Authors: Martyn Cornell, Tim Foster and Ann Elliott 

 

I don't know whether the Italian economist Vilfredo Pareto made a habit of going into bars or restaurants, but if he did, he might have observed – being the sort of chap who observed such phenomena – that in almost every establishment, 80% of sales came from only 20% of menu items; and conversely, just 20% of all customers provided 80% of an establishment's takings.

 

That's the 80:20 rule, of course, otherwise called the Pareto Principle, first spotted by Vilfredo in 1906 when he saw that 80% of all the land in Italy was owned by just 20% of the population, and subsequently named after him by the American management consultant Joseph Juran in 1941. The Pareto Principle applies to an enormous range of measurable phenomena, not just land distribution in Italy: in computer software, for example, commonly just 20% or so of bugs cause 80% of problems, while around 80% of crimes are found to be committed by just 20% of criminals.

 

The big lesson for businesses from the Pareto Principle is that if, as is likely, 80% of their turnover comes from just 20% of customers, then making sure that 20% is happy and keeps returning is vital, since one of the 20% deciding to take their custom elsewhere has a much greater effect on the bottom line than if one of the 80% doesn't bother coming through the front door any more. Which is why one of the statistics hidden in the survey conducted for the Campaign for Real Ale to promote Community Pubs Month is so extremely worrying.

 

According to Camra's survey, the number of "regular" pub-goers, those that visit pubs "once a week or more", has fallen from 24% of the over-18 population to 15% in the past five years. That's a plunge of more than a third – 37.5%, to be exact, or around 4.5 million people – in just those core customers who, according to the Pareto Principle, will be generating 80% of a pub's takings.

 

At the same time, the number of people who "never" visit the pub, the survey found, rose from 27% of the adult population to 38%, a loss of 5.5 million customers, or 15% of all pubgoers. Many "once a weekers" will have moved into the lower-spending "occasional" pub-goer category, of course, rather than joining the "nevers" – the survey found more than a third of actual pub-goers, around 11 million people, visit the pub less often than they did 12 months ago, and a fair few of those "less ofteners" must have been former "once a weekers". But even so it looks as if the average pub may well have seen up to 30% of its turnover disappear since 2009 for the total loss of just 15% of its customers.

 

What has happened to all those formerly regular pub-goers? And how can they be converted back from "occasionals" and "nevers" to regulars once again? It would seem to make sense that the recession played a part in keeping people away from the pub, although confusingly, figures from the Office for National Statistics say the numbers of people going to pubs, clubs or bars in their spare time actually increased between 2006/7 and 2012/13, from 44.8% of the adult population to 50.4%. (Visits to restaurants also increased, from 61.8% of people eating out to 73.2%.)

 

But there is no doubt that if the Camra survey is correct, and there has been a huge dive in the numbers of pub regulars, it will be massively more cost-effective for pubs to find out what makes a regular, and why regulars stop coming, or come less often, than to try to boost pub-going numbers generally.

 

There are other thought-inducing findings to be teased out of the figures in Camra's survey. Of those 5.5 million people who have apparently joined the ranks of non-pubgoers since 2005, it appears 40% said they do not use pubs because they no longer drink alcohol or have reduced the amount of alcohol they drink. But that implies that the rest, the other 60% of new non-pub goers, still drink just as much as they used to: only they no longer do it in the pub. That is more than three million people who COULD be pub-goers, but aren't. Again, why not?

 

Perhaps a big part of the problem is that we all concentrate too much on the pub as a place to drink. The surveys from the ONS say that, after "watching television", shopping and reading, the most popular use of non-work, non-sleep hours in the UK is "spending time with friends/family". You can do all those things in a pub, apart from shopping (and with wi-fi and a smartphone, you could shop as well, from the comfort of the snug bar.) As Colin Valentine, Camra's chairman, said when introducing the survey results: "Great community pubs are not only about enjoying alcoholic drinks. They are great places to relax, socialise, eat and spend time with the family. [We] have to work hard to get this message out."

It is no secret that we were betrayed in 2013 by the actions of one individual, which threatened the previous seven years' work and the future of my company. We have asked ourselves numerous questions since that time, but in reality, we could not have stopped what happened. We could have limited it, though.

