i have a feeling the i was once tought by dennis at bega high school and its interesting to actually read one of his colums in such a critical situation

@James - whilst I don't know for sure what their NP% is doing, I am willing to bet a lot of money they are making less (based on my experience in observing these things. They certainly wont be able to sell the business for what they paid for it.
@Trevor: My Father in Law was a retired General when he opened a small business. His philosophy: Buy for $1, sell for $2. Take 1% profit and don't be greedy. He was quite successful with his strategy :-)
@Sue and others have made the valid point that hospitality is a SPECIAL kind of business in that it LEAST tolerates poor service of all categories - and therefore requires a special kind of person.

I think I shall just watch from a distance, sadly...

I always wonder with restaurants, how much financial difference portion sizes really makes? Just how much are veges, etc. in the overall picture. If you have 10% more customers walk through the door, wouldn't that cover a few extras in portion sizes?

I recently visited the Barossa Valley and walking down the main street of one of the towns in the centre of the wine area, most cafes were closed on the weekend and of the few that were open (which I thought unusual as there were many other sporting events happening like the one I was there for), I walked into one, when it had been recommended as a nice fresh bakery. The bakery food looked like something out of Woolworths, they had a sign on each of the tables that said "glasses of free water will not be supplied - bottled water available for purchase in the fridge". I was completed astounded at the attitude. This was a large sign in the centre of each table. The staff were just plain rude and if I hadn't been walking for some time and tired I would have left. Never will go back. There was one cafe that was full of people and no spare tables. Thought to myself "this is the one with good service and good food". Really, there are just many people who just simply should not be working in hospitality unless the customer's satisfaction is at the top of their list. If they are not prepared to survey the customers and ask if they are happy or not - don't be in the business!

My suggestion for you, Dennis, is to introduce yourself to the owners, explain the issues they have and the noticeable loss of business since they took over. Explain your background and offer them a solution. The cost to the owner being free coffee for a period of time. You can then continue your articles in this publication and as a case study in your business.
From my experience you never buy a business at its peak unless you are an absolute expert in that area, if you are not an expert, the only way is down.
Never buy a business if you have not got the passion for it and be prepared to work 7 days a week 365 days a year. Hospitality is that type of business.
Lastly, public servants and teacher should never buy a business.

Your observations tell you nothing about their profit margin or net bottom line relative to previous years. It may be that despite loosing some customers, and locals in particular they have actually improved their return. It could also be that these owners do not want to invest the type of hours that passionate types do. This could be because they have other investments or a lifestyle that they value.

The most constructive conversation you could have as a local would be directly with the owner (anyone else you would be wasting your time). Ask him what he thinks about a loyalty system for locals (make it his idea). Perhaps a simple card that waives the holiday surcharge might be a start

A common trend I see in this country is it is becoming a national habit to rip each other off- housing, consumer goods, financial products, energy, food. The net result is more Australians sourcing overseas and an even smaller customer base for small to medium players. Australia is so reluctant to accept distribution models that dont completely gouge and double up- this includes coffee related businesses. That may in turn explain your cafes attitude and pricing. I cant imagine it is that easy to get young staff who are dedicated to serving wound up Sydney-sider tourists either!

Time to open your own and shown them how its done Dennis!

There is a peculiar attitude with hospitality businesses on the South Coast. Boxing Day is the busiest tourist day of the year. On this day in this town,the local Woolworths claims to have the highest sales across Australia in their group. At the same time, most cafes and restaurants are closed. I once asked a prominent waterside cafe why they were closed and their response was "We're entitled to have a holiday too!" and I thought 'mmmm sorry I asked and so sorry that you run a business with that attitude." Ive seen a lot of these type of operators - former public servants who have retired with a lump sum and decide to open a cafe/restaurant by the coast. The fundamental problem is that they lack the passion for hospitality and serving the customers.

Thanks again for the thoughtful responses.
@Mirela, not Thirroul - and it is widespread.
Good point about goodwill @Tim

Nobody has really suggested what I should do. Assume "nothing" is your advice?

There are a few sayings in any business that really hit home, the best one I have ever heard is "we only make a profit when we sell something, everything else we do is an expense". I have "patients", but they are really "customers" and many years ago when I started to treat them like customers who pay for everything I have and do, my business changed model dramatically. Now I have many more "customers" and my "word of mouth" business has boomed, I get referrals from past patients as well as other doctors. My parting comment to my customers at the end of their treatment is "I hope I never see you again". Dr B (heart surgeon)

love this....and yes, it's a surefire way to lose a business make changes where its working and not making any changes where its not working....btw this isn't Thirroul....because know a few spots there that most certainly can do with a 'fresh approach"....

One can learn about business models and take accountant's advice on profit margins that must be maintained, but at the end of the day, the more customers coming through the door on a regular basis, the more profit the business makes. Customers come through the door because they like what is inside, or they have heard good reports. It is up to the business then to meet expectations. Customers won't quibble so much about price, if they are happy with the rest.

I disagree that profitable businesses don't get sold. The previous owner had done the hard work in creating the business and then cashed in on all their hard work. This is a common practice, but what is more common, the new owners not keeping up the service and deciding they know better ways to run the business than the previous successful owners. New owners quite regularly fail by not sticking with the recipe that worked!

