Is the Design of Your Club Costing You?

July 14, 2017

The past two weeks I have been writing about the need to involve operations in the operational planning stage of a renovation, in Part 1 and Part 2 of the "The Importance of Strategic Architectural Design in Club Operations" series. If you haven't given those a read yet, I encourage you to do so!

 

Today I'd like to take a quick look at what involving operations in the planning stage of a renovation means for your numbers, so you can really understand what poor design could be costing you.

 

I am making the assumption that we want this hypothetical event to be properly staffed to provide a high level of service expected at a private club.

 

Let’s take something simple like a 150 person special event. Special events are supposed to have good contribution margins overall. So, let’s see how poor design could impact your operation because of minor adjustments that have to be made due to poor design. 

 

 

I’m going to show you four possible scenarios that could unfold due to poor design.

Scenario #1: CONTROL

 

First, let’s take our control event. Perfect scheduling can happen because everything is where it should be:
 

  • 150 guests at $75 per person for food and beverage provide gross revenue of $11,250. 


Let’s also assume a cost of goods sold (COGS) of 30% - because banquets are supposed to have better costs than a la carte. Why? There is a set menu, set number of people, set timing, etc., so we can be more precise with everything. Then our COGS would be $3,375, giving us a gross profit of $7,875 or 70% on this event.

 

A special event with a set menu would typically require the following:
 

  • about 1 server for every 20 guests; giving us 8 service staff. They can be used to serve or bus.

  • 1 bartender for every 75 people; giving us 2 bartenders.

 

This gives us 10 staff members. If we assume all of the above staff makes an hourly rate of $12 per hour, the total labor for an event starting at 5 PM and ending at 10 PM is about $1,080. This includes 2 hours to set up and 2 hours to break down. This can be done ONLY if the tables/chairs are already in place. Otherwise, you will need to add another 1 – 1.5 hours to your service staff.

 

If we assume the kitchen will run at about an 8% total cost just for that banquet, that gives us $900. This would allow for the following, approximately:
 

  • 3 cooks working 10 hours total (prepping and execution) at $16 per hour

  • 2 dishwashers working 8 hours total at $10 per hour

  • Administrative time to make up the difference – the involvement of Executive Chef, Sous Chef, and/or Banquet Chef who is on salary


Then let’s throw on 25% for benefits and insurance, a 2% overhead for sales and administration, and 12% for other operating expenses and supplies.

 

This gives us a net operating profit of $3,825 or 34% of the gross revenue for this event. This would be a terrific goal for a special event! 

 

If you had 30 of these events in one year, that would net the club $114,750. In three years with all the percentages remaining the same and no growth in revenues or expenses, operating in this manner would net the club $344,250. In ten years, $1,147,500.

 

Scenario #2

 

Now let’s take the same chart and make some other assumptions. 

 

Let’s say that due to the location of the kitchen in relation to the banquet area, you have to add 2 more servers to act solely as food runners. Also due to this distance, you now have to add another dishwasher so you can set up a temporary dish station near the banquet room, and that additional dishwasher will be responsible for carrying the dirty dishes back to the kitchen all night. 

 

 

 With everything remaining the same, here is how it looks against our control numbers. Service labor as a percentage increases to 12%, $1,404 and kitchen increases by 1% point to $980. This increases the overall benefits number slightly to $596. This will net the club $99,600 in one year, $298,800 in three years and $996,000 in ten years, which is a $151,500 difference over 10 years.

Scenario #3

 

Let’s add another factor. 

 

Imagine the club whose banquet equipment is on a different floor or in a different building and the liquor storage, ice machine, or wine is not conveniently located near the bartenders. This would add approximately 2 more people for three hours prior to the event to set up the tables and chairs, and two hours after the event to break down.

 

It would likely also require one bar back per bartender added for at least five hours. If they make the same $12 per hour, this increases labor service labor cost to $1644 and benefits to $636.  This would provide a net profit in one year of $936,000 with 30 similar events, $280,800 in three years and $936,000 in 10 years. A variance of $211,500 in ten years compared to our control group.

