Sean Valentine, founder of Valentine Hospitality looks at how the marketplace has evolved for foodservice companies and explores how the model can change to suit.
What will be the future differentiator between foodservice operators?
Foodservice consultants believe: “Traditional structures and models are being challenged daily. Those considering starting in this market need to be geared up to tackle the traditional high street too. Gone are the days where foodservice companies played only in their own space. There is a necessity of having a clear idea of what the product or service is, as well as the importance of creating a marketplace where everybody can compete for contracts”.
Sector focus and location is undoubtedly important; however, the structure an organisation takes from the outset could be the key differentiator for a business, and ultimately, the difference between success and failure. Evidence suggests that partnerships are important. Whether it’s William Baxter and Alastair Storey, Wendy Bartlett and Ian Mitchell, or Bill Toner at the CH&Co Group; there are many examples of partnerships that have created significant growth. Bartlett says: “Depending on the type of person you are, you need somebody to compliment your skills. If you are great at selling, you need that strong financial influence to have that balance. A partner can be very important when setting up a business.”
In the current climate, great partnerships alone cannot guarantee success. Choosing the correct financial model to launch is crucial. Tim Jones, chairman at CH&Co Group, says: “Robyn and I took the low-cost
option when we set up Charlton House 25 years ago. The other route is the high-cost one, and that involves borrowing money or investing far higher sums of your own or family money. This would be to either set up the team and systems from the outset, or even buy your way into the sector by acquiring an existing company.”
However, the industry has changed considerably since then and legislation means there are now other factors to consider. You would need much more investment today because costs are higher, there is far more red tape, and you would need to employ more people from the outset or out-source specialist tasks. A new startup would need to set up policies and procedures, health and safety systems, finance systems,
a payroll service, IT, marketing capability and much more. This all comes at a cost and a huge amount of work. Of course, you also need to be able to support yourself financially until you start making money.
With all the investment in place, and the company structure agreed, the real challenge often comes with winning that first contract. A lack of reference points, and no accounts history, it can be a real task to convince clients to procure the services of a startup business. The all-important first contract can often be the most challenging. Convincing a client to hand over an emotive part of their business to an untried and inexperienced foodservice startup can be the biggest challenge. There are, of course, other options which lead to the development of new businesses. Some companies buy others to get into the space. It’s highly competitive but not impossible, if people truly believe in their product and have a lucky break. More often than not it will involve the foodservice consultants sticking their neck out for that next great concept and team.
The birth of the delivered in market will create a new level of competition for the foodservice operators, that allows the traditional labour structure at a fixed site to be challenged. At a recent industry breakfast, much discussion was had around the key differentiators between foodservice operators. When a client goes out to tender and receives many tenders back for their catering operation, what makes a client choose an operator. It could be argued that the team are the most important differentiator, however TUPE applies and the new operator takes on the existing staff and management. There is little room in the numbers and most of the operators have a marginal amount between them as their profits are being squeezed to a point where it is becoming non-profitable. The new delivered in model allows for much more flexibility around staff and product, the two most expensive elements of the service. At the moment, the delivered in phenomenon is centred around the consumer market with companies such as Just Eat and Deliveroo, but the business community is already looking at this model to help reduce costs and improve choice.
The model is already adapting to suit the changing environment but more will and needs to happen. Traditional routes to success are no longer as accessible and without investment in place smaller players are less likely to progress compared to how it used to be. As caterers look to differentiate from the competition, we are likely to other changes to the model as we are currently witnessing with the rise of the delivered in market.