In an industry always battling with slim margins, the current economic climate is particularly unfriendly. After the pandemic foodservice operators must now deal with rising food and energy costs, a shortage of labor, a trend towards smaller kitchens and many other pressures. So, how can operators can find true efficiency and do more with less?
The pandemic put the foodservice sector under unprecedented pressure, with a near total shutdown in travel and social gatherings forcing some operations to pull down the shutters for good. Others had to rapidly switch to a delivery model, all the while preparing for a limited reopening. Now that a new normal has emerged, the pressure remains, though its nature has changed.
In the new economy, many workers are not willing to return to the foodservice industry. Skilled and motivated staff are in short supply. The global economy is one of rising inflation, and both food and energy costs are skyrocketing – a situation exacerbated by the war in Ukraine. Simultaneously, kitchens in new developments and refurbishment projects are shrinking.
Amid these pressures, how do operators continue to run viable businesses and still push forward major trends such as sustainability? The only way to flourish in such an environment is to maximise efficiency in every way possible.
The National Restaurant Association (NRA) recently released its 2023 State of the Restaurant Industry report which highlights the pressures facing the US industry, but it also speaks to problems faced around the world.
The NRA expects growth in revenue to continue, it will be driven in part by higher menu prices. Furthermore, the industry’s workforce is projected to grow by 500,000 jobs in the US in 2023, but finding employees will be very challenging. In the NRA survey, only 1 in 10 operators expressed a belief that recruiting and retaining employees will be easier in 2023.
Furthermore, 92% of operators say the cost of food is a significant issue, with 93% reporting higher total food costs than in 2019. A huge 89% of operators say labor costs are a significant challenge. More than 40% are planning investments in equipment or technology to improve front- and back-of-house productivity, and 58% say using tech and automation to alleviate labor shortages will become more common.
With many operators expecting to make less profit in 2023, where can they look to make changes that will improve margins?
The search for energy efficiency is nothing new for foodservice operators and equipment manufacturers. In fact, it has been a dominant theme as sustainability has become a priority. The challenge, however, is that cutting energy use and costs usually requires the purchase of new equipment, which can be challenging when margins are thin and the benefits are realised in the long term.
“The incorporation of equipment with new technology is a must,” says Juan Matamoro FCSI, CEO at Central American consultancy Food Gurus. “In Latin America, much of the equipment uses gas, because there is a belief that the cost of electricity is so high that it makes the purchase of electrical equipment illogical. In our work process as consultants, the biggest challenge with restaurant owners is to demonstrate that they can have a more stable operation and improve utility expenses.”
The adoption of electric cooking equipment has been slower in the US than in Europe, where induction hobs and other electric equipment have achieved strong market penetration. In the long term, electricity offers a better cost profile than gas, which is under greater cost pressure since Russia – a major supplier of natural gas – instigated a war in Ukraine.
“In California and nationally, there is a path to reduce energy footprint and be more sustainable,” says Nahum Goldberg FCSI, NGAssociates Foodservice Consultants, Inc. “Electrification is a priority and a better pathway for the future. In fact, some clients are looking to become net energy positive and water positive.”
“Eventually, new construction in California must be all-electric for commercial kitchens,” he notes. “Even though this is not the case with all refurbishment projects, many owners and developers choose to go all electric anyway, Local agencies and utility companies are actively promoting these moves.”
Electrification seems to be part of best practice when it comes to controlling energy costs, but as Goldberg points out there is a further step – becoming energy positive. This means that operators can meet some of their own energy needs by adopting renewable energy systems or, going one step further, recycling food waste into energy.
“There is already technology that is recycling food waste to run generators, let alone wind, solar and more,” says MAS consultant Rudy Miick FCSI, president of The Miick Companies. “That said, fiscal management is a must, as is budgeting for replacement. Equally important is having the discipline to care for equipment the way a pilot would care for an aircraft.”
Maintaining equipment to run optimally will help keep energy costs under control, as will improving control over its use. As IoT-enabled devices become more common, operators will be able to turn on and shut down equipment remotely, precisely programme its usage and get a clear view of patterns and costs of energy use. What can be measured can be managed and, ultimately, optimised.
Fighting food inflation
Western economies have become accustomed to cheap food, but now prices are rising sharply. One reason is bottlenecks in the supply chain, due in part to the war in agricultural powerhouse Ukraine. Another factor is the rising cost of growing crops and rearing animals, due to inflation in water and feed prices.
Higher input costs lead to higher prices for consumers, but the foodservice industry is also trying to encourage people to eat out, so pricing is a thorny issue in many sectors. Once again, there is a need for efficiency in the purchasing and use of ingredients, but how does that translate into best practice? Part of the answer is to re-examine the supply chain and, where possible, source locally.
“We all need to be buying what is produced around us,” says Jose Souto, chef lecturer at Westminster Kingsway College, former House of Commons chef and an expert in making produce stretch in the kitchen. “Chefs love the idea of being local as it requires fewer food miles, and they can provide the backstory about where produce has come from. It annoys me when restaurants don’t emphasise where they have sourced local ingredients.”
