LET ME START BY SAYING THIS ISNOT ANOTHER ARTICLE ON HOWTO REDUCE COSTS OR INCREASEREVENUES IN YOUR CLUB’S F&BOPERATION.

Plenty have come before (includingme) with every imaginable idea on thatsubject. None of those ideas will makeany difference at your club if yourboard and membership are fixated onF&B “profitability.” This unhealthyemphasis on the “subsidy” to F&Bkeeps some clubs tied in knots when itcomes to managing dining, banquetsand events.Here’s the truth: As a standalone

operation, F&B is a financial loser atmost every private club. We all know

the reasons: small customer base, highquality and service expectations, lowcost expectations. Heavy on cost. Lighton revenue. Born to lose from day one.So what keeps this topic alive as a dis-cussion point at all?First, most clubs have some members

with business experience in F&B, albeitin a commercial environment, wherethe operational and business factors arecompletely different from a private club.Members want to be helpful and applytheir experience to “improve club oper-ations and finances.” That’s a noblecause, and should be supported.Second, F&B is an easy target.Everybody is an “expert.” Who doesn’thave an opinion on food quality, service

levels, portion sizes, menu choices, pric-ing, you name it?This “mass expertise in F&B” often

generates a lot of complaints from themembers. To the rescue come the for-mer restaurateurs with their never-end-ing ideas and suggestions. Everybody“knows” somebody that made moneyin the restaurant business.Third, and most importantly, the

club’s other departments generally get apass from the members on “profitabili-ty.” Does anyone expect the golf oper-ation to run without a subsidy? Howabout fitness? Or the spa? Or tennis?Or the pool?All are huge financial losers that gen-

erally pass under the membership

THE BOARDROOM • JULY/AUGUST 201118

CLUB FACTS AND F IGURES

The Truth About Your Foodand Beverage Operation BOB SALMORE

DIRECTOR WITHMCGLADREY

JULY/AUGUST 2011 • THE BOARDROOM 19

radar. It should go without saying that all operated depart-ments are amenities that require dues to support them.

WHAT’S REALLY GOING ON?It’s simple. The club’s financial statements don’t com-

pletely reflect the complete cost associated with each “clubamenity.” Members see a profit and loss for each depart-ment that doesn’t include capital expenditures. So whenthey look at the F&B results they see a big loss.But when they look at golf for instance, they see a small

loss or even a “profit.” No reference is made to the golfcourse maintenance costs associated with the “golf ” oper-ation, or the millions spent on golf course renovations.Same with tennis, fitness, spa, etc.All of those departments generally look a lot better from

a P&L perspective than F&B because their enormous cap-ital costs are not obvious to the person reviewing the P&L.Comparatively, F&B’s capital costs are minimal.Good luck getting that new oven the chef has been ask-

ing for – we’ll make do with what we have. But we can’tlive without the front nine tee box renovations (eventhough they were renovated just a few years ago).Every organization needs a ‘fall guy’ – a focal point for

customer dissatisfaction. For most commercial retail oper-ations it’s customer service. For most service stations it’sthe cost of gas. For most clubs it’s F&B.

WHAT YOU CAN DO ABOUT IT?It doesn’t take much to figure out the “true” cost of each

club amenity. Simply perform a 10-year total cost of owner-ship (TCO) analysis on each. Include all of the P&L items,and add in the associated capital and maintenance costs.Of course, without even doing this analysis most astute

club executives know how this will end up. Golf will bethe “Biggest Loser” – by a long shot. The enormous sub-sidy to golf is the reality most clubs would just as soonignore. After all, golf is the heart and soul of the club. It’swhy the members join in the first place. Isn’t it?I strongly recommend you perform a TCO analysis on

all club amenities every year, and publish the results to themembership. An accurate TCO lets the members knowthe true cost of each amenity.In addition, a membership usage factor should be added to

each TCO to indicate the cost associated with each “use” of anamenity. For F&B use covers. For golf-use rounds. For fitnessuse visits. And so on. Pairing costs with usage provides an eye-popping experience for most members, and a more realisticappreciation for what each amenity really costs.

OTHER OBSERVATIONSF&B is often a magnet for unrelated costs that make this

department’s financial performance look worse than it

already is, for example flowers, decorations, entertain-ment, gratis food, labor related to dining room re-arrange-ments/set-ups/break-downs, and valet. What relationshipdo these expenses have to preparing a meal and serving it?None, of course. Yet they are commonly charged to F&B.Easy to fix – charge them to the clubhouse or entertain-ment.Some clubs are contradictory in their F&B practices.

Recent examples include a club that was manic about con-trolling food costs while introducing a Sushi bar at lunchthat had “big losses” written all over it. Or the club thattries to satisfy everyone’s palate with an expansive menu ofrarely ordered items.Or the club that is heavy on “specialty positions” like an

executive chef, sous chef, pastry chef, garde manger andsommelier when the membership’s tastes are more mun-dane.Why not employ basic talent and then hire the “experts”

on a part-time basis to create menus and wine lists, suggestinnovative presentations and offer service advice? Pointbeing – be consistent and realistic in what you are tryingto achieve in F&B.Finally, let’s not forget that F&B is by far the most pop-

ular amenity in the most clubs. More people eat and drinkat the club than participate in any other activity.While there may not be much we can do to improve

F&B financial performance, a lot can be done to improvemember service. The effort needed to significantlyreduce food costs far outweighs the effort needed to sig-nificantly improve member service.Great service has a balancing effect on cost. We don’t

generally mind paying more if the service is great – andpersonalized. So try shifting the focus away from cost con-trols and over to great service - by providing advancedservice training and meaningful staff incentives.P.S. Feel free to email me if you have questions on how toprepare the recommended TCO. BR

Bob Salmore is a director with McGladrey*, the nation’s 5thlargest provider of assurance, tax and consulting services. Bobmanages some 50 private club annual financial audits and is akey member of the McGladrey Club Service Team. He can bereached at bob.salmore@McGladrey.com or (561) 697-1785.

*McGladrey is the brand under which RSM McGladrey, Inc.and McGladrey & Pullen, LLP serve clients’ business needs. Thetwo firms operate as separate legal entities in an alternativepractice structure. McGladrey & Pullen is a licensed CPA firmproviding assurance services. RSM McGladrey provides tax andconsulting services.