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Hospitality Management: Inflation, Labor Shortages, and Risk Management

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Managing a hospitality business takes a lot of work, and there’s plenty of risk involved. From inflation–including food inflation–to labor shortages to risk management, as a hospitality business owner there is plenty you need to prepare for. Whether you own a restaurant, hotel, or bar business, being prepared for whatever comes your way will help you find long-term success. 

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What Is Inflation? 12 Key Characteristics of Increased Inflation

To understand how inflation affects hospitality and food service businesses, it’s important to understand the fundamentals of inflation. Read on to gain a better understanding of inflation, what causes inflation, and why you need to know more about the effects of inflation. 

What Is Causing Inflation?

Overall, there are three main causes of inflation. Some are planned for well in advance as part of a business plan and some can be worked around. Others are just something that needs to be pushed through when it occurs.

3. Demand-Pull Inflation is when the demand for products and services outweighs the supply of those products and services. 

2. Cost-Push Inflation is when the prices of different goods and services increase in relation to an increase in wages and supply costs. 

1. Built-In Inflation is the need for wages to increase when the cost of living increases. 

What Is Economic Inflation?

Economic inflation is the overall effect of inflation on the economy. It sounds simple, and that’s because it is. Economic inflation includes all of the effects you see from inflation at the grocery store, on your mortgage, or at a restaurant. 

There are three areas where most people experience the effects of economic inflation: 

3. Housing Costs: Inflation in the housing market is due to the demand for housing when supplies are low. 

2. Restaurants and Food Services feel the effects of economic inflation with inventory items, from cocktail ingredients to wholesale produce

1. Grocery Stores: For average individuals, economic inflation is felt in the grocery store. Prices on both bulk items and niche market items rise with inflation. 

What Is Hyper-Inflation?

Hyper-inflation is an extremely high rate of inflation that leaves financial and community concerns–such as panic over grocery availability and mass buying–in its wake. Hyper-inflation does the damage that general inflation does to an economy, only at a much faster pace. We’ll take a look at three signs of an oncoming hyper-inflation, to give you the ability to prepare for it sufficiently. 

3. Extreme Supply Shortages

2. Rapid Debt Increases

1. Rising Raw Material Costs

Who Is Most Affected By Inflation?

These three job titles are by no means the only people who face inflation in their work. They are, however, the ones with the most power at work to make decisions related to inflation. From buying power to operational efficiency decisions, these people tackle inflation head-on. 

3. Accounting Staff: The responsibility of the accounting staff lies in sharing information on how inflation is affecting the budget with the rest of the team. 

2. General Manager: The general manager is usually the person with the most purchasing power in hospitality and restaurant management. They may report directly to the business owner, or all business growth decisions may be entirely up to them.

1. Inventory Manager: While the accounting staff can see the numbers within the budget, the inventory manager can see the direct correlation between inflation and inventory needs through order management

What Is Inflation? Time to Deflate

When you’re armed with knowledge and a plan to move forward, even a term like inflation is something you can work through. In the hospitality and food service industries, inflation takes on a specific meaning with food supply and every other inventory need. Inflation and your inventory program needs go hand in hand. 

Food Inflation: 10 Tips to Combat Food Inflation Concerns

Food inflation–meaning rising costs and scarcity of food items–can have a direct impact on the profitability of these industries and individual businesses. Within these businesses, from the bar owner to the inventory program manager, having a working knowledge of food inflation and how to combat it is crucial. 

Even in times of high inflation, these 10 tips can help you stay afloat and even get ahead. When it comes to how to deal with inflation in a business, these 10 tips are the place to start. 

10. Offer Limited Menus 

Limited menus can mean anything from seasonal menu items, to weekly specials, to unique happy hour deals. Offering limited menus helps you combat food inflation by giving you control over what you include in your promotions down to the last detail. 

9. Find Alternatives

Finding alternatives for your food options can apply to limited menu items as well as everything you serve. It can also apply to liquor and other beverage options. 

8. Reduce Food Waste

Reducing food waste starts in the kitchen, and extends all the way to your budget and potential food inflation problems. If you can find ways to waste fewer cuts of steak, or keep complimentary bread sealed, you can hold onto fresh food longer. 

7. Rely on Restaurant Equipment

Relying on the best restaurant equipment, from deli slicers to storage containers, will help you reduce food waste. It will also give you a better idea of what you have on hand. 

