get your ideal expense. You have to make the expenses work, you cannot do it any other way. You cannot say “I am going to generate revenue and then I’ll see how much it costs and then I’ll take the profit.” It doesn’t work that way. So plan forward. This demands a lot of discipline, because when we talk about the business side and the financial side of running your restaurant, it can get tricky. Taking care of your customers, not compromising on product or the quality of service, ensuring staff motivation etc. is all nice and well, but at one point in time, you also have the financial obligation. And so you have to find ways, creative ways of getting there. So my top KPI is understanding your profitability that you need to generate to keep a restaurant sustainable.

The second point follows the first one: create clear targets, but achievable ones. Even if you don’t get the revenues in, you want to make sure you control your prime costs, which are your most important costs: labor, food and beverage cost. Create productivity standards. Depending on what type of philosophy you have, on what type of restaurant you want to run: if its fine dining, if it’s quick service, if it’s fast casual, you always have to create a standard, i.e. what performance you can expect from employees. Based on that standard you can create your productivity ratio. You can even go further and start incentivizing people. Next, get your recipes right and control them. Do an inventory every month of your goods to find out your actual consumption and compare that to your theoretical (or potential), which is based on your recipes. Are the costs aligned or not? If not, investigate what happened.

Next, make sure you manage your cash flow. Cash flow management is important because you also want to build your reputation in being able to pay suppliers and your employees on time. This requires good inventory management. Don’t build up too much stock you won’t consume immediately. Do not go for short term bargains or discounts that will end up in long-term stockpiling – that’s dead money that’s just sitting there not generating value. Instead, you want to keep the cash flowing. So really focus on the top 3 costs: labor, food and beverage.

There are of course other KPIs related to knowing your customers: where do they come from, what do they want, what’s their mentality, do they make a lot of simultaneous reservations in different restaurants at the same time, do they walk in without reservations, do they call or are there a lot of no shows?

Based on these statistics, you can take risks. So understand the data available to you, learn from it and use it to your advantage as there are always opportunities for increasing revenues and better controlling costs.

4. How important is the use of advanced technology in a restaurant, in your opinion (regarding both a performant POS system and a reporting, reservation and management system)?

I think systems are very important, but you are only as good as you know how to use the systems. So it’s not the gun, it’s the man behind the gun. We have a lot of data available to us today and sometimes we get sidetracked. Systems provide us with KPIs or key data and it’s those systems that will pro-actively help you in your informed decision taking, saving you time sifting through the data – that are going to be extremely useful and important in the future. It’s an opportunity we have in F&B and I think that technology will continue to contribute a lot to grow profits and in an industry where profits were traditionally meager.

Such systems will help understand, amongst others, the no show and occupancy situation, the customer seating cycle providing insights about how long customers on average are occupying tables, the preferred payment method, i.e. cash of credit card, what customers are ordering which produces your menu engineering or what are the best selling items and provide you with recommendations where and by how much to increase pricing etc. Yet again, this is all data, but we must be able to analyze it, to make it meaningful.

5. How can a restaurant manager/owner improve his location’s and his restaurant’s performance?

Location performance? I ask about “location performance” because we always say that location is key. I believe that an excellent location does not guarantee success but rather believe a restaurant providing for a very genuine experience – a heart and soul combined with excellent F&B – in a bad location can be a lot more successful, and more profitable.

I believe in today’s F&B landscape you don’t have to invest big money paying for the right location because you risk drowning in huge fix costs such as rent or debt repayment. So, especially for the first restaurant, pick a B+ class location. Today, with the help of technology and social media you have a lot of data available to better understand your market: what do your customers want, what are they willing to pay for it. Create unique experiences, and try to put yourself into your customer’s shoes every day. If you’re a restaurant owner, ask yourself: “How do I experience my restaurant?” For example: check under all your tables and have a seat in every single seat of your restaurant. Then you decide: How do you feel? Are the seats comfortable or worn out, or is there any chewing gum sticking under the table? How does the linen feel – is it absorbing or does it feel cheap? Then ask yourself “Is this what my guests are experiencing?” The point is: when you’re sitting in a restaurant, let’s say in a fine dining setting, you want to make sure that all the possible negative perceptions a customer can possibly have are eliminated.

The best way to do this is to pretend to be your own customers. Issues can be noise coming from the kitchen, a bad smell in a corner of the restaurant, or feeling the table edge because the padding or molton is not thick enough. Perhaps you’re sitting too deep in your seat, maybe you’re sitting too high, making it uncomfortable and unnatural to eat. Perhaps the service timing is too long etc. So there are a lot of things we can do, we can engineer, to improve the performance. We have this genuine opportunity to really improve the customer experience. But in order for that to happen, we need to put ourselves into our customer’s shoes. Believe me your customers will notice. And so I always tell my students: “You have to become very sensitive to what the customer is experiencing!” and in order to become sensitive to the customers you have to be very critical about your operation. There’s always something we can improve and I would challenge any operator or manager by saying: “Go back to your operation, but before entering the room close your eyes, then say to yourself “I will find 5 things that are not right.” I guarantee you that you will find them. You will even find 10 things because you’ll open your eyes and your ears and your other senses and you will see things you have not seen before, such as a lamp shade not perfectly adjusted, maybe some disturbing noise because a server forgot to place a napkin between the tray and the silverware, or maybe a customer is speaking too loud on the phone and other guests are being disturbed because of this, maybe the curtains are not right or the table cloth is not straight, maybe even your air conditioning is too strong on one side of the room or maybe too much light is projected from the ceiling disturbing a diner while eating etc.. All these things are small elements, micro impressions that your customers have. But now combine all those micro impressions together and what you end up with is a customer perception of your restaurant and eventually the question: Was my meal value for money?

