With rising business rates, staffing costs and food prices taking bites out of a previously lucrative sector, three casual dining entrepreneurs got together to discuss how it's possible to profit in 2019
The challenges posed by rising costs, the power of social media and retaining staff featured in a lively roundtable discussion staged by The Caterer at the Bidfood Festival in Manchester.
Nisha Katona's Mowgli Street Food, launched in 2014, has seven branches and ambitious growth plans. James Douglas's Red's True Barbecue has also grown to a total of seven sites since 2012 and David Fox's Tampopo group, launched in 1997, now operates from six venues.
s the longest-serving restaurateur on the panel, Fox was asked how casual dining had changed in the last three decades.
When Tampopo's first site was unveiled in Manchester, it was the only low price-point pan-Asian and noodle bar in the city. "From there, we have opened some sites and closed some," said Fox. "Various cities have taken to us and others not so much. Now the market is completely different. In the fast-casual sector, the amount of growth has been phenomenal in terms of different offers. It is a much more established and professional market. There is a lot more choice."
Douglas, an estate agent, was going to take a career break after selling his business. "I'd made a barbecue sauce for my mates and everybody liked it. My son, who was six, said, 'You should sell this in the shops.' I thought I'd open a restaurant. I eat in loads, so it can't be much different. It's very different."
Douglas was introduced to business partner and "meat geek" Scott Munroe. "I had some money and he had a good idea, so we opened," said Douglas. "It was heady days. You opened the doors and the struggle was fitting everybody in. Now it is attracting a consistent level of sales. It is very different now."
Katona was a child protection barrister in Liverpool when she decided to launch Mowgli. "I was very aware that what was represented in curry houses was not how Indians eat at home," she said. The food she loved was light and fresh and she became "evangelical" about promoting it to British diners.
Katona admitted she was a "reluctant" businesswoman because she had a good job and security, but the lawyer was driven by a nagging passion for food. "When you are an entrepreneur, it is almost like a disease. This idea comes alive and pokes you while you are asleep at night. I risked my house and gave up my job to launch the first Mowgli in Liverpool."
ona told the audience she has not had a day off in four years and plans to open four new restaurants a year. "You just put your head down and graft," she said, describing herself as Mowgli chief executive, executive chef, marketing director, "control freak and psychopath".
Harnessing social media
Katona said social media had played, and continues to play, a major role in the development of Mowgli. When she started out, she even asked people what the restaurant should be called via a Facebook poll.
"I am so dependent on the views of social media. I live and breathe what people say. They rollock you as well, and you need to hear it. It is their cash that I am asking for."
Katona personally runs Mowgli's three social media platforms on Facebook, Twitter and Instagram, which she said is "possibly untenable and bit mad".
Describing TripAdvisor as "white noise hatred," Katona said users on Twitter, Instagram and Facebook appeared to care. "There is a thread that runs through what they are saying, and if your service in a certain branch is crap, which we sometimes get, then they actually mean it."
Douglas conceded Red's True Barbecue had no idea what it was doing when it opened in Leeds in 2012. "I was an estate agent and Scott was an IT salesperson. We put all our cash into this first site. We would go online and people would say the food is amazing but the service is really shit. And it was, it was absolutely terrible. For anyone who came in that first six months, I apologise."
glas said they used social media to ask customers how they could improve: "It becomes really collaborative. Customers say actually this works, but that doesn't work."
Red's True Barbecue has about 500,000 followers across different platforms. "If you have a shocking weekend, it kicks in on TripAdvisor three or four days later. Twitter is really instant. Twitter is a platform, for me, where people go to offend a lot more. Facebook and Instagram are slightly more celebratory."
If criticism arose, either on social media or directly in restaurants, Fox said it was important to realise "you can't please all the people all the time". "It is a very particular experience going to all our restaurants and some people will not like it. Sometimes, people are not your customer and never will be - and that's fine."
Douglas agreed: "We've had people come in and go, 'It wasn't very American because nobody who works there is American.' Well, that's because it's Liverpool. I used to take it so personallyâ¦ It's not just a meal at a table. You are paying your bills. But if people want to vent, let them go."
Amid all the challenges and business demands, Douglas advised people to stay true to their roots. "We built a restaurant that sold what we liked, in an environment that we liked, with music we wanted to listen to, surrounded by people I wanted to hang out with. Our recruitment policy was 'I don't really want to hang out with that person, so we're not going to give them a job'. If you forget that, steer away from it, and become a little bit more corporate, you have the potential to lose what made it great in the first place," said Douglas.
The challenges of rising costs
Fox made the point that his single biggest cost was staff, with costs rising due to increases to the minimum wage and pensions.
"You cannot pass those costs on to customers," said Fox. "What I say to my team is we have to think about how we become more productive. And the really important thing for me is becoming more productive rather than de-skilling. The emphasis is on how we work smarter."
Fox said he would rather pay a chef a higher salary if he or she could successfully manage higher sales by being more productive. "That can be about investment in equipment, how you structure your dishes, going back to suppliers," he added.
"The other slightly mischievous view is that the fast-casual sector has seen unprecedented growth for so long. As an industry, we probably accepted paying rents and service charges that were too high. We spent a bit too much on fit-out. The customers are going to come and they are going to be happy to pay that.
