Are your promotions having a negative effect on business?

My wife came home this afternoon after spending a gift voucher she received from me at a beauty salon. (Yes I’m a great Husband) She expressed to me her upset at the company for not honoring the product as it was laid out on the gift voucher. This company instead gave my wife the lesser treatments and explained, that is what they do with gift vouchers. My wife has since told all of her friends about this dishonoring and bad treatment, and no doubt her friends have told their friends.

This started me thinking, has this happened in my business? Could it happen in my business? Has it happened to me before? The answers: Yes Yes and Yes.

One promotion that we offer in all of my cafes is the 10th coffee free promotion. I have often perhaps because I haven’t made myself clear enough had to reiterate that with the free coffee the customer can have any coffee they like, small medium or large. I don’t care. I want my customers feel great about receiving their free coffee, certainly not to be met by a staff member insisting that they pay an extra 30c for a medium upgrade.

I also market my business in restaurant coupon books. My instruction to all of my staff about these coupons is that they treat the customer presenting these like a king or queen. These coupons bring new customers to my cafes, and I need my staff to do all they can to have that customer rave about us and tell more people about us. I don’t ever want my new customer to feel bad about having come to me with something designed to bring them to me.

If you’re offering discounts to a group of people, perhaps students or elderly, make sure your staff know this discount is offered because you want these people in your establishment and you want them to spread the word about the available discount to others in their group. This really is elementary stuff, but as with everything; if it’s not in the forefront of your mind it’s not likely applied.

It costs less to keep a customer once their in your doors than to find a new one. Give your guests a great experience and watch them market your business for you. Give them a bad experience and watch how fast it impacts on your business.

Share

Is your cafe or restaurant website serving its purpose?

cafe and restaurant websites

It almost seems like a trend now amongst business owners to jazz up their cafe or restaurant websites with music, floating and animated backgrounds, chef and owner biographies, and extreme efforts to advertise other restaurants and cafes also owned.  In an effort to create the same ambiance and hospitable experience the owner does in their cafe or restaurant I believe they’ve missed the mark on why people are looking for their business online.

I think a cafe and restaurant website should answer a simple question and answer it quickly and neatly.  Why have people chosen to find my website online, rather than call me and ask the questions.  The answer to me seems simple and I speak from personal experience.  I chose to find a business online because it should be quick to find the address, the phone number and the menu.

If your website takes a long time to load flash animations and music, and doesn’t make it blatantly obvious where to click for a menu, map or contact details, your website is perhaps not serving it’s primary purpose.  Chef bios, the promotion of other venues and new business initiatives are the things on your site that should be secondary for those looking to learn more about your business and those happy to click more than twice on your site for the information they need.

The simplification of your website will not only create
greater functionality but also present well on mobile devices.  If at least twenty percent of the visitors to
your website are using mobile devices and they cannot view your website properly that makes your expensive flashy website only eighty percent effective.  As we’ve seen over the last few years the cost of downloading data on our mobile devices has decreased dramatically and will continue to decrease, which will see mobile user numbers increase in years to come and the amount of desktops and laptops decrease.  As business owners we cannot afford any part of our marketing to be so inefficient.

Flash websites are dated, along with fancy buttons and
animated backgrounds that require secondary applications to be installed or given authority to run.  Ten years ago this was a staple as designers were working hard to push design elements and the internet’s capabilities to the limit.  Leading websites are all about less clutter.  You only need to look towards Facebook’s
homepage as evidence to that.  Facebook’s focus is signing up new people and that is entirely what their homepage focuses on in the simplest manner possible.

When visiting your web designer be aware that the flashier the website the more expensive it will be,
and in a paradoxical manner, the less functional it will be.  This may not serve your purpose.  Look towards the proliferation of new simple sites like Urbanspoon and Menupages which are feeding from the shortcomings of restaurant and cafe websites for inspiration.   Know clearly what functionality you require from your website prior to
communications with a web designer.

Share

Do you buy or start your own café?

The first question we’re often faced with is the dilemma of buying a pre-established cafe or starting and opening our own  cafe.   And quite often for those new to the industry the choice is buying a pre-established business, but there are a few options available, below I will outline the tradeoffs for all options in point form.

