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Article by HNS
Posted on 27 April 2020
Many hotels and restaurants were already teetering on the edge. If they’re to survive this, the industry must come together and take one crucial step.
We’ve heard about “the good old days” in hospitality – apparently, people wanted to work in the industry because they could make a decent living. Working conditions were great, people loved their jobs and had a good time at work. Customers valued the staff who fed and served them, and were willing to pay menu prices because they trusted they were fair.
Owners enjoyed running their businesses too – they had a 20% profit margin so it wasn’t the end of the world if the dishwasher broke down or they had to train a few extra people that week. They didn’t need to spend half their time watching, counting and analysing their pennies, praying that the pounds would maketh themselves. They were focused on the bit they loved the most – the hospitality. It sounds like a completely different world! It was.
I’m not sure exactly when we went wrong, but we’ve backed ourselves into a corner and I’m calling for a recalibration. The Covid-19 shutdown will have a brutal impact on our industry, and that’s because it was teetering on the edge already. We’ve done everything we can to cling to the once-held glamour or grace that the industry held, but the truth is – it’s been over a long time.
We pay our staff minimum wage, and we expect them to multitask, work long hours, and understand “the business of food” by working to targets and filling out reports. We try to innovate our offering, but our creativity is stifled by the fact that our customers have been paying $4.50 for a flat white since 1999. We try to keep costs down by pressing our suppliers for the best possible deal, but they’re hardly making ends meet, and we negotiate with our landlords to help us maintain their buildings and treat rent reviews fairly. We attempt to ignite passion in the teams that we work with, but the truth is, we find it difficult to access our own passion a lot of the time – because we’re exhausted. Exhausted from trying to stay in business.
I’m in lockdown at my husband’s family Lockwood at Maraetai Beach in east Auckland and there is a fantastic Murphy’s Law poster on the back of the bathroom door. One of the adages on it reads “if it jams, force it – if it breaks, it needed replacing anyway”, and it got me thinking. Our whole industry’s business model is jammed, and we’ve been trying to force it.
Gabrielle Hamilton, owner of cult restaurant Prune in Manhattan’s East Village, wrote for the New York Times this week: The conversation about how restaurants will continue to operate, given the rising costs of running them, has been ramping up for years now; the coronavirus did not suddenly shine light on an unknown fragility.”
As customers’ expectations have risen, we’ve allowed our integrity to prevail over profitability. We’ve succumbed to the temptation to keep improving the quality of the produce we use (we are so spoiled for choice in New Zealand), to transition to sustainable packaging (it’s amazing what’s out there), and we’ve added a whole extra layer of cost to our businesses in software subscriptions that provide us with data, bells and whistles. At our core we are hosts – and we’ve become hospitable to a fault. We’ve been “forcing it” for a decade because we’ve let price wars, not the price of food, dictate what we charge our customers.
So the second half of Murphy’s adage comes to mind: “If it breaks, it needed replacing anyway.” As we emerge from a pandemic-induced shutdown, many are predicting our industry will “break”. So let’s act first, and act now. Our industry’s business model needs replacing, and now is the time for us to replace it – with one that befits the values of our small business owners, our teams and our communities. To one that restores it and protects it in the future.
Joelle Parenteau is the owner of a German street food restaurant in Ottawa, Canada, and last week she wrote a fantastic article called Why restaurants are so fucked. In it, she explains why many won’t make it through Covid-19 (“razor-thin profit margins” mean they don’t have a month’s rent in the bank); and she calls for restaurateurs to a) own the part we have played in allowing the model to morph into what it is now (our failure to manage customer expectations over time has skewed and reinforced our perception of what food should cost), and b) to step into our power to fix it.
The New Zealand hospitality industry is famously world class, but more importantly, serves an important local role for us all. You only need to take them away to realise how much cafés, restaurants and bars are valued by our communities. Covid-19 has shown me that the way we have been valuing work is all upside down. When the virus hit, it became evident quickly that the low-paid care workers, shelf-stackers, police officers, cleaners, nurses, truck drivers and food producers play an essential role in keeping our lives, our society and our supply chains ticking along.
In his piece for the Guardian this week, Jonathan Nunn wrote, “in the same way clapping for nurses illuminates uncomfortable questions about their perceived value before this crisis, uncritically fuelling the demand for more and more restaurants at cheaper prices has masked the value of [hospitality] labour to our daily lives”. Now I recognise that preparation of food and beverage isn’t saving lives, but I feel strongly that it makes a significant contribution to the cultural fabric of our society.