 

Between January 2013 and August 2013, one of our general managers at the worst-performing Yummy site, our Shepherd Neame lease, the Grove Ferry, decided to create an elaborate, very cultivated plan to steal a huge amount of money from us.

 

The basis of our business, a cash business, is trust. We are in the business every day, but not necessarily in a particular pub. Keeping an eye on every detail is impossible, knowing what is happening at any given point of the day is impossible – we have a helicopter view. But in the case of a remote pub, now two hours' journey for us to visit, we discovered a lot could happen in a very short space of time.

 

We trust our guys and gals implicitly. It is part of being Yummy – dealing with customers, being ambassadors for our company, the brand and ultimately us. It has been a struggle to keep that belief, but our team stepped up and helped enormously by living up to our name and being Yummy.

 

So, if you didn’t see the local and national newspapers, what happened? 

 

Well, Aron Sheridan, now serving an eight-month jail sentence (but probably out in three months) stole a combined sum of £69,000 in one way or another. To be honest, the police have been appalling. The process, the lack of urgency, the attitude to our situation, all taken with a sluggish, "who cares?" mentality that has been so frustrating for us. Theft of £19,800 we can prove, no issue – he held his hands up to that as a "borrowed" – but still unpaid – sum. The rest, that is an entire story in itself, and it, would seem, a very long process if we want to pursue it further.

 

Short banking is a common method of skimming cash. That is how he managed the £19,800 – that, and not banking at all when it all caught up with him in the final two weeks. Setting up a fake company, e-mail addresses, bank accounts, "selling" wedding packages that never entered a till, PO numbers for advance payments of private functions and events, now that takes some serious planning!

 

So, short banking. Well we have closed all the doors on that. Daily sealed bar-coded cash bags are now in place, GM and duty manager call in at end of shift to reconcile daily takes, with head office visibility now in place. Spot checks, audits, CCTV cameras, safe logs, are all in place. You would probably ask why we hadn’t had those measures in place before, as we did, but honestly how many small multiple operators do? From conversations we have had since, not many.

 

Have we lost the trust in our team through this? No, we have just improved our standards and, actually, our finger on the pulse. Oddly, it has enabled us to see the kind of like-for-like sales we are delivering. It’s all in the detail: 1% GP to us is now worth a huge amount of money, and now we have been analysing the detail with three pairs of eyes in the past eight months, the impact has been incredible.

 

As for the elaborate schemes, they have taken a lot of management and our team at the site has been amazing. When 50 people turn up for a hog roast wedding reception on a Saturday at 2pm when you are in full flow of service and you know absolutely nothing about it, that takes some skill to manage.

 

So, how do you tackle it?

 

Having lost the kitchen sink, we threw the rest of the kitchen at the site to fix it. It would have been easy to lie down and let it go, as we’ve struggled with it from the beginning, really. But something inside us would not give up. Maybe that is how we have come as far as we have: determination and a complete belief that we can fix pubs, even ones we sort of broke ourselves.

 

By the afternoon of the morning we had tackled Aron head on, our fixer, Matt Ward, was on site. By the following day we had decided it needed the touch of Lucy Crawford, our shining star GM at the Somerstown, and let her run with it. If anyone can calm a situation down it, is our Lucy. We then got into the mix and we started making changes.

 

As guest after guest came in with fake emails confirming their bookings we knew nothing about, claiming deposits they had paid months in advance, asking for details of the extraordinarily generous buffet receptions and free champagne parties "we" had confirmed after they had paid "cash in advance", we took every, single one on the chin and our bottom line (which, by the way, is now not a line but a bloody great big hole). We could have stonewalled them, said it was all fake, nothing to do with us, but that’s not Yummy.

 

The net result? Well, it slowed down our growth, that’s for sure. We lost a site because of it. But, the site is in 30-40% like-for-like sales growth. It is an absolute monster of a site, so a few thousand quid here and there is nothing to shout from the rooftops about. But it is breaking even, beginning to move into profit, and stands every chance of being that famous TripAdvisor killer line, “Could be amazing”.

 

Our relationship with our landlord, Shepherd Neame, has not been great, it’s no secret. But in the past six months we cannot fault our business development manager, Andy Davison. I think he gets us, he has been so keen to help, and they will see the net result. Those that believe in us, benefit in cold hard cash – just ask Charles Wells’s accountants (our two London sites belong to Charles Wells). Put your money where your mouth is, do it right and reap the rewards.