Bottom line is, the art is to eventually work on phasing out and eliminating those negative perceptions a customer could potentially have. The devil is in the detail, so work on the details, a philosophy that goes above and beyond serving and cooking – which are the basic foundations. If you go above and beyond that, you strive for perfection and create exceptional value.

6. Why do you think is important for restaurants to have a consultant? How can he bring added value to the business?

Because you are engaging a third party. A consultant comes with a completely different perspective, he or she is completely neutral, is not entangled in the day to day operation or in political issues affecting the operation.

The consultant has an obligation to provide tangible solutions for the operation and therefore can provide you with insights and best practices from other operations he or she has been exposed to. As operators we are so absorbed in our operation that we tend to lose sight of the big picture. In this ever changing landscape, where new players enter the market daily with new ideas, products and services, operators need to find distance and question the status quo, i.e. ask themselves if they are still doing the right thing.

Consultants should be expected to help you with that, but it requires taking criticism positively in order for the feedback and insights to be productive. Seeking a consultant on a regular basis therefore is a healthy practice – even when things go well in your operation, as a professional, unbiased and fresh pair of new eyes will prove useful in providing additional points of view and identify opportunities or threats based on more global trends and evolutions.

Of course there is a cost to hiring consultants, but even here you can be creative: Barter agreements in form of exchange value (e.g. restaurant or hotel credit), a success based fee or even equity when involved in a startup are good options to consider and to propose instead of a consultant package. But remember, you are buying an expertise, an expertise that you don’t have. But you have to be very clear on what you are expecting when engaging a consultant in order to find the right person: Is it a culinary expert? Are you looking for an F&B operations specialist or a marketing specialist? Either way, adding value is the key here so that you should always expect a return largely above your investment if the objective is clearly outlined from the beginning.

7. What would be your most important advice for restaurant owners and managers?

It’s difficult to only provide one single piece of advice – as F&B is complex because there are just too many variables in play. To start out – we have to be very aware of what’s happening in the world today. I don’t know the market in Bucharest specifically but I know that tomorrow the F&B landscape will look very different from that of today. There will be more F&B delivered to homes, perhaps we have high tech vending machines or kiosks, the next generation of pop up restaurants and bars or food trucks 2.0. All of these new realities are chipping away at the profit of the traditional restaurants. Although I strongly believe that there will always remain a demand for the traditional restaurant model, you just have to be aware of what trends are happening and how the world is changing.

If you are a good adaptor, you will find opportunities to take advantage of such changes. For example, why do hotels not use Uber Eats to their advantage?

A hotel kitchen is open 24/7, so why not use the downtime to prep take out or home delivery recipes and sell them online when your staff is there anyway?

Then, call me old fashioned, but I still strongly believe that engaging in customer relationship building. In order to do that you need a good team. So again it’s focusing on your people! Get the people, your team, right and they will become your best ambassadors and frontline marketing experts. They will sell experiences to your customers. One thing I have learned in my career is to always hire for attitude, and train for skills! Don’t hire the skills and then deal with attitude! It doesn’t work that way!

Getting the people right, getting the mindset right, positioning yourself with a unique product, something that adds value to people’s lives. Then focus on your best selling products, and make them even better. Focusing on what you do really well and what customers will come to your venue for! People talk and it will just be a matter of time until your efforts pay off. Further look at current consumer trends. Veganism is on the rise around the world. People want healthy food and beverage. You cannot go against this trend so use it to your advantage and tie it in to your product offering.

Finally it’s about customer loyalty. We know that happy customers have an 80% chance of returning to your restaurant. One happy customer has the potential of producing ten times the revenue he generated on the first visit. So the worst thing you can do is let a customer leave unhappy. Empower your staff to make sure this does not happen, that’s key, because one bad experience will lead to bad word of mouth and that can, based on statistics, influence the decision making of 7 other potential customers.

About Frank Schuetzendorf

Frank has built his international hospitality career over the past 23 years as a Food and Beverage professional within the top luxury hotel market.

Extremely guest focused and solutions driven, he has been exposed to some of the finest hotel and food and beverage operations across the globe where he has developed a sense for detail, perfection, excellence and engaging guest satisfaction.

Hotel Operators include Four Seasons Hotels and Resorts, Shangri-La Hotels and Resorts and Resorts and the Dorchester Collection. Having worked for different hospitality operators he was able to extract the key qualities of each, be it from a human resources, operations, innovation or a financial profitability point of view.
Following professional experiences in North America, Europe and Asia, he has acquired a sensibility to submerging into different cultures and adapting to new environments quickly in order to tackle the various challenges each operation is confronted with.

Frank today holds the position of senior lecturer at the Ecole Hoteliere de Lausanne, visiting lecturer at Essec Business school Paris and facilitates consulting and executive education programs around the world.

Follow Frank on LinkedIn!