Archive for August, 2013

Guest Blog: Club Reserve Accounts – Pay Now or Pay Later?

Monday, August 26th, 2013
Michelle Tanzer, Esq.

Michelle Tanzer, Esq.

Reserve accounts are established and maintained by Clubs to hold funds for the long-term or deferred maintenance and replacement of any assets that the Club owns or is responsible for maintaining.  Generally these assets have a remaining useful life of less than thirty years.  For example, a Club would hold funds in a reserve account for the replacement of items such as the repair or replacement of the HVAC system or the roof on the clubhouse, or funds for replacement of exercise equipment in Club’s fitness center, as well as less obvious items such as replacement of property following wind-storm damage.  Reserves are also needed for all furniture, fixtures and equipment in ample amounts.

Requirements for the establishment of reserve accounts vary from Club to Club and depend on whether the Club governing documents require establishment of such accounts.  While it is a widely accepted principle that the establishment of a reserve account is both necessary and prudent, the requirements for funding and management of association reserve accounts are significantly less clear.  To complicate matters further, funding requirements for reserve accounts depend entirely upon the physical components of the property and rarely are two identical.  This leaves developers, Club managers and board members wondering whether to pay now, or possibly pay later.

Clubs that fail to adequately fund reserve accounts face serious risks, including the potential of lawsuits from members. Past failures to adequately fund reserve accounts have led to special assessments of Members, dues increases and the need for the Club to borrow funds.  With current real estate market conditions depressed in many regions and with the litigious nature of our society, Clubs, legislatures and courts will be facing the issues relating to reserve funding now more than ever.

Club reserve funding issues can be compared to the reserve funding issues related to homeowner and condominium association reserve funding.  In the association setting, the prevailing trend is toward stricter regulatory reserve funding requirements.  Like many states, the State of Florida has reserve account requirements in the Florida Condominium Statute, Chapter 718, as well as Florida’s Vacation and Timeshare Plans Statute, Chapter 721.   The State of California, Department of Real Estate established guidelines in addition to its statutory requirements, and published the “Reserve Study Guidelines for Homeowner Association Budgets” just a few years ago.  One example of courts facing reserve account issues is the January 2007, New Jersey case, Ebert v. Briar Knoll Condominium Association, where a unit owner sued the condominium association for inadequate reserves for the maintenance of the condominium’s common areas.  The Superior Court of New Jersey agreed with the unit owner holding that the Association had failed to provide adequate reserves for the maintenance of the common elements.  The court added that the Association breached its fiduciary duty “to preserve and protect the common elements and areas for the benefit of all of its members”.  A breach of fiduciary duty could be alleged in the Club setting if the Club board fails to establish and maintain reserve accounts appropriately.

Comprehensive reserve analysis and reserve account management advisors are readily available.  Club boards should consider their reserve account needs, consider utilizing these services and fund reserves prudently.  Taking these steps will help developers, Club managers and board members avoid attacks from disgruntled members looking to make somebody else pay.

Michelle Tanzer, Holland and Knight, author of the Club Litigation Book, she can be reached at michelle.tanzer@hklaw.com or by calling 561-866-5700.

Thanks and have a great day!

Ed Rehkopf

This weekly blog comments on and discusses the hospitality industry and its challenges. From time to time, we will feature guest bloggers – those managers and industry experts who have something of interest to say to all of us. We also welcome feedback and comment upon the blog, hoping that it will become a useful sounding board for what’s on the minds of hospitality hardworking  managers throughout the country and around the world.

Hospitality Resources International – Management Resources for the Hospitality Industry!

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Leadership and Relationships

Monday, August 19th, 2013

John C. Maxwell, author of the bestselling The 21 Irrefutable Laws of Leadership, says that the definition of leadership is influence.  While it is, first and foremost, the ability to influence followers, it also requires that the leader influence those people who make up any and all constituencies.

In a free society, all but the most socially and economically disadvantaged have choices – they can choose to work for you and your business or they can take their talents and abilities elsewhere.  It is, therefore, the manner in which you as a leader engage them that determines your level of influence.

