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With reservations

Those with the knowledge and unadulterated passion for the food business enter the restaurant scene. But they soon find out that business is tough and it is getting tougher. To streamline and have a profitable venture, they will need to tread with caution and have checks and balances in place. By Reema Lokesh

It sounds fashionable to have a desire to set up a restaurant. Celebrities are often quoted saying they would love to enter the restaurant business sometime in the future. Amongst them some have indeed put plans into action but have seldom succeeded. From human resource issues ranging from the quality of staff, employee turnaround, poaching, unethical practices, to civic licensing and harassment by local authorities and law keepers, the challenges are in plenty. This business needs a trusted lieutenant who keeps a watchful eye on the everyday finances to avoid pilferage and cheating. The success of the Udipi restaurants is a clear example – their success formula rests on the fact that there is someone from the inner circle who has a watchful eye on that crucial cashier's desk.

Anup Gandhi

Most restaurateurs are in sync with the fact that this line of business calls for serious hard work, with hands-on experience and control. There need to be checks and balances in place and a constant vigilant eye on the business. As Anup Gandhi of Auriga Hospitality (Bonobo) puts it, “It is probably one of the toughest businesses to be in. It is highly competitive which requires serious commitment to ensure one offers a quality product.” This business is people oriented and human resource plays a vital role in the functioning of every segment of the business. Staff training and education cannot be compromised. Unlike in the past where people worked in a restaurants for years with senior staff members serving as waiters, the trend today is about fast money and fast growth especially in the new age restaurants, cafés, bistros, etc. The approach is short-lived and employees move on to the next best opportunity for a few thousand dollars more. The sector is highly disorganised and it is time some systems are put in place to address the misgivings of the industry. There are some restaurateurs who have put systems in place but there is more that needs to be done.

Crime check

Moshe Shek

“I noticed a drop in sales at one of my South Mumbai outlets, which was rather unnatural and that got me thinking about what could have gone wrong. I then decided to depute a reliable person in that store to check on the everyday working of the business and to my horror we discovered that our two staff members were the culprits. They would print false bills and hand it over to the clients which naturally went unregistered as everyday sales,” articulated Moshe Shek, chef, restaurateur, Moshe’s. What saddens him further that the same employees who cheated him got a job in no time in another restaurant in the same area. One is forced to question the crucial element of reference checks before hiring an employee. He further adds, “It is rather unfortunate that passionate and serious players like me have to suffer because of few unscrupulous staff members who take to robbery and theft to make fast money. Such practices break the restaurant and dishonesty can kill the business. The fact of the matter is that the owners are in a fix and not much can be done about it. I feel a true passionate restaurateur may not be able to survive in the future and it is the big groups that will lead the way in the business.” There have been outlets that have been shut due to excessive pilferage, loss of cash and unethical billing and records maintenance. It is interesting to note that often especially at quick service restaurants have a placard stating, 'You get the meal free, if you don’t get your bill.’ This is clear indication to bring in some control and check within the system.

Anjan Chatterjee

Anjan Chatterjee, founder and chairman of Speciality Restaurants also faced similar experiences in the past and learned the hard way. Chatterjee says, “We have invested heavily in technology and we have tried our level best to leave no scope for any unethical practices to prevail. As your business grows, one has to have extremely sound systems in place to ensure that untoward incidences do not take place. Adds, Shek, “One of the leading security service companies are creating a system to track and control the number of cups of beverages being served at cafes.” But however fool proof the system is there are times when the crooked human mind gets better of technology. To counter this, the need for soft management skills, sound training and education, HR best practices and talks of integrity and defining a career path comes into play.

