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Case Study: Breaking down Barriers Between a Hotel and Its F&B Franchise

Breaking down Barriers Between a Hotel and Its F&B Franchise

When it comes to thinking broadly about food and beverage, hoteliers can either opt to supervise and operate their hotel F&B programs internally or they can work with a partner who will manage the culinary branding. This decision can determine the type of consumer dining at the restaurant and greatly affect the bottom line.

Recently, hotel executives are beginning to favor the latter option. The logic behind this shift drives right back to the greater potential for revenue from incorporating an experience restaurant group to operate the property’s F&B in addition to the power that such an entity can have towards garnering incremental returns from customers.

In my experience, though, the biggest challenge in these collaborations is properly aligning the processes needed to operate two separate hospitality-driven businesses under the same roof. Disagreements and unclear responsibilities to this effect can often lead to barriers that prevent both parties from reaching a fluid partnership.

During contract negotiations, talks about the actual operation usually concentrate mainly on task ownership, such as what department will deliver ice to guest rooms or who should clean common spaces. First, however, hoteliers should try to understand the situation from their partners’ viewpoint. What actually attracts a restaurateur to hotel management agreements are two main objectives.

The first is a hotel group that will help build their restaurant without a major upfront financial contribution and with the ROI for the hotel usually paid back via higher profit-sharing within the first five to seven years of operation. The second reason is a matter of risk; if the restaurant is not successful, they can walk away without a significant monetary loss.

The tradeoff that may prevent a hotel from forming such a collaboration is that the associated company has to provide all food, beverage and services for every hotel amenity. These amenities include, but are not limited, to in-room dining, employee cafeterias, lounges, banquets, lobby spaces, pools and any other public area.

Thus, in order to attain a success working relationship, there needs to be a clear vision and strategy in place for the hotel, in conjunction with alignment of purpose between the property and F&B teams.

Situation and Challenge

I was hired by an NYC-based hotel in order to ‘fix’ their third-party F&B company. My client was extremely frustrated by the level of service the guests were getting. This foodservice provider happened to be a well-established restaurateur with two successful and well-known brands. The company also had a loyal following and a plethora of experience in the restaurant space but zero experience in hotel F&B.

Due to the negative feedback hotel management was receiving from their guests, several senior executives were starting to get extremely frustrated while market share and brand reputation were slowly eroding. As it turns out, this F&B partner couldn’t get ahead of the issues and they were quite overwhelmed. This combination resulted in a toxic relationship that was felt by management and staff in every department. Before you knew it there was a pitched between the hotel and the F&B teams.

As part of my initial analysis, I explained that for hotel restaurants to be well-received, they need to be conceptualized and treated as unique business entities – separate yet compatible with the hotel. The environment needs to be barrier-free in order to avoid such conflicts. Below are examples of how putting the time and effort into breaking down barriers between the two operators transformed an extremely volatile situation into a thriving partnership.

Contract Solutions

Putting together management contracts for third-party F&B services takes a lot of time, money and planning. I most often find these agreements to set a very negative tone for the future operation. The language is very stark and defines the sides with a very sharp divide. Moreover, legal documents have to be written in a text that can only be translated one way – that is, they are necessary but they create a gap right out of the gate.

Operating agreements penned between partners must have structure so they can be managed independently by the ground team, but there can be subtext added to promote brand equity for both units. In this client’s particular case, they didn’t have it all figured out. When reality set in, it was quickly realized that they were in a power struggle that was creating roadblocks and getting in the way of running a healthy business.

Once the epiphany had taken place, we worked with in-house leadership and focused on the things that mattered and added value – profitability! Ultimately, that meant they are both there to provide a strong and compelling internal and external value proposition. In order to have a strong external value proposition, the internal one needs to be compelling. If the internal is not intact, the external will never be successful. I have honestly never known of a bulletproof contract, but I am fully aware of less combative strategies and methodologies that allow for a ‘straighter road’ to the finish line.

Marketing Solutions

Although they fuse together nicely, hotel and F&B operations require independent but harmonious marketing strategies. The partnership should always be remembered and brought into the fold when possible – on both sides of the fence.

For example, when conducting a photoshoot for the room division at this NYC locale, the culinary team was not included in the artistic components but was needed to cater food to the team during the shoot. When the chef was made aware that outside food was used for the actual photographs, the first instinct was to engage in a power struggle. His argument was that he allowed the film crew to use his staff to deliver food to avoid the expense of a full banquet team so he should at the very least have been consulted. Although there was a contractual obligation in place to provide a 50% discount on the food to the hotel staff, the photoshoot was, however, during his busiest time of day. The chef wanted the opportunity to provide the culinary for the shoot and get ad credit.

When confronted with this, I saw two departments with two agendas. The hotel was paying for and organizing this campaign, so why should they include F&B? The chef then retorted, “Why should I have to use my staff to deliver discounted food?” My straightforward answer was that each entity holds valuable resources that can benefit one another in a unique way.

One side would get complimentary food for their photoshoot from a partner that is invested in the success of the promotion, while the other will get culinary credit in-print or online. Once we reframed each party’s demands, it was a ‘win-win’ for all. What started as a battle for control ended in a innovative collaboration for the future.

Fixing Breakfast

Hotels have a much sharper view of how breakfast service should run because guests consider the morning meal as part of their overall hotel experience. When things don’t go well during this meal period, it is a direct reflection on the hotel. Without prior knowledge of breakfast being viewed more as an ‘amenity’ rather than a strict ‘revenue outlet’, realigning resources can be very challenging for a foodservice operator.