Influence is derived from the relationships you create with your followers and other constituents.  How you act and interact with others is the basis for your success as a leader.  The quality of your relationships will determine your outcomes.  But you must understand that each of your followers and constituents is a unique individual with different needs and motivations.  What may work with one may fail miserably with another.  And, unfortunately, creating meaningful relationships with other people can be a great challenge for all of us – witness all the dysfunctional families, rocky romances, and failed marriages – and no less challenging for leaders who must interact with a wide variety of followers.

But the art of relationships can be learned.  Generally speaking, while it requires experience, judgment, a measure of sensitivity to the needs of others, and a fair degree of emotional maturity, the ability to form and sustain meaningful relationships improves with age.

Developing leadership, or relationship skills, is a cumulative process.  It’s why Jim Collins, author of Good to Great, Why Some Companies Make the Leap . . . and Others Don’t, proposes the Level 5 Hierarchy leading to the consummate Level 5 Leader.  It is why potential leaders must be identified early, why young managers must be trained in the skills of leadership, and why such skills should be nurtured and shaped with each increase in responsibility and each step of the career ladder.  Clearly, the rudimentary skills of direct face-to-face leadership that serve the front line supervisor so well are inadequate for the more complex and subtle exercise of authority required of a mid-level manager or senior executive.

Creating and sustaining meaningful relationships is at the heart of Service-Based Leadership.  The extent to which you are able to develop those relationships early in your career will have a great bearing on your future success – but not only in your career.  The bonus is that in developing Service-Based Leadership skills, you develop the skills to form meaningful relationships in other areas of your life.

Ed Rehkopf, Excerpted from Leadership on the Line – The Workbook, Clarity Publications, 2009

Thanks and have a great day!

Ed Rehkopf

This weekly blog comments on and discusses the hospitality industry and its challenges. From time to time, we will feature guest bloggers – those managers and industry experts who have something of interest to say to all of us. We also welcome feedback and comment upon the blog, hoping that it will become a useful sounding board for what’s on the minds of hospitality hardworking  managers throughout the country and around the world.

Hospitality Resources International – Management Resources for the Hospitality Industry!

Upping Your Average Check

Monday, August 12th, 2013

Every food professional knows that the primary way to increase revenues short of increasing the number of customers is by increasing the average check.  While this is important in all food service operation, it is particularly important in private clubs where each club has a finite number of members and cannot attract the wider audience of the general public.  But regardless of what type of food service operation you run, how does one go about upping the average check?

If you consider most menus, diners have a choice of appetizers, entrees, desserts, wines, and specialty alcoholic drinks.  Most go out to eat with a particular entrée in mind – “Honey, I’m hankering for a thick, juicy sirloin tonight,” or “Gosh, I’m dying for the chef’s veal shanks in a cabernet sauce.”  What they have not thought about, and will not think about until they sit at the table is – what might go well with their entrée?  Here is the opportunity to increase the average check!  The server can “sell” customers/guests/members on the idea that this or that accompaniment will add to their dining experience.

But as any veteran salesperson knows, “you can’t sell what you don’t know!”  Given that we hire bright, outgoing, but often young and inexperienced people to work as servers, how do we give them the necessary knowledge to upsell the chef’s offerings?  Further, recognize that food and beverage is an inexhaustible fount of knowledge not easily mastered in a lifetime of concerted learning.  While this presents a challenge, it is not insurmountable with a little organization and effort.  The following steps, if implemented and persistently practiced, are guaranteed to increase your revenues through higher check averages.

1.   Benchmarking

Break your revenue projections for food and beverage down into volume and average sale.  For example, if you know from history that your average check for dinner is $18.53, you can divide your projected revenue for dinner for a given period by the average check to see how many dinners you will have to sell.  If your budget is $50,000 for February, then you must sell 2,698 dinners to reach your goal.  You can further break down the goals into weekly or daily targets.  By benchmarking your appetizer, dessert, wine, and specialty drink sales, you can likewise determine the current average sale for each and compute a target figure for the number of each you must sell in a given period. If you’ve not previously benchmarked, your first few months’ targets may not be very accurate or realistic, but you can adjust them as you gain experience.