HR best practices

Sameer Uttamsingh

The common grievance across the board is the stress of training and retraining the staff as this business faces very high staff turnover. Most restaurant chains have put some sound training modules in place using their own inhouse training systems and formats. The Speciality Restaurants Group has a training centre in Kolkata that has been in existence over 11 years. According to Chatterjee, training of staff is important to maintain the quality of food and service. “Staff should be trained to not only know the right way of serving but also to be hospitable - know how to react in different situations. We started training in the back area, a refresher course is done,” he says. Sameer Uttamsingh, brand head, Dish Hospitality, agrees that staff turnaround is high in the business and loyalists are rare to find. But he also mentions that it is crucial and mandatory to put in proper training modules in place and different types of tools for training such as a training calendar, wherein the staff go through different sectors of training for four days of the week, from bar menu to food menu, etc. They also have a mystery shopper system in place and a regular audit is conducted that provides the required guidelines for these training programmes.

Sartaj Bedi

Most employees who work in restaurants are not highly educated, hence it is important to explain concepts and systems to them in their language of comfort. Out of the Blue have designed training programmes in vernacular languages for their staff to feel comfortable and hence bring in better results. They have set up video based training with voice over in regional languages. Sartaj Bedi, general manger, Out of the Blue, says, “It is a big challenge, no doubt, to retain staff in our industry. Meeting staff expectations, salaries, etc, coupled with the lack of quality supply of talent in our business is a challenge. We have also invested in technology to overcome these issues. For example, we have invested in high end ovens that cook faster with increased consistently and productivity. We also lay emphasis on being method oriented and train our staff as per a set method from cooking to serving. It is important to invest in people and train them on the company philosophy and work culture.”

Sumit Gambhir

Gandhi brings in a new angle wherein he firmly feels, “There is high attrition, systems are not yet in place and the staff is uneducated but we need to talk them. As employers who should also keep to our commitment of timely payments and also pay them their due, not underpay or under value the staff. Our company has also paid bonus during the tough times.” The top management role is essential to define the goals and direct the staff in the right functional path. Apart from training and building staff integrity, staff selection also pays a vital role. Reference checks need to be done thoroughly and minutely, all the more as this industry has been a victim of thefts and robbery at work place. Says Sumit Gambhir, co-owner, Neighborhood Hospitality: - Woodside Inn/Woodside All day Bar & Eatery, “We also feel it is important to build a career path for the people which requires a dedicated effort by the top management to achieve the same.” Further, he also makes a valid point wherein the company has hired an HR manager, auditors, specialists in their field within the company to take charge of core functional areas. “It is important for medium sized companies to employ specialists within the business. We have an HR manager who communicates with the staff on regular basis. Sometimes it is not comfortable for owners to take up the role of HR heads hence it is best left to the specialists. We also have an outsourced controls team in place to look into other important functioning on the business,” he adds. Shek also feels that it is important to give the staff an opportunity to work in different departments and give them a career path to grow. He proudly says that his head of bakery today, started his career with the company as housekeeping staff. Designing courses to suit the requirement and need of the restaurant industry needs to be catered to. Ministry of tourism, Government of India started Hunar se Rozgar programme in 2009-10 with great success with courses in F&B Service and Food Production. New courses in housekeeping, bakery and a composite multi skilled course in Food Production and F&B Service is also scheduled to start. Many hotel management institutes and private players are already tied up with the project; what is required now is to for more industry players to come ahead and take this initiative ahead.

Diwali dampener
Most restaurant owners have expressed their view that the Diwali of 2012 can be recorded as one of the worst Diwali for the restaurant fraternity as business was at its all time low. Says Shek, “This was the worst Diwali in the history of Diwali.” Chatterjee, echo’s his sentiments, wherein he says that this was the worst Diwali ever. During these times it is important to focus on the middle line and ensure the brand standards are maintained.