Buying a pre-existing failing café

Advantages                          

Purchase price is usually lower

Pre existing infrastructure & stock is provided for

Council permits are pre- Acquired

Ability to quickly fix and sell for profit.

Disadvantages

Bad will may need to be overcome

New system implementation required

 New marketing required

Renovations Required

Point Of Difference needs Establishment

Who Should Consider This Option

Experienced Café Operators who have successfully implemented a system with good results.

Those familiar with nuances of café business success.

 

Buying a pre-existing profitable café

Advantages

You have instant cashflow

Goodwill

Preexisting System that work

Preexisting Staff and Management

Disadvantages

Expensive Purchase Price

Difficult to build and sell at higher price.

Preexisting Systems can be difficult to change.

Who Should Consider This Option                   

New business operators who have confidence in their learning abilities.  Experienced café operators who want instant cash flow.

Building a new café

Advantages

Building a new brand

New Depreciable Equipment

No Preconceived Perceptions of business

Flexibility in applying branding ideas

Easy to implement new system

New Staff adopt new culture

Disadvantages

No goodwill

Location risks

High Setup costs

Negative Cash flow during building and first few months

Implementation of systems can be time consuming.

Who Should Consider This Option                   

Experienced Café operators who want to develop or expand a brand.  New well researched and planned entrepreneurs.

Buying a new cafe franchise

Advantages

Systems are in place

Ongoing support available

Location is often selected for you

Buying Power  (not in all cases)        

Goodwill               

Disadvantages

Some franchises have exceptionally high startup costs, often higher than what it would cost to start your own business.

Ongoing Franchise Fees

Marketing/Advertising Fees

Inflexible systems        

Dependant on franchisor success

False expectations

Location performance risk.

Outgrowing Franchise is a common problem also

Who Should Consider This Option

New business operators willing to invest more for a proven system where marketing and business systems are pre-established.

Ideal for those happy not to deviate from or outgrow the system

Buying a pre-existing cafe franchise

Advantages

Established presence brand and customer base

Systems in place

Preexisting Staff

Ongoing support available

Proven Location

Buying Power                           

Goodwill               

Disadvantages

Paying a premium for pre-existing business. 

Pre existing staff

Ongoing Franchise Fees

Marketing/Advertising Fees

Inflexible systems        

Dependant on franchisor success

Outgrowing Franchise

Who Should Consider This Option

As per ‘Buying a new franchise’ but a greater premium will be paid for the security of a successfully proven location.

Obviously there are many things to consider as can be seen above, franchises are definitely only suited to those happy to work within a certain framework, and buying or building a café either profitable or otherwise will depend strongly on your financial position.  What I have found in my personal experience is that you make of your business what you put into it. 

Do your research and due diligence and be confident within yourself and your abilities that you can make it work.  When it’s your own business, failing is not an option.

Share

Cafe Job Descriptions

Have you ever heard yourself or one of your manages saying “why hasn’t someone put this away?!”  It is all too common for tasks to be dismissed when nobody is personally responsible and accountable for the task being completed.

All tasks no matter how big or small need to be allocated to somebody.  Regardless of whether you only have two staff or thirty staff each task within your café or restaurant needs to be allocated.  When staff know they have a responsibility which is a measure of their job performance things just get done.  There is no talk of “I thought so and so would do it…”

The best way to begin the process of allocating duties is dividing your business operations in separate areas and establishing where your staff strengths lie.  Allocate tasks within an area to the person most likely to excel at those tasks.  My rule of thumb with all of my staff is this: “I don’t care if you complete the task or somebody else does, but it not being completed at the time required will be entirely your problem, and you will be the person I will be speaking with.”

It can be all too easy employing staff in general areas within your café like a cook, a kitchen hand or a waiter, but job descriptions need to be more specific than serve customers or prepare breakfast dishes.  They need to include what seem like trivial items like: empty all bins in kitchen at the completion of your shift, or back-flush coffee machine every evening and restock sugars coffee cup lids and napkins.  A general job description such as maintain your work area is far too general.