"One of the paradoxes I've had in the past year is that the very last thing we do is pass that cost on to the customer. I went back to my suppliers and said any cost increases you give me I cannot pass on to my customers. You need to go away and think about that. I am not asking you not to put your prices up. I am not asking you to reduce prices, although some of them actually did.
"But I am telling you that is not a sustainable business model and I need to work with you. Some suppliers have been proactive and creative about how we achieve a cost model that works better for us and that's a big paradigm shift for me in the last 12 to 18 months.
"We use a lot of pak choi in our dishes. We now use bok choi. I've got to be honest, five years ago I didn't really know what the difference was. But when it is chopped and turned into a stir fry, you can't tell. The beautiful thing about food is that it is a constant evolution. The challenge is to evolve with it in a way that is right for your business."
Douglas said technology could help with cost efficiencies, but added: "Technology is great as long as it works for you. I think there is a lot of technology that works down South that doesn't work up North because people are a lot more akin to going in and paying by mobile, or ordering from tablets at the table in the South]."
Douglas also warned about putting too much pressure on suppliers to cut costs. Instead of "turning the screw," Red's True Barbecue seeks to establish long-term relationships. "It is not always about the price. If I am paying 2p more a kilo with them, I do know that on a Sunday when I run out, they are going to open up and send a truck and replenish us. That relationship often pays dividends."
Katona has used her background as an Indian domestic chef to inform the philosophy at Mowgli. She said: "I run a big household. You have got to cook cheaply at home, and quickly and healthily. The genesis of Indian food is that you have got to feed 10 mouths with one cabbage. It's kind of a cake walk for me [at Mowgli]. The majority of our menu is vegetarian. That's the movement at the moment. It is also important to keep a tight rein on your chefs."
Dining frequency and healthy dining
Katona wants customers to become "addicted" to her restaurant food and eat at Mowgli three times a week, using it as a canteen. "People want food that makes them feel good, that they can eat frequently and that is cheap. Consumers quite rightly want a good price point. You cannot pass narcissistic costs on to the customer."
Douglas is facing a different challenge. He said Indian food was now seen as part of mainstream British food culture due to its heritage and popularity. However, barbecue was viewed as a "treat and occasion" food. Red's True Barbecue forecasts diners will eat at its restaurants three times a year, not three times a week.
"If you ate our food every day, I would say that that would not constitute a particularly balanced diet in the same way that if you eat any of one thing constantly," said Douglas.
"I am not saving lives, I am not changing lives. I am just making them slightly better for an hour and a half every now and then.
"We have a doughnut burger with 2,500 calories. It's meat, bacon, cheese, doughnut. It's a huge thing. You wouldn't eat that every day. Is our food healthy? As part of a balanced diet, anything can be healthy. If you want to eat a tub of lard every now and then it is not going to kill you. Everything has its place."
Keeping staff engaged
Recruitment and retention, allied to skill levels, is a major issue facing the industry, so how do casual dining operators keep valued employees engaged and happy?
Katona said part of her strategy was to employs chefs who are "curry virgins". They have to love food but have no knowledge of cooking Indian dishes. She trains each one of them and they are not allowed to tweak any of her recipes.
It means chefs have little scope for individual creativity, so to keep them happy, they are paid well, given good hours and opportunities for enrichment, such as a forthcoming study trip to India.
"They have to come into work feeling nourished and fulfilled. It is the most important part of the business. I could sell food out of a hole in a wall, but those people are the face of our business," said Katona.
Tampopo's head chefs and general managers are due to visit Bangkok with Fox as part of a new chef development programme while Red's True Barbecue staff are offered incentives, have free reign to try new ideas and are invited to theme parties at the company headquarters.
Taking the positives from Brexit
Tampopo's David Fox said he was optimistic about the future of the industry post-Brexit. "I have no doubt we will see more British-born people coming through the system as well as young people, and I think that can have advantages as well. They are going to be slightly more invested."
He added: "The industry has had it really good with net migrationâ¦ and if I were completely honest with you, maybe as an industry we have become a little bit lazy."
Douglas described the situation as a "mixed bag." "It's not too difficult to get a constant and steady flow of people who want to work front of house," he said. "Brexit, for us, has impacted slightly. We do rely quite a lot on migrant workers. Guys from Eastern Europe, a lot of them have been with us from the start and they have gone up the ranks from pot-washers to sous chefs and managers. That has been nice to see.
"You might have 21-year-old Kevin, who has come out of college, and he's not applying for a job because I am not paying £45,000 a year. There are some people that are more than happy to do restaurant work. We don't just try and retain managers. We try and retain general staff as well."
The Bidfood Festival The Bidfood Festival is an annual celebration of the latest food and drink innovation for our customers to sample and experience. The festivals - one in the north of England and one in the south -showcase the best of our branded and own-brand products, and help to bring our customers closer to our supplier base. The Manchester festival this year saw 500 attendees visiting more than 75 stands, ranging from food and drink to concepts and catering solutions as well as non-food.
As well as exhibition stands, there were a series of theatre talks focusing on key industry themes and discussions on practical solutions for the future. Our theatre talks this year included sessions on Brexit, trends for 2019, allergens and food waste.
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