Hi Dennis,

It amazes me how often a business is acquired without the new business owners understanding the source of value in the business that they acquire.

Everyone in retail understands that customer loyalty is valuable, but customer loyalty is an outcome, not an attribute of the business. In retail, and arguably more-so in hospitality, customer loyalty is derived from a personal relationship between the customer and the individual delivering the service.

In my opinion, it is the individuals working at the coalface, together with the systems and processes enabling those individuals to deliver consistently, that are the asset in the business which ultimately delivers customer loyalty. Put another way, if I'm paying for 'good will' in a service oriented business, I'm investing not in loyalty of customers, but rather in a relationship that individuals working within that business have with their customers.

If I were setting out to turn around this business, my starting place would be with getting the service right. Training and development of the service team; engaging the input of those facing customers as listening posts; and consistent rostering which encouragest familiarity between customers and the service team. Second task on the list would be promoting a reversal of some of the less popular decisions that had turned customers away and giving customers an incentive to return.

As for managing your brand in public forums, there are so many and varied out there, it may be worthwhile being attentive to and responding to one or two high profile forums (they are worthwhile barometers after all), far better to focus upon consistently delivering outstanding service, speak to customers at every opportunity, and let the press take care of itself.

Re the coffee shop article:
You are not the only one with this problem. We live in Melbourne and have
frequented two coffee shops on a regular basis - One has now changed hands.
The menu and the staff have gradually changed from friendly happy people and good food, to superior staff and "modern food" at higher rates.
We have tried to talk to the person in charge, and the reply was in one, "if you are unhappy go elswhere!" Which we have done to both of them.
How you make the changes with these attitudes is I think impossible. They will soon be out of business and perhaps someone with more concern for their customers may take over. In the meantime, don't go there.
Poppy

Thanks folks (retail geeks?), most comments are contributing something to an interesting conversation.

@JimK - your assessment is very close to mine:-)
And @TIM - you are right, when you buy a business there should be some upside, but I suppose human nature (as others observed) makes us want to change things simply because we can.
@steve - they ARE trying to control their portions, but what they fail to realise is that increasing (premium) prices and reducing portions at the same time changes the value proposition AND the brand perception , right?

why buy a great business and then bend your mind to changeing it immeadiatly. i bought an 89yo shoe store. i changed the decor and display system. both were 89yo and hand made. i kept the shoes that i bought and left them at the price that the previouse owner had. i then waited 6 months to find out why that owner had purchased the stock he did. 7.5yrs later i am still in business and doing okay and getting better each year. i bought the business to learn from not to tell everyone what a crap job the other guy did. that came through on its own.

so i ask why buy a good business and throw out everything that made it good. like staff, menu and such. sure dress it up and make it yours but take the time to find out why it worked. patience and foresight are what is required in business. change is different to progress.

We all know the experience of 'once something starts going wrong' that this leads to a domino effect and disasters happen and nothing can fix things unless you identify the problem early. Sometimes this is a single transaction/customer experience and sometimes a total running down of service, quality and product. People are invariably the key, the catalyst to successful or failing businesses particularly in restaurants and cafes. Having said that I also believe people are loyal to people they get to know and if the people change it takes a massive effort to keep them coming in unless you offer an even better product and service than the previous proprietor. Businesses that are sold by successful hands-on owner-driver entrepreneurs are possibly the worst ones to buy!

One can learn about business models and take accountant's advice on profit margins that must be maintained, but at the end of the day, the more customers coming through the door on a regular basis, the more profit the business makes. Customers come through the door because they like what is inside, or they have heard good reports. It is up to the business then to meet expectations. Customers won't quibble so much about price, if they are happy with the rest.

I disagree that profitable businesses don't get sold. The previous owner had done the hard work in creating the business and then cashed in on all their hard work. This is a common practice, but what is more common, the new owners not keeping up the service and deciding they know better ways to run the business than the previous successful owners. New owners quite regularly fail by not sticking with the recipe that worked!

Their value proposition has changed and the customer perception has changed accordingly.
There are now higher prices, poorer service and a lower quality product.
Customers have negatively perceived this new offering (understandably) and this has lost them customer loyalty.
The new management have forgotten their most important asset, their customers. Pleasing customers is why they are in business.
The new management need a change of strategy before it is too late to recover.

Jim K. (Blackburn South VIC)

Without knowing the financial situation of the coffee shop before it was sold, it is difficult to comment on the practises adopted by the new management. Perhaps these changes were necessary as the previous model was not turning an adequite profit for the risk involved in running the business. For example, the reduction in food servings points to portion control, a method which most major food chains employ. However, there are also a number of obvious problems highlighted, such as the inconsistancy of the coffee quality.

Steve.

Denis indicates that the place is no longer offering an expected or acceptable level of service/product/price. A key factor is the inconsistent quality of the coffee. A quick and long term fix is to do as McDonalds have done and offer a free replacement coffee if not completely satisfied. With a big sign "training underway" at the barista station whenever the novice is on the machine.

@Brons152
I think loyalty is a result of doing things right and as you mention the article is about what you think they are doing wrong. (Loyalty is the by-product.)
For the record the business was (more) successful - I have come to know the previous owners & they simply got tired of the hours/demands and felt it was time to cash out and try something new.