I personally have general job descriptions issued at the time contracts are signed by employees, and at the time of their induction I have my managers allocate very specific responsibilities to each staff member.  It’s important to take advantage of new staff, as at the early stages of their employment staff appear to comprehend more clearly and retain information like expectations much better.  Perhaps the topic of another post at another time.

Allocate even the smallest tasks in your café and the daily running and maintenance of your café or restaurant will become much easier to manage.

 

Share

First impressions count, from the door the customer has to push to enter your cafe to the display cabinet at your counter showcasing your food.

So far I should expect all reading would agree but how many of us as cafe owners diligently observe what our customer may potentially be observing.  And how many of us impress upon our staff how important it is that our display cabinet looks fresh at all times?  The customer does shop with their eyes, if  a display is colourful and
abundant the customer is significantly more likely to buy something as opposed to a customer looking into a half empty display cabinet.  I’m often faced with the objection from managers and other cafe owners that they’re just not busy enough to fill the cabinet.  This is the paradox, if there is not food to sell, you won’t sell food.  If there is not an abundant amount of food to sell, you will not sell an abundant amount of food.  This of course lies true if the cafe owner has done his homework and is situated in a position with a market enough to sustain a successful cafe.  If you’re market is there you cannot afford to fall into the downward spiral of reducing your food on offer.  As you’ll have less food for the next customer and he/she will not return another time in the knowledge that you have a limited amount of food.

Food looks best in abundance.  A lonely sandwich on a tray cannot compare to a platter full of colourful sandwiches.  A bain marie tray half full of noodles is not as appitising as a mountainous pile of noodles garnished with fresh green coriander.  Ingredients should be celebrated and showcased.  If you have baguettes on offer, they shouldn’t be wrapped they should have the opening facing the customer with the ingredients flowering out of the baguette.  Wrapping your cakes and muffins in plastic wrap to keep the moisture in is an absolute no no, but a regular observation I make in struggling cafes.  They should be on trays and composed in the best manner possible to show off the sweets.

Display cabinets frame our food, they should be well lit and uncluttered without things on top of them or next to them.  All the attention should be drawn to the contents of the cabinets not elsewhere and with that said your cabinets must be crystal clear.  If customers have a tendency of leaving fingerprints on your display glass, it should be a staff procedure to have the glass cleaned regularly through the day.

With a stunning display and a clean cabinet that isn’t detracting from the amazing products on display within them, you should also ensure that all signage clean and uniform. There really is no excuse for using a marker to black out an old price and then scribbling a new price below.  Spend some time designing simple signage for all of your products and ensure it is uniform throughout your cafe.

Often your display cabinet is the first thing that greets your customers.  Spend the time it deserves on presenting it well and you may find less customers walking in and then out of your cafe.

Share

Stop asking staff to do things more than once

As cafe owners we’re so often so busy doing what we do that we take little time to assess the efficiency of what we’re actually doing.  I spend a good part of my day motivating and educating my managers and other cafe owners on how to do things more efficiently.  More specifically how to communicate with their staff more efficiently.  Because in communicating more efficiently tasks are performed more efficiently. 

Only yesterday I asked of one of my managers to delegate a job so that it was done today.  Following that communication I walked into the cafe office and overheard the manager say to an employee ‘When you have time, can you please mop up that floor in the corner and try to remove that stain.’  I immediately knew why I was having problems with the management of this cafe, it was the communication that was coming from my manager.  Although her request was straightforward and polite, it was very open ended.  She opened with ‘when you have time’.  This is a presupposition that perhaps the staff member will not have time. The statement also leaves itself open to dismissal by the staff member as they know they don’t really have time in the busy cafe environment.  The opening to this statement also provides the staff member with an excuse for not completing the task ‘sorry I just didn’t have time’.  As there was also no timeframe for the completion of the task the staff member could easily interpret the request as not too pressing.  The manager went on and asked that the employee ‘try’ to complete the task, again subconsciously planting the idea that that task will by trying and perhaps difficult to complete.  The correct manner to which the manager should have composed the request is ‘Please organise to have that area mopped and the stain removed before lunch.’  This gives the manager a timeframe to which they need to organise their time and staff to have the job completed, and works on the premise that it will be done before lunch.  The last step in ensuring that either you or your manager are being listened to is to ensure the job is done within the timeframe outlined.  If staff know that work will not be checked it will not be done or done properly.  Ensure you make a habit of commending staff on good work and having staff correct sub standard work.  When staff know that you follow things up and don’t forget about requests, you will be amazed at the initiative and quality of work completed.  One clear observation I’ve made from one cafe to the next is managers and owners who don’t let anything go unnoticed, unremarked and corrected immediately, almost always have a team of reliable and efficient people behind them.  This is a result of inferior staff simply not staying with the team, and all other staff showing initiative at all times in order to avoid correction and increase the chance of praise and recognition. 