 

Here is a chart showing all three scenarios we have covered thus far:

 

Scenario #4

 

Now, let’s look at one last design related occurrence that can happen, but leave the increased service labor from the last scenario at $1644.

 

Imagine that the club is lacking the refrigeration, kitchen equipment, or kitchen space to run an a la carte line for 2 – 3 meals per day and prepare and execute a banquet efficiently. In order to pull off this 150 person event, they have to schedule differently so that they can get to the equipment when not in use by a la carte, prep on the day of the event because there isn’t enough refrigeration to prep in advance, etc.

 

Suppose working like this increases the kitchen labor overall to 12% from the 8% we have been working with. This would make kitchen labor $1,350 compared to $900 in our control scenario, increasing the benefits line to $749 for an overall net profit of $2,258 or 23% of gross revenue.

 

This would give you a net profit in one year with 30 similar events of $76,725, in three years, $230,175 and in ten years, $766,250. In 10 years this is a $380,250 variance.

 

Let’s take a look at the chart now with all four scenarios and the 1, 3, and 10 year breakdown if your club had about 30 of these events each year.

 

 

I’m sure that $151,500 variance number in one year could mean the difference between incurring a loss and breaking even in many clubs.

 

So, what does it all mean? I have taken just one type of special event and broken down the different ways poor design can be costly to operations. There are many, many more examples to explore on your own.

 

Imagine if the last scenario is happening at your club and you do have about 30 of these events in a year, but you also have another 30 – 50 other types of events with similar situations. If you extrapolate the numbers, you will begin to see just how costly things can become.

 

This doesn’t even include the potential member dissatisfaction because ticket times are forever impacted sometimes by poor design.  Regardless of how hard the kitchen works, or how fast the servers move, they simply cannot make up for poor operational design.

 

My examples also don’t include the frustration of members who cannot use the locker room the way that they would like to because of poor design. Or the members who refuse to park in the parking spaces provided because they want to drive up close to the fitness center or spa and park there. Or the ongoing price in repairs and maintenance in golf course operations to continue to repair grass where the members have worn a path because that is their preferred route to the clubhouse. 

 

What can you do?

 

Take a walk around. Watch how far in advance your kitchen is able to prep with the refrigeration, storage, and equipment they have. Notice the distance from the service areas to the kitchen or service stations and what is located in those service stations; chances are many have turned into storage areas.

 

Watch how many times a server leaves their station to service a table, or how many steps they must take to retrieve a drink from the bar or ring in an order. Look for random items stored in strange places like credenzas, in a coat closet, under a table, on the side of a building, under the stairs, on a tray jack, etc. You may see portable bussing stations being rolled through your hallways or buckets and buckets of ice being carted or walked to bars throughout the day

 

You may notice kitchen staff rolling large pieces of equipment to and fro or setting up a temporary ‘plate up’ table in a hallway to service a room. These are ‘work arounds’ that the staff has put in place to try to be efficient if they can. But so many can be avoided if only the operations team or an operational consultant could chime in at the very beginning of the process. Just think about how much time and attention goes into the finishes of a building. Then think about all of the eyesores you have at your club because of these work-arounds. Why not do it right the first time and keep the integrity of the look intended intact. 

 

That’s enough of my soap box for now. I will continue to carry the torch for my friends and colleagues out there trying to answer the call for high level private club service in a building or kitchen or locker room or fitness facility or pool or snack bar or cart barn that simply wasn’t designed to deliver the experience desired.  

 

They deserve a standing ovation for making it work every day – day in and day out.  

 

Kudos to you, my friends!

 

 

 

Whitney Reid Pennell, president of the RCS Hospitality Group, is a celebrated management consultant, educator, and speaker. RCS, the creators of Food and Beverage Service Boot Camp™, specializes in operations consulting, strategic planning, food and beverage management, and training programs for private clubs, fine dining restaurants, and luxury resorts and hotels. For more information, phone (623) 322-0773; or visit the RCS website at www.consultingRCS.com.

 

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Whitney Reid Pennell
 Founder & President

Whitney Reid Pennell is the founder and president of the award-winning RCS Hospitality Group (formerly Reid Consulting Services). She is a published author and widely praised seminar leader, with over 20 years of club operations management and consulting experience. 

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