In Jim Collins’ seminal book, Good to Great, he outlined what enterprises have done to go from a good company to a great company. One of these principles, the Hedgehog Concept, can be perfectly applied to foodservice businesses in any stage—whether just starting up or expanding.
The idea is simple in concept but trickier in execution. It consists of three parts: being the best in the world, being passionate, and knowing what drives your economic engine. In this Enterprise Insight, we’re going to look at the three parts and how they apply to a foodservice business.
This is the easiest for some and hardest for others; you have to be honestly excited and in love with what you’re trying to achieve. The type of restaurant an owner operates is largely driven by what they’re passionate about—whether that’s a great hospitality and a café, high-end cuisine and a fine dining restaurant, or coffee and coffee shop. If you’re not passionate about coffee, your coffee shop won’t be as good as it can be; you’ll never get to be the best without passion for what you’re doing.
Being the Best in the World
“Best” is subjective and someone’s world is tied the context of what that person has experienced. So, what we mean here is simply doing what you’re passionate about better than anyone else in your market. The goals for a local-favorite, third-place café are drastically different from a restaurant like Noma. However, they both are executing on what makes them great; warm service and familiarity with the café and cutting-edge, locally-driven cuisine at Noma.
Knowing What Drives Your Economic Engine
This is the integral third leg on the stool because all the passion and expertise in the world won’t guarantee that you turn a profit. Jim Collins explains the economic denominator as the “Profit per X”—the metric that would have the greatest, most sustainable impact on cash flow over time. In the foodservice industry, the most obvious economic metric that comes to mind is average check, and this is certainly valuable information. However, you can understand and drive your business in a more specific direction by choosing the metric that best reflects your ability to make money, because your average check is limited to your type of business.
For example, a coffee shop that’s focused on being the best in a given market would want to capitalize as much as possible on repeat guests. The average check at a coffee shop is not going to be able to increase drastically over time simply because of the product category. However, you could drive more sales per repeat customer per, say, week, by focusing on quality and service, thus compelling more customer visits. So, in this case, the average sales per repeat guest.
In a fast food or quick service restaurant, again, average check won’t rise over time. A better metric to push might be profit per labor hour. Limited-service restaurants need to run lean in order to be profitable, so finding the balance between maximizing sales while minimizing labor could drive you in the right direction. Meanwhile, a full-service casual restaurant should consider profit per seat, because it needs to maximize the number of turns per shift.
Applying Jim Collins’ Hedgehog Concept to your foodservice business can help to define or reposition your strategy. It is important to remember that the three items are reliant on one another: being passionate, being the best, and knowing your economic denominator, and when applied simultaneously, can be a powerful tool.