It really is a case of ‘you get what you accept’.  Give your staff freedom to think and trust that they will find solutions to problems.  This will free up your time in the long run and breed a trust in your employees where you can be confident that your staff will do what is needed to meet the results you request.

Share

Access any of your computers from anywhere in the world

Running multiple cafes simultaneously calls for as many tools as possible to help you avoid driving around all day.  One of those tools is teamviewer.  

This program allows you to view and control any computer you have set up team viewer on.  Teamviewer is very popular amongst IT Support companies, as it allows the technician to dial into the customers computer and perform maintenance remotely.  In the café and restaurant industry we are also sometimes faced with IT issues that can be quite difficult to communicate over the phone, especially when you cannot see the screen and what is actually happening.  That’s where teamviewer comes in.  Imagine your manager calling you with a quiry about where a particular file is saved on the computer.  They’re not too computer savvy so they’re having all sorts of problems following you as you direct them over the phone.  With teamviewer you can dial in even from your phone, take over their computer perform the task they require and be done with it.   Only recently I’ve even installed it on my Point Of Sale so I can now view my staff remotely on CCTV and watch what transactions are taking place on their register.  I even call up my x or z read on the register when it’s quiet to see how business is going.

If you have any tech tips for running your cafe or restaurant share them with our community and leave a comment.

Share

What you must know about opening a cafe or coffee shop

Establish if the café is being run efficiently.

When purchasing a café or coffee shop ensure you collect profit and loss statements and balance sheets prepared by the vendor’s accountant.  These will tell you the story behind the café or coffee shop you’re looking to purchase.  Using Benchmarking, the same tool that the Australian Taxation Office utilizes to establish if a business owner is being fraudulent in the declaration of profits, you can establish whether or not a business is in fact the prospect it has been painted as.

Increase your return on investment by reducing your purchase cost.

More often than not the buying and selling of a business is not an equitable win win scenario.  Usually it is either an inexperienced business purchaser overpaying for a business or an exhausted and frustrated flailing business owner cutting their losses and selling for what they can.  The key to buying business is to ensure you are not driven by emotion and purchasing the café or coffee shop on the ‘look and feel’ of the shop or the taste of their coffee.  The new business must tick all of your boxes not just some.  Purchasing low will give you a greater return on investment, and a greater probability of selling your business down the track for more than you purchased it.  This is one of the easiest ways to make money in your new business.

Calculate the value or selling price of a café or coffee shop.

Never make an offer on the business relative to the asking price.  Many business owners have a selling price in mind based on no reasonable calculation.  The annual net profit of the business multiplied by 3 – 4 is a good place to start.  This will allow you to pay off your business in 3 to 4 years and begin making money within the term of your lease. Obviously a good place for you to open negotiations is their net profit multiplied by 3.  This is not a clear cut rule, but my market observation and what has become common practice in the industry in Australia.  There are factors that can influence this formula which I’ll discuss in a later post.

Work in the business prior to purchasing.

It’s not uncommon for business owners not to declare their full turnover or takings in their business.  This is highly illegal and employed to evade tax.  Analysing profit and loss statements and calculating the percentage of material purchases against turnover will quickly show this.  The business owner may quietly suggest that the business makes more money than what he/she is showing on the financial reports.  This may be the case but you should never take somebody’s word for it when investing.  A simple solution to this is to work in the business for a period of time.  In doing so you can quickly identify if there is money being skimmed from the registers and sales not being recorded.  You can calculate staffing levels and wage estimates, and also calculate daily material costs (that is food and supplies purchased).  Working in the café will also identify if any of the equipment you could be paying for is faulty or in disrepair.  It’s a horrid story hearing of people buying a café only to have to repair and replace most of the plant and equipment.

