David Read, founder and chairman of Prestige Purchasing discusses options for operators in the face of rising labour and food costs

I read this morning that sector bosses are battling staff shortages as they prepare to welcome customers back indoors next month, quoting that in London and the south east, where the shortage is most acute, the going rate for waiters has already risen from about £11 to almost £15 an hour. Some kitchen staff are commanding salaries a third higher than before Covid struck. 

This news arrives shortly after CGA and Prestige Purchasing’s newly published forecast for the Foodservice Price Index (FPI) that predicts a significant firming of food prices over the coming months, as supply markets re-open and the full impact of Brexit on imported foods is felt. Whilst there are some categories where prices have fallen due to Brexit (fish for example) the overall direction of travel is still upwards.

Operators, faced with weakened balance sheets from a year of lockdowns, propped up by debt and (the now rather short-term) government support, will be wondering when the bad news is finally going to stop.

But this is an area of the business where leadership can take action to mitigate the impact of negative external influences. After all, the restaurant kitchen is just the final step in a series of value-add processes that deliver food to the customer. I worked for many years as a chef myself, and eventually came to understand my true role as the final critical link in a long chain of production – with the ingredients themselves as the true stars of the show.

There are two key actions that operators can take right now. These are:

Remove complexity – more ingredients and more changes in ingredients have a cost attached to them. So, it’s important to ensure that if you have a big and ever-changing menu you can command the premium price that will be required to protect your margin. If not, then weighing up the criticality of each and every ingredient in your buying list is a worthwhile exercise.

Even in relatively small multi-site operators we often see (for example) as many as 20 different SKUs of mayonnaise. Or three dishes on the menu that include prawns, but with a different prawn specification for each. It doesn’t seem like a big issue, but the cumulative impact on the whole basket can be surprising.

Look at your ‘make versus buy’ decisions - Instinctively we all want our chefs to really understand food. To do so they absolutely need to know how to prepare ingredients from their raw state. No argument. But to make a £50,000 chef bone and cut meat, or fillet fish every day is not a good use of resources. We still see Italian kitchens grating cheese, and casual dining restaurants making core sauces in each and every site.

We see an insistence on fresh fish even when there is just one low-selling fish dish on the menu, and when blind tastings select a well-handled frozen product as better performing on taste and freshness. And there is not enough space in this article to begin to examine the merits or otherwise of in-house production kitchens, which are a luxury – but rarely an affordable one.

My point here is two-fold. Firstly, there have been enormous technical strides made by food wholesalers and manufacturers in recent years. There was a time when there was a quality and freshness argument about outsourcing inefficient effort to the supply chain, but this is rapidly diminishing.

And secondly, there are no universal right or wrong answers. To simply say ‘we produce everything from raw ingredients’ needs to have a hard, commercial logic applied to it. Similarly, saying ‘we move all possible labour costs to our suppliers’ is not an intelligent approach. But reviewing every line is an activity that will yield good returns without impacting the diner.

As we return to the levels of volume that are so essential to the sector’s recovery, this is surely not a time to be allowing any inefficiency into our businesses, and paying more for product, or allowing low value-add activity into our kitchens are great targets to protect margins in a difficult market.