2. Establish Realistic Goals and Track Results

Use your benchmark numbers to establish goals for future operating periods for appetizers, desserts, wines, and specialty drinks.  Post those goals prominently in the pantry or other central location for your servers to see.  Break your monthly goals for each category into daily goals.  Then challenge your servers to surpass those daily goals.  Every day post the previous day’s and the month-to-date results as shown in the following sample so each and every server can monitor their success or lack of success.

upsell-graphic-573x2851

3. Teach Servers to Upsell

Use your pre-shift meetings (you should always have a pre-shift meeting!) to continually train your servers about the food and beverage products you serve.  This means appetizer and dessert tastings and teaching them about wines, liqueurs, and spirits in general and those that you carry in particular.  Equipped with this knowledge they will be far more comfortable in suggesting accompaniments to members.  Encourage them to use their new knowledge to sell, sell, sell!

4. Provide Servers with Product Knowledge

Use Menu Item Selling Sheets, HRI Form 484, prepared by the Chef to educate servers about all items on the menu.  These selling sheets should include ingredients; flavorings (herbs and spices); cooking times; portion sizes; special distinguishing characteristics such as vegetarian, organic, farm fresh, kosher, heart healthy; country or locale of origin; presence of dairy products or possible allergens such as peanut oil, shellfish, etc.; method of preparation (e.g., sautéed, pan fried, roasted, deep fried, etc.); types and preparations of sauces; and any other pertinent information of interest.  Lastly, the Chef should include his suggested wine accompaniment for appetizers, entrees, and desserts.

5.  Continue Tracking Daily Sales against Goals

Design contests or offer prizes to those who sell the most.

6.  Continue Benchmarking Your Sales

Not only is this historical data helpful in setting goals and projecting future business, but the detailed benchmarks you keep this year will help you budget your sales for next year.  Lastly, there will be a clear record of the progress you’ve made in increasing sales – certainly a nice thing to have when you meet with your supervisor at your next performance review.

Charles A. Coonradt, in his wonderful book, The Game of Work, explains how people will work incredibly hard for no compensation to lower their golf handicap or beat their best time in a 10k race or improve their bowling average.  The same desire to improve oneself or improve one’s performance can be demonstrated at work if people simply get measurable feedback on their performance in a timely manner.  The key to measurable feedback is knowing past performance – easily acquired in a business setting by benchmarking – and setting challenging goals for future performance.

Increasing your average check is one of the easiest things a manager can do to improve his Food and Beverage bottom line.  The additional revenue helps overcome the high fixed cost in food operations and will bring more margin to the bottom line.

Thanks and have a great day!

Ed Rehkopf

This weekly blog comments on and discusses the hospitality industry and its challenges. From time to time, we will feature guest bloggers – those managers and industry experts who have something of interest to say to all of us. We also welcome feedback and comment upon the blog, hoping that it will become a useful sounding board for what’s on the minds of hospitality hardworking  managers throughout the country and around the world.

Hospitality Resources International – Management Resources for the Hospitality Industry!

Guest Blog: What You Say Through Your Pay

Monday, August 5th, 2013
don-vance-135x180

Don Vance, CCM, CPC Chief Operating Officer General Manager Hound Ears Club

All general managers are well aware that payroll costs and benefits are the top operating expense at any resort or club – and that it only stands to stay that way, largely because of how the cost of medical insurance premiums continues to skyrocket.

While there’s probably little we can do to control benefit costs-short of cutting back on program features, which no one wants to do-there are some opportunities for creative cost management on the payroll side.  While it may seem, especially in a turnover-prone business like ours, that we’re hiring new staff almost by the day, the fact is that the median number of years that wage and salary workers have been with their current employer has pretty much remained unchanged (at four years) during this decade, according to Department of Labor statistics.