Because of that, I’m happy to pay the ever-increasing minimum wage. I value the work that our teams do, and I believe that our customers do too. I want to attract young, smart, passionate people to work with us, and I want to be able to look them in the eye and tell them that they can make a decent living in hospitality. I want to retain them too. So my team can have 35c in every dollar earned, no problem.
But I also feel strongly an obligation to minimise our footprint on the planet, and we made a commitment to quality that I intend to keep. I wish to support suppliers whose ethics are aligned with mine, so it is my preference to serve free-range meat, pay for eco-friendly cleaning products and to prepare our menu in store from scratch. It is impossible for me to lower my costs further without compromising my values, so our suppliers and producers take 35c of every dollar earned, and I have no qualms there either.
I won’t bore you with the details of where the other 30c we earn in the dollar goes, but let’s just say that by the time we have paid our rent, operating expenses, utilities, insurance, lawyers, accountants, maintenance, and replaced the broken dishwasher – there generally isn’t any change from that $1 of revenue. On a good month, we celebrate single-digit profitability. My proposed solution? We need to reopen the profit margin that we have allowed to close by putting our menu prices up now.
If Jacinda’s team of five million can stamp out coronavirus, then I’m confident the hospitality industry can reclaim its margin together. We have more than 100,000 food outlets in New Zealand, and with sustainable margins, it’s a big contributor to our economy. Let’s reinstate our profitability by adjusting menu prices to reflect a fair margin. Let’s be the change we want to see.
I am acutely aware that many people’s incomes will be hit by the aftermath of coronavirus, but it gave me hope when I read last week that New Zealanders spent over $6 billion on international travel last year. If we just redirected just a small portion of this to supporting our hospitality and domestic tourism industries over the next year, hospitality might just get through this alive.
I want to emphasise Nunn’s point made in the Guardian though, that “the pandemic offers us an opportunity to shine a light on the less visible reaches of the restaurant ecosystem” too. On a bad day it is an industry built on cheap labour, particularly migrants, and according to chef Thom Eagle, quoted in the piece, “an ethos that work ranks above personal and social needs”. Nunn proposes that “to move forward, we must start by examining what we would like to save about the industry, giving space to the things that nourish us and our communities, and discarding what we believe doesn’t deserve to survive”.
I’m sad to say I think it’s true that many restaurants won’t survive the aftermath of Covid-19, but I agree with Hamilton’s point in the New York Times that “few of us will come back as we were… The concerns before coronavirus are still universal: the restaurant as we know it is no longer viable on its own”. I also agree with Nunn that “the real danger the restaurant industry faces isn’t annihilation – the danger is that is comes back the same as it was before”.
To be clear, what I’m proposing is the equivalent of a $1-3 price increase on a pita or chawarma at Fatima’s or a burger at Burger Burger. I’m not foolish enough to believe that demand won’t be affected, I studied economics at university. I’m also not naive enough to suggest we won’t be criticised or even hurt in the short term. But to that I say we are hurting anyway, and the alternative is “letting it break” on its own. Worse than a price rise would be our favourite restaurants, takeaways, cafes and bars all withering away, right?!
I’m proposing that we give our customers the benefit of the doubt – that they would be happy to pay a few dollars more for the same if they knew it meant fair wages, supporting local suppliers, reducing our footprint on the planet and survival of their local restaurants, cafés and bars. My proposed solution envisages a strengthened hospitality industry that provides a compelling career for hundreds of thousands of New Zealanders and a beating heart to our communities. Never mind the glamour, let’s work on bringing back the creativity and the grace to an industry we can be immensely proud of.
But in the interests of making sure everyone plays their part, alongside this price increase, I’m also proposing radical transparency. A 20% margin isn’t exorbitant or greedy when compared to other business sectors, so we’d have nothing to hide. I’d be happy to disclose my profit margin to my customers – hell, I’d post it on the website!
We have an opportunity to change the way we do things. Having a more equitable society in general is something I hope emerges from Covid-19, and now is the time to fix hospitality before it breaks itself.
Opinion piece by Sophie Gilmour
From New Zealand
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Article by HNS
Posted on 27 April 2020