6. Cut Non-Food Costs

When it comes to food inflation and the higher prices of the available food it’s worth looking for other areas to cut from. This could be printing single use menu options on cheaper paper or buying more supplies in bulk when you can. 

5. Examine Your Supply Chain 

In some cases, you'll be dealing with ongoing food inflation issues due to simple food supply chain issues. When that is the case, it might be time to look into other options for vendors and shipping choices–maybe even bulk shipping.

4. Raise Costs with Care

Raising costs is something that should be done with great care and consideration. By choosing the right items and not raising costs by an extreme amount, it can be an effective way to balance with food inflation. 

3. Optimize Menu Items

Optimizing your menu items is all about planning your menu around the ingredients and standardized recipe options you can expect to have on a regular basis. This strategy is the close cousin of making limited menu options. 

2. Adjust Operational Efficiency

The operational efficiency of your business can have a direct effect on your menu options, your budget, and your ability to handle food inflation. 

1. Improve Inventory Practices

Food inflation issues are as close as can be to inventory practices and potential issues. If you’re running into food inflation problems, or you see them coming up, evaluate your inventory process, and see where you can improve. 

Food Inflation: Like a Bad Soufflé

There’s no doubt about it, food inflation is something you have to keep a close eye on in the hospitality and food service industries. With these 10 tips and operational efficiencies, however, there’s no reason why food inflation needs to rule your business. Plan for it, work with it, and know that it’ll come and go while you work to make your business last–even in times of inflation. 

Effects of Inflation In Restaurants: 5 Effects on Menus

The effects of inflation on restaurant menus are highly visible from third-party perspectives, and deeper in terms of restaurant businesses. Of course, the effects of inflation on menu items also affect a bar business and other establishments in the hospitality industry. Any business with a menu has and will continue to feel the effects of inflation.

In this section, we dive into five effects of inflation on restaurant menus. We also offer some solutions to these effects to keep restaurants running smoothly through inflationary periods.

5. Printed Menu Changes

If you’re in the practice of using physical menus, including a single use menu, you know how much time and money goes into printing them. An effective solution to making printed menu changes is to utilize a QR code menu. From custom QR code design to using the best QR code generator, there’s plenty you can do.

4. Item Scarcity Through Competition

One inflation side effect in the restaurant industry is the reduced availability of specific items. When such items’ prices rise, every business purchases more of these in bulk so they don’t have to worry about the short term. 

There isn’t one solution to this issue, because you can’t coordinate industry-wide help to ensure everyone stays stocked. What you can do, as an individual business, is only buy what you need (not forgetting safety stock, of course). 

When your preferred ingredients aren’t available, lean into other menu items that make use of ingredients with greater availability. You’ll have to get creative with menu options, but that can be a boost for profits–from restaurant to bar profits–as you mix up what you offer. 

3. Extra Work for the Kitchen Staff

Poor food supply chain management and inflation scarcity lead to extra work for the kitchen staff, from the Sous chef to the pastry chef. When the kitchen has fewer ingredients to work with, they have to be extra careful and plan ingredient usage scrupulously. 

You can work against this effect of inflation by streamlining your restaurant inventory process and order management. A system like BlueCart, which brings together everything you need for order management, can help you keep track of what is coming in. BinWise as a platform–BinWise Pro paired with the BinScan mobile app–helps you track and take inventory in real time. With that, your kitchen staff has a clear line of sight into your real-time inventory. 

2. Additional Wait Staff Training

The direct effects of inflation on menu items and pricing make it difficult for wait staff to do their jobs. From keeping track of menu changes to keeping customers satisfied with menu alterations, inflation puts extra pressure on wait staff. 

You can use a restaurant training manual and have regular training sessions with your staff to keep things moving smoothly. On top of those solutions, the best thing you can do is keep your wait staff updated on what is changing and why. 

1. Rising Prices

The price increases that come along with inflation are the main point of concern for restaurant menus. As the inflation rate increases, the cost to buy ingredients rises alongside it. 

There’s no concrete way around those price effects reaching the menu. It’s the main reason fewer people go out to eat when inflation is on the rise. 

