Creating a Profitable F&B Strategy
By Brian Bullock, Chief Operating Officer, Restaurants, Legacy Ventures
In today's environment, hotel owners and operators must find or create a food and beverage (F&B) concept that is accessible, inviting and relevant to the market. It's important to create an atmosphere that entices hotel guests out of their rooms and into the greater scene, as having an alluring, busy restaurant enhances the hotel guest experience. However, to create a sustainable and profitable F&B offering, the hotel must attract local customers as well. To achieve this, the menu must be crafted around an unfulfilled need in the market and deliver on the service promise of the hotel brand.
Hotel restaurants often struggle with profitability, especially in boutique and mid-sized properties. If a concept portrays to the guest that it's just another hotel restaurant, it will fail. Additionally, if a restaurant is too trendy and there is no substance, local guests won't return once the initial "buzz" wears off.
Take, for example, the restaurant at the Glenn Hotel, located in downtown Atlanta. Before our company, Legacy Ventures, took over Glenn's Kitchen in 2011, several operators failed because they couldn't consistently deliver quality food and service at the restaurant while also meeting the hotel's needs. Operators served up trendy concepts that fizzled, and when restaurants began to lose their buzz, operators struggled and compromised their standards even more - and revenues continued on a downward spiral.
Today, Glenn's Kitchen is a destination in its own right and financially successful, with nearly $3 million in revenue last year and more than $500,000 in profit. In fact, if Glenn's Kitchen were a stand-alone restaurant, it would be profitable - a clear exception in the hotel industry.
The Three-Step Process to Choosing an F&B Concept
To create or select the right F&B concept, we take a three-step approach. Our forte is creating site-specific food, beverage and banquet programs, recognizing that exceptional guest experiences and profitability are the key objectives for today's hotel owners. We have developed and managed 12 award-winning facilities and annually host more than 5,000 banquet events.
First, if we are acting as a third-party operator, we do a deep dive with the owners to learn what their goals are for the F&B offering at the hotel. Is it important to have large capacity for catering services? What sort of offering do they feel would be a good fit for the market? Do they want an original, chef-driven concept, or are they open to a chain or existing concept? These are all questions we ask when working with a new owner. From there, we can identify if a national brand such as Ruth's Chris Steak House, Marlow's Tavern and Legal Seafood, all of which we have worked with in the past, would be appropriate.
Second, we review what the area needs based on location, supply versus demand, and demographics. We take into consideration what concepts are performing well in the market, and, conversely, what needs are not being satisfied. Additionally, it can be lucrative to tie into the surroundings of the hotel. For example, Legal Sea Foods has been highly successful in the Hilton Garden Inn in downtown Atlanta, which sits directly across from the Georgia Aquarium.
The kind of customers staying in the hotel, however, is the most important factor. The desires and needs of business travelers vary greatly from what leisure travelers are seeking. While a leisure traveler might prefer a tried-and-true five-course dining experience, business travelers likely want something that's quick and easy, and could be easily transported on-the-go.
Additionally, you have to take local clientele into account, which are key in making restaurants profitable. They are the most challenging group to convince to dine at a hotel restaurant, particularly millennials, and require substantial marketing and enticement. With its prime downtown location and strategic social media strategy, Glenn's Kitchen has been successful in driving business people to the hotel for breakfast and lunch, as well as happy hour, which has created a huge difference in our P&L.
Third, we look at what the capacity of the F&B offerings on both the hotel and restaurant side will be based on the kitchen space itself. More often than not, especially in boutique and mid-sized hotels, restaurant concepts are limited by a small kitchen. At Glenn's Kitchen, we faced several challenges including virtually zero prep space, and storage that was two floors below the kitchen.
As the fifth F&B operator at the property, we realized some prior operators only focused on transient guests, while others focused their efforts too much on private parties and ignored additional opportunities like meetings altogether. Meetings were a small part of The Glenn's business, as the hotel has a very modest amount of meeting space, and the focus before we took over was on the restaurant versus the bigger F&B picture. We developed a strategy to focus on transient guests, private parties and small meetings. We would get around the space challenges with a small menu.
