Club dining - Cost center or value proposition
ECLUB NEWS |
When discussing food and beverage operations in the boardroom, the discussion frequently turns to the reasons why dining operations incur deficits and are subsidized by dues income. These reasons are numerous and valid; staff must be paid throughout the year, not just during the seasons when the club is busy; members are sensitive to menu price changes, so dues are increased instead; the expectation is that high-quality ingredients will be used and that quantities will be generous. We could go on, but that is a different article.
When analyzing how clubs manage their food and beverage operations within the confines of these business dynamics, however, it’s important that these dynamics are used as context and not as an excuse. Club managers need to be able to set forth to their volunteer committee members what specific actions they have taken to operate efficiently, albeit while continuing to subsidize the dining operations from member dues. Most times these actions focus on the cost side of the equation with costed menus to control product use, scheduling for zero overtime or sending staff home early when the dining room is especially quiet. In addition to these steps however, club managers should consider if they are taking full advantage of their club’s information systems to analyze and understand member spending habits.
Consider the following graphic which RSM professionals developed in the course of a food and beverage efficiency review engagement for a leading residential club community.
The graphic confirms the truism that oftentimes a significant portion of club usage revenues are derived from a relatively modest number of members. In the example above, 29 members spent more than $10,000 each in one year, which generated $435,000, or 14 percent, of the club’s annual food and beverage revenue. Conversely, 284 members spent less than $1,000 each in one year, which generated $125,000, or 4 percent, of the club’s annual food and beverage revenue. The question this poses for managers, is one of how to move members to the right. While the obvious answer may seem to be the introduction of a food and beverage minimum, this is not a course of action that we would recommend, for two main reasons. First, clubs should seek to “pull” members into the dining room with the quality of the product and experience, rather than “push” members into the dining room through the imposition of a minimum. Second, where a minimum exists, members who eat at the club only to satisfy their minimum tend to plan poorly and wait until close to the last minute to meet their minimum spending requirement. This creates stress on the club’s operation and staff which can potentially translate into an unsatisfactory dining experience for these members, which in turn leads to the complaint to management of “… and you wonder why we never eat here?”
Even among all the clubs RSM serves nationally, it continues to be surprising how few clubs analyze member spending on a regular basis. The ability to analyze member spending, and develop service offerings accordingly, is one area of food service operations where clubs have a distinct competitive advantage over their commercial restaurant peers. By understanding member spending habits, managers can identify which members never eat at the club and develop strategies for encouraging some utilization. Perhaps they had a poor dining experience years ago and are unaware of changes the club has made recently to its menu. Similarly, the club can identify which members may be prepared to pay a premium for a small group wine-pairing dinner or chef’s table experience. Given that a large proportion of club food and beverage costs are essentially fixed, with proper management, incremental revenue should substantially drop to the bottom line. And the analysis doesn’t need to stop with merely the total spend by members. Are item counts from point of sale being examined to determine what items are selling (and to whom), and what is not selling, when deciding on menu changes? Are seating times being analyzed to determine who is dining and at what time, when deciding on dining room operating hours? This information should be readily available from a properly implemented and utilized information system and should not place any additional administrative burden on the club’s management team.
Presumably, members joined their clubs in the first instance because they were attracted by the amenities and opportunities for socialization. Members who are active at the club and spending time and money in the dining room should present less of an attrition risk than light users. So perhaps it’s time to change the dialogue with regard to food and beverage operations from managing a cost center to harnessing a value proposition for member retention and recruitment.