There’s no way to completely avoid raising menu prices, but you can mitigate it. You can raise prices only as much as you absolutely need to. The main thing to do is just keep moving forward, too. You can take care to only raise prices when you need to and keep up restaurant quality.

Inflation Effects: Time to Pop the Balloon

When you know how inflation affects restaurant menu prices and availability, you’ll be more prepared to handle those effects. As inflation rates rise, you can rest assured that you know what to do to manage your restaurant, how to survive inflation and come out the other side.

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How to Survive Inflation: 5 Key Strategies and Tips for Bars

Inflation is tough on bars, there’s no doubt about that. There are, however, steps bar owners can take to mitigate the effects of inflation and save their budgets piece by piece. These five key strategies and tips will help a bar stay afloat, and even find ways to improve practices beyond inflationary eras. 

5. Maintain Order Management

4. Promote Call Drinks

3. Get Creative with Ingredient Substitutions

2. Measure Twice, Pour Once

1. Streamline Inventory

Bar Inflation Survival: Bust Out the Tiki Torches, We're Surviving Together 

Inflation is a scary thing to deal with, especially when you’re already balancing the activities involved in running a bar. When you’re armed with knowledge, however, you can plan for the worst and come out successful on the other side, even when labor shortages are also involved.

Labor Shortage: 9 Tips for Surviving the Labor Shortage

The labor shortages that started with COVID-19 have ranged across many industries, including the hospitality industry and food and beverage industries. It’s easy to say that the COVID-19 pandemic did and still is causing the labor shortage. However, it goes deeper than just the pandemic. We’ll dive into some of the finer points that have changed the face of the workforce. 

3. Desire for Lower-Labor Work

The desire for work that is less labor-intensive is something most of us can all relate to. The pandemic shutdowns and consequent need for work-from-home (WFH) options showed people there were jobs out there that required less physical labor. It’s hard to go back. 

2. Demand for Higher Pay

The general cost of living has been rising rapidly for years, with minimal wage increases to match. These days, a lower paying job simply isn’t enough to live on. When folks can find something higher paying, it’s a no-brainer to choose it. 

1. Work-Life Balance Needs

The COVID-19 pandemic and shutdowns also showed everyone how nice life can be when you have plenty of time for life outside of work. Naturally, if someone finds a job that gives them time to enjoy life outside work, that’s the job they’re going to stick with. 

Labor Shortage In Restaurants

The restaurant and bar industry was hit particularly hard by the COVID-19 pandemic. With food and beverage establishments closing, then opening for outdoor dining, then closing again, the industry and workers have been through a lot.

The industry is down by 1.2 million workers from the employment numbers of February 2020. This has left the restaurant industry hurting for workers to bring balance to returning customers in the face of the restaurant labor shortage. We’ll take a look at three key ways to find new workers.

3. Hire by Referral

Asking current employees to refer their job-seeking friends is a great way to get past that obstacle. You can care for your current employees in this as well, by offering enticing bonuses for referral hires. We recommend offering at least $150 per referred and hired employee, provided they remain an employee for at least 90 working days.

2. Care for Your Employees

The idea of bonuses for referrals is just one way you can care for your employees and foster a healthy environment. From working with them on scheduling conflicts to stepping in as back up on busy shifts, proving you care with actions is a must. 

1. Maintain Quality Management

Maintaining quality management also plays into caring for your employees, but from the top down. Invest in your management team with training and organized plans. Make your management team a team your employees can rely on. In turn, you’ll be able to rely on your employees.

Labor Shortage In Hospitality Industry

The hospitality industry has suffered a labor shortage on a similar scale as the restaurant and general food and beverage industry. To get specific, hotels were tossed into a labor shortage when travel restrictions began to ease, and the workers didn’t return. From front of house to back of house, hotels have been scant on available staff.

3. Showcase Workplace Culture

In a hotel, the hours can be strange and the guest needs can be unpredictable. You can’t change these things, but what you can do is foster a workplace culture that makes employees feel comfortable in all those situations. 

2. Offer Incentives

In the case of hotels, some of the best incentives you can offer are deals on hotel offerings. Of course, raises and bonuses are great too. However, offering free lodging vouchers, friends and family discounts, and even free meals for long shifts are unique offers you can include. 

1. Highlight Unique Opportunities

In hotels, unique opportunities can be anything from learning to work as a banquet server to achieving the position of food and beverage director. When you’re searching for employees, highlighting these opportunities will show people what they can achieve through working at your hotel.

