Thread by @somehotelguy

1/25 De-Risking Hotel Acquisitions Thread 3: Business Plan, F+B Outlets

Now that we’ve talked Occ + ADR, let’s talk about some of the more fun areas of a hotel – the F+B outlets. Full Disclosure – I’m not a “restaurant and bar guy” professionally.

2/25 I work closely with them on hotel acquisitions and developments, and have learned quite a bit about how they think about outlets, but I’m not an expert here (other than at the eating and drinking part – I’m seriously, seriously good at that).

3/25 Hopefully some actual experts step in to correct me where I’m wrong, and to fill in the inevitable gaps! Tomorrow, we’ll hit on banquets + catering, then the smaller departments (in-room dining / mini-bar) and other revenue opportunities.

4/25 We’ll wrap up over the weekend with operational / staffing changes to consider.

First up – how do we think about repositioning a F+B outlet in an Upper Upscale hotel?

5/25 Let’s make a few additional assumptions here: (a) we’re talking a non-union hotel; (b) we’re talking a three-meal restaurant; and, (c) we’ve both identified the need for a repositioning and budgeted the $$s for said repositioning.

6/25 What we talk about will apply to multiple different types of outlets, but picking one as an example makes sense.

7/25 Some things to keep an eye out for in reviewing DD materials: (i) in a hotel with a single kitchen and multiple outlets, labor (sometimes just kitchen, sometimes all) will often be lumped into one and excluded from the others; (ii) staffing counts by FTE are especially…

8/25 …messy in F+B outlets – I tend not to rely on these, unless / until I get per-person detail; and (iii) financial statements won’t tell you if you have a location problem, an identity problem, a quality problem, or any combo thereof.

9/25 My perspective on hotel restaurants (and F+B outlets in general) is that they need to focus on appealing to local residents rather than hotel guests – if locals want to eat there, the hotel guests will too.

10/25 Finding a “missing link” in the local restaurant scene and focusing there will offer the best chance for success. What does that mean? The best Due Diligence there is – dine arounds! Hit a bunch of local spots on a few different evenings. See what hits and what misses.

11/25 Talk to people – I find bartenders the most informed and useful, though taxi drivers and servers are good also. The goal is to understand what’s successful in the market and what types of concepts are adjacent to that but un- (or under-) represented in the market.

12/25 Critical here – identify, if possible, multiple options! We’ll get to why shortly.

From a business planning perspective, I’ll generally have two different depths of business plan on a restaurant repositioning.

13/25 First, underwriting, will be based on comps and looking at cover counts, average check, COGS, and general staffing ratios.

14/25 Here I’m working off of a generic “new concept” without having determined exactly what it is, and this is really going to be directional at best (your acquisition should almost never hinge on the F+B, other than maybe B+C).

15/25 Once I’ve had the chance to do a deeper dive into the market and potential concepts based on existing space / equipment, then we can start going deeper.

16/25 The “existing space / equipment” statement here is critical – changing from, for example, a steakhouse to a Neapolitan pizza concept may make sense superficially due to demand in the market, but the change in kitchen infrastructure would likely be cost prohibitive.

17/25 If you can, you’d be better off trying something like a “new American brasserie” if it could work in the market.

Once you’ve established your target concept type, it’s time to really dig in.

18/25 With a sample menu you can start to really refine both your check average and your COGS, as well as your kitchen staffing. Here it’ll help to get a GM or Executive Chef aligned so there’s buy-in from the on-the-ground team from the get-go.

19/25 This is because getting the restaurant right is going to be a considerable operational / asset management exercise, much more so than having a business plan from the acquisitions team going in.

20/25 Whatever your first menu is won’t work – operationally you’ll be tweaking and adjusting for a while.

21/25 A few things to keep in mind when planning / affecting a concept change: (a) changing design and décor is relatively easy; (b) changing equipment and layout is hard; (c) marketing / PR is even more mission-critical than the rebranding of the hotel component; and, (d)…

22/25 …stake out a position – being “all things to all people” means you’re nothing to nobody… it’s ok to not be for everyone.

23/25 Other areas to consider / focus on as you look at repositioning: (i) beverage profit > food profit; (ii) menu synergies (using the same ingredients across multiple dishes / in multiple ways) can cause material benefits; (iii) think about prep time and how that allows you…

24/25 …to expand (or contract) your operating hours – sometimes, opening for lunch (with the right menu) can be done highly efficiently as most of your kitchen staff will be in prepping for dinner anyway; (iv) spaces transition well in theory (e.g. “café by day / bar by…

25/25 …night”) but in practice feel clunky and poorly thought out in one or both of those dayparts 95% of the time; and (v) the best way to make a million dollars in the restaurant business is to start with a billion.

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