Specia Report - London Business Mission

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.


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


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.


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


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


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.


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.


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.


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


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


“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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THANK YOU

CONTACTFor more information please contact:

ROGER LOO t: +65 6829 9604 e: [email protected]

www.bdo.com.sg

This publication has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. The publication cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. Please contact BDO Consultants, to discuss these matters in the context of your particular circumstances. BDO Consultants, its partners, employees and agents do not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this publication or for any decision based on it.

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