License Raj

Apart from dealing with human resources and dishonest practices, another issue that restaurant owners have to deal with is the age old issue of licensing and constant questioning by civic authorities on minor matters. Most restaurateurs are of the opinion that it is time archaic rules are amended to cater to present times. Chatterjee puts it rather strongly, “We entrepreneurs are a cursed lot. The list of licenses works as a major discouragement, from excise issues (which is a state subject) to a host of others. The government needs to understand that our business is a major employment generator, we are creating value and opportunities for growth and we need to be given a friendly work environment. Single window clearance is the need of the hour, licenses renewal needs to be seen with a long term approach.” The owners are asking for a little more concern from the civic authorities toward their business. “We are ready to work and abide by rules, and would like to conduct our business peacefully. It would be nice if the authorities can have a dialogue with us, help and advice us and request us to make amends on small matters, instead of penalising us for trivial issues,” expresses Shek. Sharing his view and that of Chatterjee’s is Gambhir, “Our industry is not valued enough and though our business is extremely interesting it is also tough at the same time. There are random reasons as to why we can’t open in right places and further the license clearances take longer than expected that leads to delay in opening of the outlet. At times we have also met reasonable officers who understand our problems but the system needs to be made more friendly and approachable.” Gandhi adds that, there needs to be an authority to put systems in place. Apart from government apathy, escalating costs on electricity and base work as major dampeners to business, adds Shek.

Service Tax
Based on inputs from National Restaurants Association of India (NRAI) members, the association had asked for clarifications from Commissioner of Service Tax, on the new Service Tax Regime which became applicable from July 2012. The points raised for clarification and the response received is as given below:
What items of purchases, expenses and capital goods, the restaurants are entitled to input credit of service tax paid by them on the above items?

The service tax assessee can take input credit of service tax paid by them on the items of purchase, expenses and capital goods used specifically as inputs for providing the taxable output services, in accordance with the Rule 3 of CENVAT Credit Rules, 2004.

Whether service tax paid/ payable on the rental charges of restaurant premises shall be entitled to input credit of service tax and if yes, then whether it would be allowed 100 per cent or a partial amount and if partial amount, then the ratio thereof.

Yes, the rent paid exclusively for restaurants by the assessee, can avail the CENVAT Credit of such rent paid.

Whether service tax paid/to be paid on the rental charges pertaining to the period prior to July 2012, under (the Exemption Scheme of Interest & Penalty of Service Tax Department) is entitled to input credit or not and if yes, the ratio thereof.

The renting charges were liable to service tax before June 30, 2012 as well as after June 30, 2012, too and hence, the assessee are entitled for taking input credit.

NOTE: This point is pending since a further clarification has been sought as to what period before June 30, 2012 would this input credit be available from.

Whether excise duty paid on purchase of capital goods, if any shall be entitled to input credit or not and if yes, the ratio thereof.

Yes, in accordance with the Rule 3 of CENVAT Credit Rules, 2004.

If the input credit of service tax/ excise duty for a period (quarter) exceeds the amount of output service tax payable for the same quarter, whether the excess amount of input credit is allowable to refund or carry forward of the amount to the next following period/ quarter.

Yes, the input credit of service tax/excise duty may be carry forward to the subsequent quarter / period.

Any specific records, the restaurants are required to maintain under the new service tax regime, please provide a list of that.

The assessee may maintain their records in accordance with Rule 5 of the Service

Tax Rules, 1994 and Rule 9 of the CENVAT Credit Rules, 2004.

Any other compliance or requirement of new law which the restaurants are required to take care of.

In accordance with The Finance Act, 1994, as amended from time to time.

Suggestions in place

  • Shek strongly feels it is vital to set up a website for the restaurant fraternity wherein like minded members can come together on a common platform and actively post information and details of any staff or employee who has cheated the organisation in any way. This can work as an effective tool to check the credentials of the staff and can work as a healthy reference check point in an industry that is highly competitive.
  • Start training courses, with short modules designed especially for the restaurant industry. These modules can be designed along with the help of the restaurant owners and HR heads.
  • Request the government, civic authorities to provide the industry with a better and friendly work environment to perform as it is a service industry.
  • Put in best HR practices in place to improve employer-employee relationships

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