Souto gives the example of venison from Scotland, which is iconic and instantly conjures an image of quality, history and sustainability – all of which customers are eager to buy into.
“Provenance is everything,” he remarks. “It tells our customers why they might be paying a little bit more. Customers were looking for provenance pre-Covid, but now we spend less money on high-end dining out. The middle classes go to supermarkets more and Michelin-star restaurants less, The tier below only goes out on special occasions, goes to supermarkets much more and has fewer takeaways. People focus on price more.”
If people know why they are paying more they may be persuaded to spend more on dining out, but operators must also look to streamline their sourcing of ingredients.
“In Latin America, the biggest challenge is the increases in raw material costs, which has put on a lot of pressure to constantly raise prices,” says Matamoros. “So, you must be very innovative to effectively manage the price of the dishes on the menu. The shortage problems have steadily disappeared, but we have still sought more local suppliers.”
Another key weapon in the fight against rising costs is to get more out of what you buy. Tackling food waste is a moral imperative as well as a financial one.
At present, wasted food in the UK costs the industry more than £3bn every year, and it is estimated that 75% of that food waste could be eaten, according to Guardians of Grub. The UK’s hospitality and foodservice industry throws away more than a million tonnes of food every year – equivalent to 18% of the food it purchases.
These statistics become even more shocking when there are kitchens that prove zero waste is possible. Take, for example, chef Adam Handling’s zero-waste kitchen at Ugly Butterfly originally on King’s Road, London, but now transferred to Carbis Bay, Cornwall. The restaurant has a short but constantly changing menu using locally sourced, quality ingredients. In Cornwall Handling incorporates foraged ingredients into menus based on hyper-local ingredients.
Other zero-waste concepts in the UK include Dougie McMaster’s Silo restaurant, one outlet of which was home to a huge aerobic digester, named Bertha, into which all food waste would be deposited. John Rowlands of Our Farm in the UK’s Lake District took Simon Rogan’s restaurants to zero food waste, partly by implementing Ridan composters.
“Don’t underestimate the cost of waste,” says Sam Ward, managing director of Umbel Restaurant Group, the company behind Simon Rogan’s restaurants. “The hospitality industry is a helpful resource – if you don’t know what to do with waste, shout out on forums or Instagram. Ask what you would do with fish skin, veg peel and so on. The industry is happy to work together. Preserving and pickling isn’t for show – you buy ingredients at their cheapest and preserve them for use throughout the year.”
Sustainable livestock supply chain experts the Buitelaar Group are among those enterprises that are revolutionising the way meat can be used more efficiently. Its British Rosé Veal, for example, comes through an integrated and fully traceable supply chain, allowing each animal to be tracked from farm to fork.
“The classical education of chefs doesn’t allow for that kind of thing and products are discarded,” says Souto. “Now, there is a different approach. Even composting allows you to grow more vegetables, so there is a circular approach to recycling the waste. Any good foodservice establishment should be looking at composters. Be clever about waste. Ask whether you can use it or, at the very least, put it in a composter to help grow more vegetables.”
“Have a good composting system in place or have an arrangement with local composter,” says Ward. “The first step is to look inside the bin and ask yourself, did it have to go there? The answer is ‘no’ to most of your food waste.”
While zero-waste kitchens may not be within reach for every foodservice operation, there are still ways to optimise the buying and sourcing processes.
“Think delivery to delivery, rather than about filling shelves,” says Miick. “Buy only what you need and focus on tracking and budgets. Once again, discipline and measurement are key. This is simple and has been the case for years.”
Another simple approach is to extend the shelf life of ingredients as much as possible, while maintaining the quality of your expensive ingredients. For instance, if fruits and vegetables are washed on arrival with an antimicrobial wash in an advanced washing system, the shelf life and quality across the shelf life can easily be more than doubled.
Labor: the workers’ revolution
According to the NRA’s latest survey, 63% of full-service operators and 61% of limited-service operators say their restaurants do not have enough employees to meet customer demand. A huge proportion of operators (87%) are actively looking to hire, but 79% say they are already having difficulty filling open positions. Much has been said about the labor shortage, but is that the real reason hiring is so hard?
“There is no labor shortage, there are only management mistakes,” says Miick. “Finding and keeping the right people is about paying them and providing benefits that are perceived as engaging. Now, we have the opportunity to have a deeper dialogue about what operators can do to find, keep, engage and celebrate good people instead of dealing with a lack of loyalty and high turnover.”
For Miick, better wages and benefits are the starting point, but the endgame is defining an engaging culture and creating a rewarding environment. “Coach to the positive, instead of slapping hands and catching people doing work wrong,” he says. “Coaching is needed instead of policing, and dialogue is the key, not robotics. Staff turnover is about culture and internal brand experience. The story about having no good people out there is a major example of a symptom being mistaken for a root cause.”