Understand your Café or Coffee shop lease

Make sure you go through your lease very carefully, it’s your responsibility to understand this document.  Having your lawyer go through it may uncover a few things and it’s always recommended that you use a lawyer to identify clauses in your contracts that may not be in your favour, but nobody understands your business and requirements better than you, and certainly nobody cares as much as you do.  Examine the term of the lease and any options.  I would not be paying full valuation on a business if there was little left on the lease and you have no assurance from the landlord that a new one can be drawn up at the sale of the business with a full term and option available.

There are more factors which need to be considered when purchasing a café and I would love for you to share some of your experiences here with everyone.  If you’ve had a bad experience purchasing a café or a great one leave a comment and share the knowledge.

Share

The History Of Coffee

Coffee Bean History

There are a few circulating stories about the discovery of the effects of coffee and its initial consumption. They all revolve around an Ethiopian goat herder called Kaldi. It’s said on one fateful day Kaldi noticed goats in his heard behaving inordinately energetically. On further observation he linked their behaviour with red berries growing on some bushes which they were seen eating.

Curious; he tried the berries and found he too began to feel animated. It wasn’t long before he shared this new discovery with others and the berries became popular throughout the land. It’s not known if Kaldi was a member of the Galla tribe in Ethiopia but they are said to have consumed a mixture of ground berries and animal fat earlier than 1000AD.

Arab traders soon encountered coffee in their travels bringing it back to their homelands and cultivating the plant on farms. It was these Arab traders around 1000AD who were also likely to be the first to have boiled the beans consuming them as a drink identified for its ability to prevent sleep.

Bernard Lewis, in his “Istanbul and the Civilization of the Ottoman Empire”, tells of the ottoman scribe İbrahim Peçevi who wrote of the first coffeehouse in Istanbul:
“Until the year 1555, in the High, God-Guarded city of Constantinople, as well as in Ottoman lands generally, coffee and coffee-houses did not exist. About that year, a fellow called Hakam from Aleppo and a wag called Shams from Damascus came to the city; they each opened a large shop in the district called Tahtakale, and began to purvey coffee.”

The demand for coffee around this time escalated to such importance that soon it was legally acceptable for a woman to divorce her husband if he was not able to supply her with her daily coffee.

Around 150 years later coffee was introduced to Italy by Italian traders. Although initially declared an infidel threat by the Vatican in fear of Ottoman influence, Pope Clement the VIII after no doubt tasting the drink himself was quick to declare it acceptable for Christian consumption. In 1645 the first of what would be many coffeehouses opened in Italy.

In 1650 the fist coffee house in England The Grand Cafe is alleged to have been opened in Oxford. The café exists to this day though their speciality is now wine. Soon thereafter more and more cafes began to open around England. They became a place to share ideas and news of the day. It was from here the term ‘Penny Universities’ was coined. A penny was the price of admission, an affordable sum, which allowed the well to do to share ideas with those who were less fortunate. Two years later, a Greek from Ragusa named Pascal Rosea opened the first coffeehouse in London, in Cornhill. In 1668 Edward Lloyd opened his famous Coffee House in Lombard Street, London, which soon became a popular congregation for shipowners and sea merchants.

1668 was a pivotal year in coffees adaptation into north American culture as this was the year that New York City’s favourite breakfast drink beer was replaced by coffee.

Pascal Rosea after opening the first coffee house in London also established the first coffee house in Paris France in 1672. The café stood alone as a coffee outlet in the city until Café Procope opened in 1686. Café Procope is still in existence and boasts a history of being the gathering place of historic figures such as Voltaire, Denis Diderot and Rousseau. Café Procope will also argue it’s right as the birthplace of the Encyclopédie, the first modern encyclopedia.

Europe’s first Viennese café is commonly accepted as being opened by a Greek merchant named Ioannis Diodato in 1675. It was coffee houses in Vienna that established the process of filtering out the coffee grounds adding sugar and milk. A vienna coffee is one prepared with cream, this perhaps a throwback to Viennese influence.