We committed to "owning" the small meetings market. We compete with some great hotels in downtown Atlanta, but we know a meeting for 10 to 15 people gets lost in the shuffle and many of our larger competitors. For the Glenn, two of these are our meetings for the day and so we do them very well. Today, the hotel does $1 million a year in private parties and meetings alone.
Additionally, Skylounge, the rooftop bar at The Glenn, was being marketed by a third party that did not have the best interest of the overall hotel operations in mind. Today, it's a successful destination for visitors and locals alike, known as a great place for a cocktail overlooking Atlanta's downtown skyline and Centennial Olympic Park, or to have a private event with catered food from Glenn's Kitchen.
By limiting the menu, the small kitchen has been able to effectively accommodate all audiences. This strategy has been very successful and has enabled us to effectively serve restaurant guests, as well as room service and events. Glenn's Kitchen has been prosperous because the team has executed on the mission to create a sustainable F&B concept that can be executed flawlessly in both food and service quality.
What to Look for in an Operator
For owners who don't have the experience or desire to operate their own F&B offerings, hiring a knowledgeable third-party manager can make a big difference. It's important to find a third-party manager that is able to approach F&B like a restaurant company instead of a hotel company. For example, we are the third-party operator for the Embassy Suites by Hilton Chattanooga Hamilton Place located in Chattanooga, Tennessee, which houses a Ruth's Chris Steak House. We work hand-in-hand with the Ruth's Chris team to insure the profitability of the restaurant, which lead to manager Andrew Penland and executive chef Roger Burrows being named Franchise Leadership Team of the Year by Ruth's Chris.
In hotel P&L, there are a lot of extraneous costs included so there's a false sense of how a restaurant is actually performing. We keep our restaurant and hotel P&Ls separate, therefore operating the restaurant as a restaurant that's its own profit center independent from the hotel. This enables us to more accurately see how the restaurant is performing, and adjust our strategies if need be.
Too often restaurants are considered an amenity or looked at as a profit loss for a hotel, but it doesn't have to be that way. Normally hotels are quick to give away F&B when they don't need to. If there's a convention in town and every hotel is taken, 100 breakfasts a day don't need to be given away in order to book rooms. The only time F&B should be viewed as a concession to be made is when it's crucial to seal a large deal or enhance the opportunity during off-season. We work hand-in-hand with the sales teams at our hotels to insure that what's being given away makes sense and isn't having a huge negative impact on the bottom line.
Look for a company that's structured with different levels of accountability that can really make your F&B operations profitable. In doing so, we have seen huge turnarounds in profit. We have found that having separate general managers for the restaurant and hotel that each report to someone different at Legacy has created a great symbiotic relationship that is beneficial to helping both the restaurant and the hotel to be successful. Restaurants run on such a small margin, so it's important to have staff and partners that are detail oriented in where money goes and what it's spent on.
While creating a profitable F&B operation can be difficult, it is possible. Glenn's Kitchen and Ruth's Chris are perfect examples of the great success a hotel restaurant can have while still meeting hotel demands. By examining what kind of restaurant a hotel needs and bringing in a third-party manager with a deep history of experience, a hotel can start to see restaurants as a successful part of their hotel instead of an amenity that guarantees a loss.
Brian Bullock has over fifteen year’s experience in the restaurant industry working with high-volume, industry-leading companies. He began in 1995 with Houston’s restaurants in Atlanta. After being promoted to general manager, he operated stores in New Orleans and Houston. In 2000, Mr. Bullock left Houston’s to become vice president of operations for Border Cafe Restaurants. In 2007, he joined Bricktop’s Restaurant Company, which was founded by the original Houston’s co-founder Joe Ledbetter and industry veteran Tom Brunnberg. Mr. Bullock earned his associate’s degree in culinary arts from Johnson and Wales University and his bachelor’s in hotel and restaurant management from the University of Massachusetts at Amherst. Mr. Bullock can be contacted at 404-222-9100 or email@example.com Please visit http://www.lvmgt.com for more information. Extended Bio...
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