Perceptions of Key Success Factors and Key Success Inhibitors in Australian Restaurant and Catering Business Operations.

Abstract

This article reports the results of a survey conducted to obtain detailed information concerning Australian restaurant and catering operators' perceptions of their industry. Members of the Australian Restaurant and Catering Association were given the opportunity to voice their opinion, in an open-ended format, concerning factors that either hinder or help their operation. Through content analysis, several factors were identified that respondents perceive as important to the success of their business or as increasing the difficulty of operating their business. In particular, five broad success/difficulty factors emerged, relating to product, staff, financial, environmental and customer issues. Respondents were also asked whether managers and/or owners of businesses in the industry should possess appropriate qualifications. Although a majority of respondents believe managers should be appropriately qualified, many in the sector perceive experience, motivation and other qualities to be more, or equally, important. Implications of the findings are discussed within a framework of recent hospitality and management literature.

Keywords: Critical Success Factors, Australian Restaurants, Business Environment, Success Inhibitors

Introduction

Most businesses are challenged with complex and dynamic operating environments. Competitive forces, technological developments, consumer trends and government regulations are a few of the factors that contribute to the pressures of succeeding in business. As Olsen (1996) notes, for a business to succeed, it is imperative to identify the threats and opportunities that exist and meet these with appropriate competitive methods. Similarly, the volatility of the restaurant market (Tse and Olsen 1990) highlights the importance of understanding the factors that contribute to the success or failure of restaurant and catering businesses.

Previous research in the small business sector suggests that prime determinants of business success include the amount spent on marketing, the quality of product offered and lower levels of debt (O'Neill and Duker 1986). Similarly, a more recent study indicated that clear and strategically focused promotional and advertising activities are important components of restaurant operational success (English, Josiam, Upchurch, and Willems 1996). Others have suggested critical performance areas for small hospitality businesses include the quality and presentation of food and beverage, hygiene, staff attitudes and appearance, fast and efficient service, attention to customer needs and the quality of the physical environment (Kozak and Rimmington 1998; Singerling, Woods, Ninemeier and Perdue 1997). In a review of a number of studies concerning small business failure, English et al. (1996) found common themes of ineffective financial controls and marketing strategies. Despite this evidence, however, there appears little specific data pertaining to restaurant and catering operations, particularly in the Australian context. This paper details a study of restaurant and catering operators' perceptions of factors that either contribute to, or hinder, success in their industry.

The Australian Restaurant and Catering Environment

Data that is available concerning the Australian restaurant sector suggests that, although busier lifestyles mean more consumers are dining out, competition is intensifying due to the increasing availability of ready-to-eat meals from supermarkets, delicatessens and butchers, as well as the overall growth in the number of restaurants (Hing, McCabe, Lewis, and Leiper 1998). Moreover, as the market itself is becoming more sophisticated, judicious and desirous of novel experiences (Hing et al. 1998) it is likely that customer expectations of the dining experience are increasing. Subsequently, in an effort to retain market interest, restaurateurs are compelled to examine many aspects of their product mix (Hing et al. 1998). For example, strategic alignments with high profile chains or franchises are increasing, albeit to a lesser extent than that experienced in Europe and the United States (Hing et al. 1998). Such a backdrop for restaurant and catering operations means there are continuous customer and business environmental challenges facing the sector.

In Australia, the past decade has seen rapid growth in the size of the restaurant industry, leveling out to around 20 000 businesses by the end of 1997 (A.B.S. 1998a). Nevertheless, the number of restaurant and catering businesses has continued to climb in Queensland, Western Australia, and the Northern Territory (A.B.S. 1998a). Certain tourist regions (e.g., Queensland's Gold Coast) have also seen continuous growth during the 1990s (A.B.S. 1998a). According to Hing et al. (1998), the typical sized business in this sector is small to mid-scale. This growth potentially leads to more competitive pressures being experienced by the Australian restaurant and catering industry.

Employment within the industry has paralleled the growth in the number of restaurant, cafe and catering businesses. In the period between 1994 and 1997, the sector experienced employment growth in excess of 10% with a total of 163 000 persons employed in the restaurant industry (A.B.S. 1998b). The growing employment rate was reflected in a 5.5% increase in salary and wages expenses in the sector between the 1994/1995 and 1995/1996 financial years (Australian Taxation Office 1996, 1998). Hence, it appears that the Australian restaurant industry may need to consider ways to balance rising wage and salary costs with productivity and sales.

In addition, unlike their counterparts in some other countries (e.g., US), whose front-line staff rely on tips and sales commission to supplement a low basic pay, increasing payroll expenses may be of particular concern to Australian restaurant operators. Moreover, net profit and retail turnover declined from 1995 to 1997, in contrast with steady growth during the early 1990s (A.B.S. 1998c; Australian Taxation Office 1996, 1998). Such eroding profits and increasing expenses signal significant challenges for restaurant industry operators. Hence, a better understanding of what factors could either assist or hinder operators may help prevent business failures.

McQueen (1989) suggests that four of the top ten reasons for business failure are directly related to management effectiveness (i.e., poor operations management, poor management accounting, poor chief executive officer and poor marketing/sales management). Yet the importance of developing some of these skills through completing a tertiary course in hospitality or business studies remains unclear. Some commentators suggest that the need for formal qualifications is escalating, due to the increasing complexity of hotel and restaurant operations, whereas others argue that there is no substitute for experience (Lang 1991). Hence, determining operators' views on management qualifications may assist in further understanding the success or failure of restaurant or catering businesses.

This article reports the results of a survey conducted to obtain detailed information concerning Australian restaurant and catering operations. As part of the survey, restaurant and catering owners/managers were given the opportunity to voice their opinion, in an open-ended format, concerning factors that either hinder or help their operation and whether operators should be appropriately qualified.

Research Method

Questionnaire

A questionnaire was specifically designed for this study. The questionnaire sought information on a range of issues, including business profiling, financial data and demographics. To optimise content validity, the …