It was circa 1690 that the coffee plant was smuggled out of the Arab port of Mocha by the Dutch and transported and farmed in new colonies in Ceylon and Java. Java is now a well known bean origin.

The mayor of Amsterdam gave Louis XIV of France a small coffee bush as a gift in 1714. Louis XIV treasured the tree highly and had it tended to in his royal greenhouses. Years later in 1723 a French Captain who; whilst visiting from his station in Martinique managed to convince the kings physician to source a cutting from the bush. His intention was to cultivate coffee on the lush volcanic island of Martinique. This cutting may very well have seen up to 90% of the worlds coffee originating from this plant and it almost didn’t make it to Martinique due to rough seas, attempted theft and pirates. Fifty years later there there were 19 million coffee trees which were noted in an official survey.

1727 was a pivotal chapter in the proliferation of the coffee tree. It was in this year in Guianna; at a time of border disputes between France and Holland, a Lieutenant Colonel Francisco de Melo Palheta manages to smuggle a plant from the French. During his time there arbitrating the dispute, the colonel became involved with the French governor’s wife. At the time of their parting the governor’s wife presented to him a bouquet of flowers which also contained coffee tree clippings and seeds. Lieutenant Colonel Francisco de Melo Palheta returned to Brasil introducing on his arrival the coffee tree. Brazil would unbeknownst to him at the time, become in years to come the largest producer of coffee in the world.

In 1773 it was declared at Boston Harbour in the US that it shall be every American’s patriotic duty to drink coffee. After heavy taxes were imposed on tea exported to America, colonists in the new nation began a revolt by throwing tea into the Boston Harbour, thus the name ‘Boston Tea Party’. This action by the Boston Tea Party not only set the wheels in motion for the revolution but it also led to the adaptation of coffee as America’s choice drink.

On August 11 1903 Satori Kato a Japanese Chemist working in the US filed for patent the “Coffee Concentrate and Process of Making Same,” the first patent for instant coffee. That is not to say water soluble coffee was not in existence at the time, although it had a very short shelf life and went rancid very quickly. It was due to this that the idea of instant coffee disappeared as soon as it emerged prior to Satori Kato. In his April 1901 patent application Satori Kato explains the problem and how he solved it:
“ The volatile oil is mixed with the solid aqueous extract, but I have discovered that an attempt to effect this without other precaution results in the production of a pasty sticky mass which does not resist rancidity, but quickly spoils under the usual conditions of transportation and storage. I have further discovered that the difficulty arises from the presence of in the concentrate of the non-volatile coffee-fat or at any rate is overcome by its removal, which, I believe, I am the first to effect.
I separate the volatile oil and the fats from the coffee and remove the fibre and reduce to a hard substance. This hard substance is reduced to a finely divided condition and a portion thereof is pulverized and thoroughly mixed with the pure volatile oil and dried, after which this mixture is mixed with the remainder of the hard substance and used in this granulated or flaky form or pressed into tablets.”

In Germany around this time Ludwig Roselius a German Coffee Merchant develops the first commercially successful decaffeination process in Bremen Germany with his assistant Karl Kimmer. This process used benzene or methylene chloride as a solvent to remove the caffeine. Ludwig Roselius founded the brand Sanka to market his decaffeinated beans. Today the use of Chemicals to remove caffeine is no longer in use.

Another inventor, Englishman George Constant Washington, living in Guatemala noticed powdery coffee build-up on the spout of his coffee carafe, He soon goes on to develop his own instant coffee and mass-produces his brand Red E Coffee in 1906. Red E Coffee was procured as rations for US troops during World War I. Nescafe soon developed an improved process and started marketing their brand in 1938. They went on to supply the US military with coffee rations during World War II. By 1940 the US was importing up to 70 percent of the worlds coffee harvest.

Achilles Gaggia and The Birth Of Modern Espresso
The Gaggia story begins with Mrs Rosetta Scorza, the wife of Sr. Cremonese a coffee grinder technician in Milan who patented the idea of a screw piston which forced water through coffee in the 1930s. When Cremonese died leaving Rosetta Scorza with the patent she was largely unsuccessful in interesting manufacturers with the design.

