Productivity Challenges and Levers of Small F&B Businesses
Small enterprises, defined as those with annual operating receipts of less than $5m, make up the majority of the Food & Beverage Services (F&B) sector in Singapore. These enterprises typically own less than 5 outlets, each employing less than 10 employees.
In terms of establishments, they make up more than 95% of the total number in the F&B sector. These enterprises, which include innovative start-ups with growth potential, play a key role in the cultural fabric of Singapore and add vibrancy to the economy.
In 2015, SPC conducted a survey to identify the key productivity challenges and opportunities for improvement for the local small F&B businesses. The survey was conducted with the key decision-makers and business owners of 178 small F&B businesses in Singapore, and supplemented with one-to-one interviews with the respondents.
The survey focused on the operations of the businesses, covering the following areas from the back-of-house to the front-of-house:
- Manpower management
- Customer service
- Food waste and food quality
- Layout and space utilisation
- Inventory management
- Profile of Respondents
They are located in the following areas which have a higher concentration of the small F&B establishments:
- City Hall area (e.g. Haji Lane, North Bridge Road, Seah Street)
- Katong area (e.g. East Coast Road, Tanjong Katong Road, Joo Chiat Road)
- Tanjong Pagar area (e.g. Smith Street, Cross Street, Tanjong Pagar Road)
- Little India area (e.g. Jalan Besar Road, Chander Road, Balestier Road)
Persona of a small F&B business
Top Productivity Concerns
Waiting time, inventory management and customer service are the top 3 concerns. It seems that the businesses are more concerned with their limited capacity to service their customers, leading to loss of sales and revenue; and less concerned with their ability to attract customers.
They are generally less concerned with back-of-house processes and staff management, with areas like “kitchen layout” “manpower” and “food waste” low on the list, though these areas contribute or could have caused the problems they are concerned about.
Long Waiting Time
Long waiting time, especially in the form of queues outside the outlet, is a double-edged sword. In the case of restaurants, queues sometimes give the impression that it is popular and that the food is worth waiting for.
However, long waiting time could also lead to the loss of income when customers start walking away or when it reduces satisfaction due to the poor experience.
The businesses are concerned with the lack of proper systems to manage queues and serve customers during the peak periods. Customers have walked away, leading to loss of income. Some of the respondents also cited limited dining area, poor layout and high staff turnover as reasons for not being able to reduce the long waiting or service time.
At times, the long waiting time is a symptom of the bottlenecks faced in the processes of other areas. Inefficiencies could lead to long service time, and hence low table turns. Examples are inefficient food preparation process due to poor menu planning, poor layout leading to a long distance to travel to serve customers, and inexperienced staff who are not familiar with, or not trained, in the most efficient way to serve and manage queues.
Poor Inventory Management
F&B businesses deal primarily in perishable food supplies which have limited shelf lives and require strict compliance to food safety regulations. For the smaller businesses, replenishment and procurement are often carried out based on “visual assessment? “gut feel?and estimates based on past experience.
Often, they have limited bargaining power with food suppliers, and have to comply with the practices and prices imposed by suppliers. The lack of storage space and proper system to keep track of inventory have also led to unnecessary waste of food items.
Poor Customer Service
F&B business owners understand the importance of customer service in giving them the competitive edge over other businesses. They are concerned with the poor service rendered by inexperienced staff and staff who are stressed out during the peak periods.
They are also concerned with the lack of staff to serve customers. Some respondents have indicated an interest in providing customer service-related training to their employees, but staff turnover has deterred or made it difficult for them to carry out the training, and to ensure consistency in their service quality.
Key Success Factors of Small F&B Businesses
In a separate study of small F&B businesses commissioned by SPRING Singapore in 2014, it was found that only 60% of the businesses survive their first five years of operations. The successful ones focus more on “core business operations?instead of areas such as branding and store design.
The study identified three key success factors of small F&B businesses:
Businesses that take steps to streamline their processes are able to make more efficient use of the manpower resources. The processes include queue management, billing and payment, and inventory management.
A well-constructed menu helps F&B businesses to increase their margins, improve production processes and better manage their inventory. Businesses that regularly evaluate and engineer their menu are able to perform better than their peers.
Successful businesses are able to manage their finances effectively. This includes proper cashflow management, supplier management and tracking processes.
Solutions for Small F&B Businesses
In response to the above studies, SPC has rolled out three packaged solutions to address the challenges identified and to enhance the factors that are key success factors for small F&B businesses.
They are in the areas of:
- Menu Engineering
- Process Redesign
- Working Capital Management
Each package will cost no more than $15,000 to the company, after 70% funding support from SPRING under the Capability Development Grant.
Find out more about these packages at: http://www.sgpc.sg/solutions-for-sm