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Persuading customers to spend up is key in downturn

Increasing customer spend is the key to lifting profits in the hospitality industry, says foodservice industry consultant Tony Eldred.

Speaking at the Foodservice Infocus Expo trade show taking place in Melbourne on the topic of how to maintain profitability in difficult times, Eldred said foodservice companies which simply increased the number of customers would not receive the same results by more than half.

“If you increase your customers by 25 per cent you can expect to increase profit by 5.4 per cent,” said Eldred. “But if you increase customer spend by 25 per cent you increase profit by 14 per cent.”

Eldred said that hospitality businesses were down across the board between 20 per cent and 30 per cent in customer numbers and spend.

“This situation will not go away quickly; it will take 18 to 24 months for it to improve.”

Eldred, the founder of Eldred Hospitality, told the audience at the Melbourne Convention and Exhibition Centre that there were four main ways a venue could improve its position and avoid falling into debt.

Firstly, improve sales per customer, by training staff to be good salespersons. “Only 20 per cent of staff are naturally sales oriented,” he said.

By training staff to sell higher margin items and increase dishes, customers will spend more per trip.

Secondly, look at the menu. Eldred said lots of restaurants were “unwittingly providing a charity to the dining public.” Portion sizes and ingredients along with not reviewing the menu to keep track of changing market prices are some of the key issues.

Eldred said restaurants that were offering discounted meals during these times, were looking to maintain staff skills and keep seats on bums, rather than actually returning a profit. “It allows them to continue to preserve core teams,” he said.

Chefs are another area businesses can save money. While experienced chefs are required for creating menu’s, costing and training, Eldred said, “they aren’t always needed and most of what they do can be done by kitchen assistants”.

Lastly, given the economic climate, Eldred suggested businesses re-negotiate all their overheads from rent to power, water and even supplies.

“Just because you have signed an agreement does not mean it is set in stone. A landlord would much rather you pay a little less than have you close in two months,” he said.

His last tip to business owners was to delegate tasks to staff, such as researching insurance policies, advertising or supplies, because while it might cost money in wages, they could save you thousands in bills.
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