We can assume Gaggia a bar owner was perhaps approached by Rosetta, as we know in 1938 Gaggia lodged a patent application for a piston mechanism doing largely the same thing as the Cremonese patent. Gaggia went on to further develop and patent a screw piston forged from aluminium and brass, the distinct difference this time is that he had connected this system to a boiler. Gaggia experimented with various styles and materials including surprisingly asbestos in an effort regulate temperature. Gaggia’s design did encroach on Rosetta Scorza’s patent and led to Gaggia making a payment in using the design.

Gaggia went on in 1947 to patent a spring operated lever and piston mechanism which was totally different to previous patents, this paved the way for pressurised coffee and the machines we know of today. This new patent allowed for pressurised water pushed through the coffee independently of the pressure in the boiler, it also allowed the temperature to be regulated with a quicker and stronger extraction. Gaggia was now producing coffee unlike any other seen or tasted before, his extraction process was producing a rich golden crema, and perhaps he was a little unsure of it himself, but being the salesman he was, he wasted no time in installing his machines in bars and advertising the product with a sign on the window saying “Caffe crema di caffe natural” – coffee cream from natural coffee.

From there the adoption of the new style coffee gained momentum and soon Gaggia was exporting his machines worldwide aiding in the proliferation of espresso coffee all over the world.

Share
Pareto's Rule in Cafes and Restaurants

The 80 20 Rule in Cafes and Restaurants

Increased turnover and sales in your café, takeaway or restaurant does not equate to increased profit.
Too often as business owners we focus so heavily on increasing our sales in the hope that our business will become more profitable, when the unwanted truth is often not in the turnover but the efficiency of the business.

An inefficient business that makes small sales or a small turnover has the potential through small oversights to make small losses.  Conversely a large inefficient business making large sales and large turnovers has the
propensity to make large losses.  I call this the rule of relative inefficiency.  Profits will only ever be relative to sales when you’re business is running efficiently.  That is when your wages, cost of goods purchased, and overheads are relative to your sales.  I have seen and also owned and run small well run cafes that have been more profitable than larger more inefficient cafes.    Try
the following principal to help you tighten the bolts on your hospitality business:

Investigate Pareto’s Principal, the 80/20 rule and how it applies in your business.   Pareto’s law suggests that the 20 percent of something will be vital to your business and the 80 percent trivial or that 20 percent of your effort will result in 80 percent of your results.

 One example of Pareto’s law in the instance of café, takeaway and restaurant management dictates that 20 percent of your products can be attributable to a greater level of profit than the other 80 percent of your stock.  I was looking over my Coke ordering the other day and identified the 80/20 rule clearly there.  The vital 20 percent was in the sales of black coke and water, which far outweighed the sales of all other coke varieties.  I have also identified Pareto’s law in the gross profits our products generate.  If you consider that perhaps as in the example of Coke sales above that you are making little gross profit on the sales of the 20 percent (Black Coke and Water) but you are making a good gross profit on the other 80 percent of coke products.  You may find overall your cost of goods sold as a percentage of turnover isn’t too good.  With the required adjustments on either the purchase price, the sale price or both on the 20 percent you will likely see a marked improvement to your overall bottom line.

If you consider that 20 percent of something is potentially responsible for 80 percent of the results, as a business owner or manager you should be spending some time considering whether or not you’re allocating more of your time to the 20 percent or the 80%.  You should consider outsourcing or delegating the 80 percent of tasks that are essentially trivial and largely inconsequential and focusing on the 20 percent that counts towards your business growth.

Consider the following applications also 80 percent of your stock comes from 20 percent of your suppliers. Are you misallocating your time with suppliers?  Also 80 percent of your sales will come from 20percent of your staff.  How should this affect your roster?  20 percent of your staff will cause 80 percent of your problems, but another 20 percent of your staff will provide 80 percent of your productivity. Can this aid in cutting back rosters? Absolutely, but you must learn to identify the attributable 20 percent.

What Pareto’s principal is ultimately trying to teach
us is to focus on the 20 percent that matters and remember that often 20 percent of something is responsible for 80 percent of the result.   Do this and your business will profit.

Share