Food shortages are never welcome news, especially for food and beverage business owners. However, with McDonald’s running out of milkshakes and Nando’s having to close 45 restaurants due to a shortage of chicken, there’s no denying that there are tough times ahead for many cafes, restaurants and cloud kitchens.
This seems especially harsh since it follows 18 months of closures and operating at reduced capacity. That’s why we’ve put together a guide on steps to mitigate the impact of food shortages upon your business so that you can weather the storm.
What Is Causing Food Shortages?
The current shortages are largely being caused by a lack of heavy goods vehicle (HGV) drivers. Without enough drivers to transport goods across the country, many orders are being severely delayed or cancelled.
The lack of drivers is partly due to Brexit. Leaving the EU brought about changes in immigration laws, causing an estimated 25,000 European drivers to leave the UK. It is also now more difficult for haulage companies to hire EU drivers, exacerbating the problem.
The industry is further threatened by an ageing workforce and thus a high retirement rate. HGV Training Services Ltd reports that 65% of British drivers are aged 45 or over.
Of course, the pandemic has only exacerbated this problem. 30,000 HGV driver tests were lost as a result of the pandemic and with covid-19 cases still high, many drivers are forced to miss ten days of work at a time due to self-isolation rules.
The HGV industry is calling upon the government to grant temporary work visas to drivers, but F&B businesses cannot afford to sit back with their fingers crossed. Let’s take a look at steps you can implement right now to prepare for forthcoming shortages and reduce the impact upon your business.
1) Plan Ahead
The more carefully you plan, the less you will need to panic.
It may be tempting to bury your head in the sand, but you need to accept that food shortages may soon become a reality for your business – if they aren’t already.
It’s important to prepare for multiple scenarios so that you can have a plan ready to go for whichever one proves to be true.
For example: what would happen if you were no longer able to serve your most popular menu item? How would you compensate? Would you introduce special promotions on other items to distract customer focus from the shortage?
McDonald’s, for example, has had to remove six popular menu items due to ingredient shortages. They have reintroduced several “old favourites” to replace these items. Could your business do something similar?
You may also want to consider using an Enterprise Resource Planning (ERP) solution to help you predict the impact of food shortages so that you can prepare for multiple scenarios. This will help you to manage inventory and preserve profits when facing shortages.
2) Strong Cash Flow Management
Cash flow is incredibly important to your business, particularly in the face of a crisis. You will need plenty of cash available in case you need to spend more than usual to secure certain ingredients, since shortages often lead to price increases.
Furthermore, food shortages could lead to a drop in sales if you’re forced to remove a popular and profitable item from your menu. This will mean less cash coming in, so you need to take steps to mitigate the impact of this and ensure that you have plenty of available funds to continue operations.
You should create regular cash flow forecasts and later compare them against cash flow statements. During tough times, it’s best to do this weekly so that you have a detailed understanding of your spending.
It’s also important to have a strong safety net. As well as cash reserves, you may want to think about a line of credit, which is a preset borrowing limit that you can use as necessary and then repay in increments.
The more structured and efficient your cash flow processes are, the easier it will be to navigate the food shortage crisis.
3) Build Team Spirit
Team spirit is more important than ever during difficult times. You will need your staff to commit to making your business run as efficiently as possible and creating an excellent customer experience.
Haulage and logistics companies are not the only ones struggling with labour shortages. Supermarkets are working hard to recruit new workers since self-isolation is causing disruption in stores. As a result, they are increasing wages in an attempt to attract new staff, which is simply not an option for many small businesses, particularly in the face of rising food costs.
It’s important to make sure that every employee feels like a valued member of the team. Disengaged employees are driven solely by money and won’t hesitate to defect elsewhere if offered a better pay packet. However, staff who enjoy their work and feel appreciated are much more likely to remain loyal. On top of this, satisfied staff will work harder to help your business cope with the strain of shortages.
4) Help Employees Obtain Visas
Following on from this, assisting your employees’ visa applications may help you to mitigate the impact of shortages. Businesses first need to obtain a sponsor licence before they can sponsor employee visas. Take a look at the UK government website to find out more and see whether or not your business is eligible.
5) Find Backup Suppliers
It always pays to have a backup. Cafe, restaurant and cloud kitchen owners should start searching for backup suppliers now in case their current suppliers can no longer deliver. This may mean spending more than usual, which is why it’s important to have a good cash flow management system in place.
As well as searching for suppliers who can deliver the ingredients you currently use, you may want to think about substitutes and create a list of companies you can use to acquire these.
6) Communicate with Customers
When facing food shortages, it’s important to communicate openly with your customers and manage their expectations.
Keep a close eye on any deals and promotions you are running. You may want to avoid these if they involve an item you are likely to run out of to prevent disappointing your customers.
Make sure that your website is up-to-date and that customers can access the latest version of your menu. Remember to update allergy advice and nutritional information if you are altering recipes due to ingredient shortages.
Preparation is Key
The F&B businesses who are best equipped to deal with food shortages are those with a positive company culture, a strong cash flow management system and the forethought to prepare for a range of outcomes. Whilst food shortages certainly present a challenge for all hospitality businesses, the ones who will fare the best in the face of adversity are those who have structured and efficient businesses and a clear insight into their finances.