 

We have the summer to come. We have upgraded the heating systems, the water recovery systems, the toilets, the function suite, added a dedicated kitchen to the garden to cater for the opportunity of 1,000 covers a day, bought more pigs and now have a very Yummy team on site.

 

Calls now come directly into my sales and marketing team, we answer the emails on behalf of the site, we arrange the weddings, functions and events. We scrutinise every element of the site’s operation.

 

We have focused Lucy on her customers and her team, both of which appear to be working. Our stock audits have tightened up, our kitchen audits are now done weekly, with roll-over stocks. In short, we are looking closer than ever before at every element of our offer. 

 

Could it happen again? Maybe. There is always an opportunity in cash businesses. But will we be ready to spot it, the minute something slots out of place? Oh yes.

 

In the past few weeks, I have become a lot more engaged with the contract catering world, which has been something of a revelation, to be honest. Before launching my own business, I worked for restaurant and pub companies, in both operations and marketing, but never really considered a career with a contract caterer. It seemed a bit of a dark art. Operators from "my" world seemed to join contract caterers and quickly leave, thus confirming my impression that it wasn’t for me.

 

As marketing specialists in this sector, though, we have inevitably been briefed on projects for a range of contract caterers, including Compass, Elior, Lexington and 7 Day Catering. I have had experts in my team to work on these briefs, and I have tended to limit my involvement to insight and strategy work rather than campaign development or day-to-day customer communications.

 

"Time to learn more," I thought. The starting point was attending a first-class conference organised by Chris Sheppardson of Chess for contract caterers and affiliated businesses. It was completely illuminating and totally inspiring, with a range of brilliant speakers. Second stop was visiting a number of city office restaurants with the sales director of one of the top five contract caterers. I was completely blown away. The third stage was being a Catey judge this week, and seeing some brilliant marketing submissions from contract catering companies. After that came some intensive reading on the sector from online and print sources.

 

Various themes have emerged from this deep-dive exercise, in particular from "Business and Industry" (B&I) operations in city centre offices.

 

1 They have small catchment populations:

 

While high street restaurant operations can literally have many thousands of potential customers on their doorstep or passing by, B&I operators are completely limited to those who work in the building. They cannot attract the "man in the street" over their threshold. The building may represent a catchment population of fewer than 10,000 people and, more often than not, fewer than 5,000. B&I operators have to work incredibly hard to ensure this target market is aware of them, use them weekly and spend when they come in.

 

2 They operate brands:

 

These "brands" will have been developed for their customers. They are one-offs. Rarely will two buildings (even run by the same company) carry the same brand. Imagine developing brands (with all the supporting brand communication) for hundreds of customers. It is a demanding task. It means these contract caterers have to be very creative. Their offer has to be fully developed and thought through. Their brands on site have to be credible. They have to have first-class operators, and it is very challenging.

 

3 They are in an incredibly competitive market place:

 

Every one of a B&I operator's so called "captive market customers" can walk out of their building, past their "company" restaurant operation and on to the high street to visit any one of a myriad of competitors. They can do this at any time across all day-parts for any sort of offer. Contract caterers are not competing with the brands developed by their competitors in other offices; they are competing against high street operators. That is even more challenging.

 

4 They empower their teams:

 

I have never experienced the level of empowerment given to the managers of contract caterer operators in the B&I environment. Never. They do whatever needs to be done to satisfy the end customer and the company while achieving footfall, spend-per-head and margin targets. They try things. If they don’t work they stop but they don’t get blamed for trying. It means spreading best practice is a bit of a task.

 

5 They are food focused:

 

The quality of merchandising in these sites was extraordinary, with an enormous focus on fresh food, provenance, taste and food presentation. I have seen chefs cooking dishes to order in front of the customer at lunchtime – and still getting them to the customer in less than three minutes. The enthusiasm I experienced for fresh food was extraordinary, as was the passion for developing and training chefs.

 

6 They are quick to respond to customer demands:

 

The chefs and managers on site are able to respond to customer trends, needs and expectations in an instant. They are not dependent on having to reprint a corporate menu. They simply do what is right when it needs doing. It is very refreshing, and very inspiring.

 

I could go on. To high street operators I would say – go out with a contract caterer in a city B&I environment and enjoy! Let me know if you want any introductions.