Creating a process that encompasses all of the details of service, loyalty programs from the hotel and proper scheduling are imperative. In this instance, the F&B operator could not get it right. In order to answer guest complaints of poor service, the F&B supervisors just kept adding staff, and yet they still couldn’t get ahead of the operational differences.

I dug deep to understand what the issues were exactly as management did not know. All they knew was they were being forwarded multiple emails per day from clients stating concerns about their F&B experiences and asking for compensation or reimbursement. No one ever sat down and said, “Here are the concerns and this is what we would like to see.”

The immediate step was that I got them off of email and into the boardroom where I asked the team to listen and write things down. Via this process, we rapidly learned one change could clear up five problems. Guest were frustrated because all they wanted was ketchup for their potatoes or raspberry preserves for their toast; they’d ask five people and nothing ever arrived.

Going forward, all tables were set and reset with every breakfast condiment they could think of. This saved steps while simultaneously clearing up more chaos than one can imagine. Once in place, new steps of service were memorialized into the training guides, staff side-work and management duties. These new manuals were shared with the hotel and, when faced with complaints, their team members could explain the service model used in the restaurant without generating a feeling of separation or a lack of care for the patron.

In the beginning of the partnership, it is essential to lay out goals from each side for the agreement. For the hotel, brand recognition from the restaurant group is paramount, but not always relevant. If your F&B partner is known for a certain type of cuisine, one needs to be aware that this flavor profile will flow through all meal periods. The food options will show themselves on the breakfast menu in the form of different grains, sauces, portion size and selections in general. It cannot be assumed that the morning meal will follow a classic standard of eggs benedict and pancakes.

Chefs communicate through their food. While it is hard to conform, in these situations it is necessary. If the demographics of both the local and hotel clientele are calling for granola instead of the restaurateur’s preexisting preference for quinoa, that needs to be respected. If the locals want ketchup instead of puréed sundried tomatoes, the former must be made available.

In this particular case, hotel guests were asking for traditional items and when their requests went unanswered, disappointment set in. Taking my time to thoroughly explain this from the guest’s point of view, the chef was able to understand and find a happy median between adapting to requests and maintaining his foods’ identity. All told, this one alteration made a meaningful difference in the overall tone of the partnership.

In-Room Dining (IRD)

IRD is a very tricky department for a third-party F&B operator. The staff are employees of the restaurant that work with restaurant patrons, but only interact with hotel guests. For this reason, the hotel partner has a heavy influence in this area by way of requirements for the tray set-up, uniforms, phone scripts, delivery times and tray pick-up. The IRD staff shares storage space, uses the service elevators and, most importantly, enters guestrooms. A major struggle I saw was delivery times for the breakfast meal period.

Calling IRD for a pot of coffee and some toast on your way to a business meeting could take an hour for delivery. They tried adding staff but it didn’t work. I suggested looking into the service elevator set-up. Hotel staff were scheduled to arrive at the peak of the in-room-dining rush which meant that all of housekeeping would be waiting for the service elevators to get to their assigned floors at the same exact time as the IRD staff were trying to deliver hot food within the quoted time.

This was clear to the staff on both sides of the equation but they just developed defenses against the issue and ultimately made things worse. Elevators were being held on floors while some staff members were pushing all the buttons so elevators would stop on every floor so they could jump out and grab supplies. It was a disaster!

Back to the boardroom, we went through this issue with the hotel & F&B managers, and then staggered the staff schedules around the service elevator usage. Next, we changed the hours of employee cafeteria usage so that some teams would have their meals at peak times in order to ease traffic on the floors. These two simple yet meticulous alterations ended up making a world of difference.

Problems At The Pool

There is nothing more frustrating than relaxing by the hotel pool then asking for a menu only to be told, “I’m sorry, but I work for the hotel. I’ll get someone who can help you.” Or worse, getting out of the pool and in need of a towel only for a staff member to say, “I’m not allowed to give out towels. Let me see if I can find a pool attendant.”

Whenever employees from two different departments share the same customers and space, the approach for service and training must be crystal clear. Everyone wants to know their role and responsibility for ease of process and efficiency.

In this case, we came up with a ‘chit’ system. This procedure is used to communicate between departments without it being obvious to the guest. It functions through a ticket being filled out by the pool attendant which is then given to server with guest information. The purpose was to give one another silent cues and encourage an exchange between the different sections without it being visible to the guest. Soon, everyone was back to sun-and-fun at the pool!

Long-Term Results

Now going into the second year of the partnership, there is a salubrious working relationship between both teams on this property. Positive feedback from guests on TripAdvisor and their own internal ratings have both increased, while occupancy is at the budgeted levels. In addition to the three revenue outlets described above, the partners are in talks to take over other amenities within the hotel. Now that there is trust, the partnership can continue.

The moral of the story is that when engaging in a partnership where both individuals reside in the same building, barriers needs to be broken down. Joint ventures are formed because of a perception of mutual value. For this, though, brand equity has to be an added component to the agreement while effort needs to be exerted to push forward and not quibble over whose responsibility it is to clean the garbage room or who is to blame for a flood.

Henry Ford once said, “Coming together is a beginning. Keeping together is progress. Working together is success.” This should be the motto by which all hotel F&B agreements operate.

About the Author

Kelli Carucci is a former member of Cayuga Hospitality Consultants.