The 80/20 Principle Effect on Hospitality

No doubt you’ve heard of the 80/20 principle. In fact, we probably first heard about it in school all those years ago, and forgot about it like most things from that time! It’s time to take a look again, refresh our memories and see how this theory impacts our industry and how we can use the understanding of this principle to our benefit. What is the 80/20 principle? Simplistically it’s a relationship between the time (or money) we spend on something and the impact or outcome we get. At the home it’s the simple perspective that we wear 20% of our clothes 80% of the time.

80/20 in Hospo

Much like our daily life the 80/20 principle is evident in all aspects of our business from people management to product management

80% of our time is typically spent on 20% of the workforce (the under-performers)
20% of our menu items create 80% of our sales
20% of our beer selection account for 80% of our beverage revenue
80% of our revenue comes from 20% of our customer base – our regulars

Flip the 80/20 on its head

80/20 and People Management

According to research, if we focus only 20% of our time on the under-performers (hopefully less than 10% of our workforce) that leaves 80% of our time to focus on those committed to the organisation and the stars. I would hazard a guess, albeit a calculated one, that both the ensuing peer pressure and or the FOMO (fear of missing out) attention will lead those same under-performers to either depart without need for a push or improve their own performance.

80/20 and Menu Engineering

We know that under normal circumstances a menu or beverage list cannot purely represent “best sellers”, so the key is how do we treat the 80% of the menu that only sells 20% of the items? The first step is to ensure that you only spend 20% of your time dedicated to menu engineering focusing on these items. After all gaining an additional $1 in profit from an item selling 10 portions is insignificant to an additional $1 gained from and item selling 200 portions.

check out “The Art of Menu Engineering” for more on this topic

80/20 and Marketing efforts

Whilst there may be nothing wrong with diverting 80% to your marketing effort/spend to social media/digital, the big question is, who are you targeting? If your target audience is not well defined and segmented then that 80% spend or time and effort could only reach a customer base representing 20% of your revenues. And if 80% of your customers aren’t using the social media platform you prefer, again, it’s clearly not an effective use of resources.

80/20 and Restaurant-Bar Floor Management

Coming back to our customers, how do we allocate management’s time? While ensuring we “touch” all our tables, is it sufficient? For those 20% who are generating 80% of our revenues, the more bespoke our efforts, the more likely they’ll be even more loyal to your business. Do you have a dedicated resource in your business whose key responsibility is to genuinely pamper your regulars, identify up-in-coming fans, and build your database?

check out “The Importance of a Host in Hospitality” for more on this topic

These are just a snapshot of where the 80/20 principle is evident in the Hospitality field.