Short on Labor? Time to Put In the Work

A labor shortage can be daunting from the business perspective. On the other hand, it can be viewed as an opportunity to solidify smart business practices. It's a great time to find a team of exceptional people to move the business forward. 

Risk Assessment for a Restaurant: 6 Key Restaurant Risks

Risk assessment for a restaurant is all about finding the areas of potential risk and discovering ways to mitigate or avoid them. The hospitality industry is known for inherently risky business models, especially when inflation is involved. 

Restaurant Risk Assessment

Restaurant risk assessment covers everything that could go wrong in a restaurant business, including:

There are so many areas of a restaurant business, and each area comes with its own risk assessment needs. There are common facets of risk assessment that cover all restaurant areas, however.

The following three facets of restaurant risk assessment show up across your entire restaurant. They’re rather broad because they can fit different situations with varying contextual relevance.

3. Kitchen Mishaps

A risk assessment in your kitchen includes a close look at the areas where something could go wrong and its probability of occurring. The best way to avoid kitchen risks is to have a streamlined order of operations in line with your restaurant operations, and have regular training for kitchen staff. 

You should also include a quantifiable measurement of your kitchen’s risks and draft a plan that lowers those risks. For example, consider the 23% that at least one full-time worker will get sick within 30 days. That can severely decrease your kitchen efficiency. You can minimize that risk by making sure proper cleaning measures are taken to avoid germs.

2. Customer Service

Customer service risk issues can show up in a few ways. Some of those risks include lawsuits based on poor service or food poisoning and general customer satisfaction. Poor online reviews are also a risk, even if they aren’t as big as a lawsuit.

To manage customer service risks, training your wait staff for both immediate and long-term needs is the place to start. Beyond that, make sure every customer-facing action and area of your restaurant is managed with customer satisfaction in mind. 

1. Shrinkage

Shrinkage occurs in the form of food waste, customer theft, employee theft, or–in extreme cases–natural disasters. You can prepare for each of these scenarios in different ways.

For natural disasters, pretty much all you can do is have an emergency plan in place. That can include emergency exits, or even a power shut-down to avoid further destruction. 

For food waste, the best plan is to map out dishes and ingredients to avoid preparing food that will be thrown out. That means both being careful with ingredients and making use of older ingredients. An example of that is, using the surplus tortilla chips from a dish to be used for nachos. 

When it comes to customer theft, you can discourage it by perfecting your customer service. You can also make sure customers are aware that you have staff throughout the restaurant. Additionally, you should set up a host stand by the front door. 

For employee theft, it starts with hiring the right people. Asking the right restaurant interview questions and screening candidates will help you avoid hiring people who will steal from you.

Restaurant Risk Assessment Example

After reading those facets of risk assessment for a restaurant and learning what to expect, you’re on your way to preparedness. The next three examples are some of the most common areas of risk and risk assessment in a restaurant. As you open your restaurant and create your restaurant business plan, you’ll want to test examples of risk assessment for your restaurant.

3. Menu Item Example

A risk assessment example for a menu item can help you identify potential pain points with specific ingredients. To craft this example, make a list of everything that you need, from restaurant equipment to ingredients, for a specific menu item.

2. Dine and Dash Scenario

For a dine and dash scenario, the best example is to plan how you would react if a customer were to dine and dash. A tip to use for your plan is creating a restaurant floor plan that's hard to get through quickly for someone unfamiliar with it. 

1. Food Supply Chain Management

Food supply chain risk is often out of your hands. You can prepare for it though and work on supplier relationship management. With this example, take a look at the sourcing of a specific ingredient. 

Restaurant Risk: Risky Restaurant Checks (and Balances)

When you enter into a restaurant business knowing the risks to look out for, you’re ahead of the curve on mitigating those risks. There are issues you won’t be able to avoid, but the more you know, the more you can prepare for. 

Hospitality Risk Management: 9 Factors of Risk In Hospitality

When it comes to hospitality risk management, many hospitality businesses have room service, hotel food and beverage services, and direct customer service to consider. From hotel staff-related risks to the food and beverage director to room service staff, hospitality businesses cover a lot of ground. It’s like risk assessment for a restaurant and home-away-from-home all in one. 