Miick believes that there are always good people available, and also a lot of poor management and poor training, as well as a lack of investment in people. “We have not defined what excellence is, so people don’t know what it means to be good at their job,” he explains. “We need to be clear and precise about the skills and attitude that are needed. Clarity is key. The relationship between employer and workers must be based on defined excellence and defined performance.”
Miick is not alone in thinking that the smart way to attract new staff and avoid churn is to create a positive management style and a friendly work environment. The experience of staff extends to the experience created for customers. “One issue we focus on is the staff environment in the kitchen,” says Goldberg. “They need space to work in, functional equipment, ergonomic layout and workspaces, and they need good air quality and natural light to create the right platform to work in.”
“For instance, dishrooms are often neglected,” he adds. “They are often a pit, an afterthought, with a lot of steam, chemical smells, humidity, and that has to be addressed in the design. Switching to electric cooking equipment removes unhealthy by-products of gas combustion from the kitchen for overall improved air quality. As a bonus, electric cooktops heat up quicker and are also much easier to clean.”
Fortunately, there are signs that this change in attitude is taking hold in the industry. “There is a perception of hospitality as not being a desirable career,” says Ward. “Although this is currently changing, as working hours and conditions are getting better, for a long time hospitality has not been seen as attractive for those wishing to pursue a long-term career.”
The shrinking kitchen
One trend that cannot be ignored is the shrinking of kitchen spaces. The question of how to do more in less space is, therefore, fundamental to the decisions operators make about labor and equipment. Today, operators want equipment that is more efficient, simpler to use and performs more than one task.
“They are looking for high levels of automation and process control as well as space-saving equipment solutions that reduce energy, water and chemical usage,” explains John Cantrell, president of Immersion Systems, Inc. “They are looking for single pieces of equipment that can perform more than one task or process and in a small footprint.”
Cantrell’s company has recently introduced a system called ImmersaFlex, which has a small footprint and performs several thawing, de-glazing and washing processes. “Look for products that can do more than one process in a single footprint,” he says. “Equipment must be designed to be more compact and still provide excellent throughput. This can be challenging but if manufacturers are willing to invest in development this can be accomplished.”
Taking a more contentious view, Miick believes that small can be beautiful. “Smaller is efficient, until it’s too small,” he remarks, “It is not so much that kitchens are small, it is more that workspace is under-utilised or poorly designed.”
Undoubtedly, multifunction equipment will address some of the challenges that come with optimising the use of space, as well as reducing some of the need to hire more workers. AI and robotics can take over some manual tasks, and equipment is becoming increasingly easy to programme and, to some extent, more autonomous. But it can be expensive.
To control costs, equipment leasing is becoming a more viable option, as it helps operators to preserve cash and have consistent monthly payments.
“There are times when it’s smart to lease equipment, and there are times to purchase,” says Miick. “It depends on cash flow, profitability and working capital. Dishwashers are classic examples of smart to lease equipment. At the same time, too much leasing and cash flow or profitability can be easily jeopardised.”
“Equipment leasing has become a new trend, especially with equipment that is a challenge to acquire due to its high price,” observes Matamoros. “Leasing of blast chillers is more common in Latin America because operators are still not very familiar with them, and to make a big investment you must first understand all its technological advantages.”
Cost efficiency is key in the current climate, and it is forcing operators to rethink some of the decisions made during the pandemic. For instance, delivery was a must during lockdowns, but high third-party fees are making it unviable for a growing number of foodservice outlets.
For instance, the NRA reports that 13% of operators have eliminated third-party delivery to better manage profitability, as well as increasing menu prices, changing menu items, reducing hours of operation and postponing plans for expansion.
In some sectors, more radical structural changes are required to keep costs under control. “Commissary kitchens are more of a topic now, and foodservice providers, tech companies or school districts are using them to create a consistent, quality product and control labor costs,” says Goldberg. “Finish cooking or retherm is done at each satellite location. Less labor is needed and a lower skill set is required to maintain consistency, but the quality can still be there.”
In terms of simple hacks that can help operators to be more efficient, much depends on the scale of an operation and its market segment, but there are always general principles that can be applied.
“While new, advanced equipment can be expensive, operators should look for a long product life and low cost of operation,” says Cantrell. “If an equipment manufacturer is not confident in standing behind a statement that their equipment will hold up for a minimum of 10 years in a commercial kitchen, you should take a step back.”
In terms of labor, creating the right working environment is of prime importance, and that can simply mean a change in leadership style or creating a cooler, calmer or more ergonomic workplace.
Reducing food waste and extending the shelf life of ingredients can be a matter of small and simple changes, while remote monitoring of equipment to control operation and optimise energy usage is a viable option if investment capital is available.
“Pay meticulous attention to running overheads,” adds Ward. “The costs you can’t see are the ones causing issues – rents, rates, utilities. Make considered purchases on consumables. Look at everything you do and ask what things cost you the most money. Focus on retention not recruitment.”
The underlying rule is to closely monitor and measure costs in every aspect of the business. What can be measured can be managed, and small but meaningful changes can add up to big savings or productivity gains over time.