The main reason for this, I think, is that we as managers are getting better at paying attention to the non-pay aspects of employee compensation and benefits.  Other surveys that I have studied over the years clearly show that employee retention is now not as reliant on pay as it is on a list of other factors that’s grown to include:

  • flexible work schedules;
  • more paid time off;
  • options to work from home;
  • continuing education opportunities;
  • personal praise from the “boss”;
  • fair treatment;
  • the ability to work independently, while still working interdependently with the team;
  • having the proper tools and equipment needed to do the job right;
  • up-to-date technology;
  • respect and the ability to give input into the organization;
  • opportunities for advancement.

While pay and benefit levels are certainly critical to recruitment, in reality most employees stay at their jobs for more than a paycheck (remember that it’s a hassle for them to look for, and change, jobs, too, and that it still takes a lot to get most people motivated enough to do so).

With the ongoing change in age demographics within the workplace, we must study and learn the different attitudes and expectations of each age-based employee group, and treat them accordingly.  We are all dealing with four employee groups in our operations: seniors, boomers, “Gen X,” and “Gen Y”-each with very different “hot buttons” for what makes them want to stay in a job and not look elsewhere for “something better.”  We need to stay proactive in responding to the needs of each employee group-and much of this effort must continue to be directed to how we reward them, not only with salaries and benefits, but also the so-called “psychic rewards.”

Backing Out of the Boxes

Doing this calls for getting away from rigid job descriptions or “fitting bodies into [organizational chart] boxes.”  More than ever, it’s important to shape jobs around the talents, skills and needs of each individual employee.  This requires paying close attention to what each person can bring to, and wants to achieve from, their employment.

Yes, it takes time to develop a better understanding of each employee in this way-but making the effort to tailor jobs and programs around their individual needs can go a long way towards gaining, and keeping, their loyalties.  And that will produce tangible payoffs for your operations, not only through the performance of a stronger, more experienced staff, but also by reducing the cost of turnover whenever a new employee has to be recruited and trained.

A big part of this is coming up with creative compensation solutions when good employees are affected by restructurings, or when it’s clear they’ve been over-promoted.  I recently encountered a situation like this when we had an employee who had been promoted into a position that wasn’t working out, either for him or the club.  He initiated the decision to go back to his old position, which was fine with us, because he was an outstanding employee who could still contribute to the operation.  And we worked out a program to reinstate him to his former position in a way that would help to soften the financial impact on him.

Instead of immediately adjusting this employee’s pay back, we created a “declining pay rate” that would eventually get him to what his new (actually old) position paid.  We accomplished this with pay adjustments over a period of a year, on a quarterly, declining scale, giving him the time needed to modify his personal finances accordingly.

At the end of the day, we were able to reinstate a high-caliber employee back to an important position in the club.  Yes, this might have cost us a little more upfront in payroll-but factoring in what would have been involved with recruiting (and possibly relocating) and training someone new, it was still a sound decision financially.  More importantly, we solidified the loyalty of a valued and experienced employee, while still making a staff move that would help us achieve the long-term goals and objectives of the club.

As this example shows, it takes more than a pay raise these days to keep a great staff in place.  Building employee partnerships is all about creating a workplace that works for both the club and the employee.  A well-thought-out compensation and benefits program, adjusted regularly using feedback from all employees, is the best way to give everyone the sense of purpose, and job assurance, that’s needed to keep them focused on a property’s mission and vision.

Article written by:  Don E. Vance, CCM, CPC, Chief Operating Officer/General Manager, Hound Ears Club

Thanks and have a great day!

Ed Rehkopf

This weekly blog comments on and discusses the club industry and its challenges. From time to time, we will feature guest bloggers — those managers and industry experts who have something of interest to say to all of us. We also welcome feedback and comment upon the blog, hoping that it will become a useful sounding board for what’s on the minds of hardworking club managers throughout the country and around the world.

Club Resources International – Management Resources for Clubs!

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