6 Risk Factors In the Hospitality Industry

A hospitality business–like a hotel, motel, or similar establishment–is a combination of otherwise disparate service offerings. It contains everything from food and beverage services, to special event settings, to every nuance involved in the rooms for guests. These six risk factors in the industry show the scope of what you have to be aware of in hospitality risk management. 

6. Liquor Liabilities

Anywhere liquor is sold and you’re stocking a bar, there are liquor liabilities. In a hotel bar, it’s hard to know where your guests may be headed after they’ve had a drink or two. 

The best thing you can do is keep tabs on how many they’ve had with you. You should also keep an eye on areas like the pool for safety measures. 

5. Hazardous Chemicals

Cleaning is a big part of keeping hotels and hospitality businesses ready for guests. This is even more important given the recent COVID-19 pandemic. There are more stringent bar cleaning checklist rules and hotel standards. Of course, this brings with it the hazard of dangerous chemicals.

The best way to avoid risk with these chemicals is to keep them in the hands of the cleaning crew. That can mean either on carts or in a locked store room.

4. Common Safety Hazards

Common safety hazards in a hospitality business are slips, trips, and falls. To avoid these risks, make sure your carpets are well-maintained and keep wet floor signs available. Additionally, it's a good practice to have stairs and steep areas lit up for greater visibility at night. 

3. Special Event Management

Special event management–from the banquet server work to the banquet manager job to banquet table setup ideas– is a unique type of risk. Events, from parties to corporate functions, bring together food and beverage risks and general guest satisfaction and safety risks. A full risk assessment and plan is needed for the event management department.

2. Property Damage

Property damage is bound to happen from time to time with so many guests moving through the hotel. Property damage can be as small as a bit of chipped paint on the wall to as large as a broken nightstand. It can be hard to avoid, as guests are unpredictable. 

The best risk management plan is to have a budget set aside for damages. On top of that, you should have a liability and property damage waiver included in your room agreements. With guests signing a waiver that says “You break it, you buy it” you’re less at risk of careless mistakes.

1. Food Safety

Food safety is paramount in a hospitality business. From in-house restaurants to room service to catering, a lot of food moves through a hotel. With all that food, food safety is a top need to meet–for everyone. The best way to mitigate it is to have operational efficiency in the kitchen and food storerooms.

Risk Assessment In Hospitality Industry: 3 Risk Assessment Practices

Risk assessment in hospitality industry businesses is nearly identical to the practice of risk assessment in other businesses. The only different factor is the fact that guests are involved. Of course, other businesses have customers too, simply in a different capacity. 

Since guests are ‘round-the-clock factors in hospitality businesses, they play a greater role in the assessment. In hospitality businesses, guests are the one thing you can’t ever fully predict.

Because of that, they are the one thing you need to plan for the most in risk assessment. The following three risk assessment practices for hospitality businesses all take into account the presence of guests:

3. Lobby Danger Zones

The lobby is a place with many risks. Such risks include slips and falls near the entrance to baggage mishaps. A mapped-out risk assessment with procedures in place and necessary equipment–like baggage carts–will help avoid cluttering up the lobby with risk. 

2. Food and Beverage Examinations

We’ve said it before, we’ll say it again: you don’t want to mess around with food and beverage safety. An assessment of safety standards from the kitchen to the room service trays will show you the spots you need to watch. It starts with food preparation and storage, and leads to making sure room service food is served in a timely manner to avoid spoilage. 

1. Room Service Assessments

Room service covers everything from food and beverage delivery and cleaning to general room needs–like extra blankets or toiletries. The best way to perform a risk assessment for room service needs is to make a list of everything a guest could need. From there, follow the path of that item or service to the guest, and mark down any areas of potential risk to find solutions. 

Risk In Hospitality: Be Hospitable, But Not at Your Own Risk

Hospitality risk management is vital to the success of a hospitality business. From room service and lobby safety to banquet event ideas and planning, there are plenty of areas with risk potential. One risk area that spans the business is everything to do with hotel inventory and order management. 

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Management for Hospitality Businesses: Manage Your Risk, Build for Success

With this pillar of hospitality management in your list of resources, you’re well on your way to running a successful hospitality business. From restaurants to room service, knowing your risks and being ready for the ups and downs outside of your control will help you stay ahead of the curve.

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