Like many of you, I've heard McDonald's spends roughly 3-4% of their annual revenues on marketing and advertising. They rival Subway for the most fast-food locations worldwide and jostle with Starbucks for the top spot in value and earnings. 3-4% seems like a ton to invest annually, doesn't it? I guess the premise is to constantly stay on the minds of consumers, making it extremely difficult for any up-and-coming competition. The old adage, it's harder to stay on top than it is to get there.
Similar to McDonald's decision to stay consistent with their advertising spend, I feel like our industry budgets have become more compartmentalized over the last decade too. Separate out your fixed expenses, shoot for an overall wage bill of 50-55% of revenues, sharpen the pencil on a retail margin by limiting your vendors, break-even or subsidize F&B, and so on.
Zero-based budgets have attracted some of the spotlight becoming a real trend during covid with less reliance on historical references. Data from our industry surveying in August 2020 states 60% of clubs were using a zero-base and historical references, while 13% were strictly using a zero-base for 2021's budget.
Capital budgeting has come leaps and bounds as well. We see clubs pay more attention to covering depreciation, establishing reserves while concurrently investing in a capital reserve study for sustainability in their assets.
Service meanwhile, seems to have taken a backseat. How come there aren't clear metrics or benchmarks for service and experience the way there are when examining capital and the financial health of a club? Have capital improvement projects become more important? When asking GM's, it's clear, they have not...
(59club Study, Jan 2023)
One area where capital receives favor, is in an operational surplus. Clubs will often dump what's left in the capital bucket versus investing in people-focused area like training and development...
(59club Study, Aug 2021)
Now, taking that surplus and doing a 180, putting it into operations can be precedent setting for next year's budget. But let's take a step back for a second and pickup a different lens. What would it take to make a ratio of staff training & development, as an expense of overall revenue, a staple in your budgeting process? Sort of like the earlier reference of McDonald's annual spend on advertising. Training and development has occupied its own line on your annual expense report but with compulsory health and safety training, few ever see it as an investment. We've asked a few times over the last three years and discovered the following...
(59club Study, May 2023)
Looking at this graphic below, it seems it's even gone down a little since 2021...
(59club Study, June 2021)
Doesn't this seem like a woeful amount as a percentage? Surely this topic is more important to club ops than that suggests! Looking at the spend as a dollar amount provides a different lens; a $7mm club will spend less than $70k on average in training & development. That dollar amount all of sudden seems fair, or even a little high to some. How could it possibly double? Club budgets need to jump through many hoops as it is, they are set to a break-even, are usually reduced to razor thin areas and have not been immune to record setting inflation on top of it all. This is all true. I don't want to say there's a lot more room in there to simply designate another $40, $50 or even $60k+ in training on top on the 4-5% bump in wages for 2023.
Besides, with many clubs establishing or adding to wait lists and seeing increased activity over the last 2-3 years, they may not see the same need to invest in staff. Realistically, decisions are usually reactive not proactive. Avoiding loss vs seeking gain. It's in our nature! I am willing to bet those that are sitting at 2%+ have a stronger culture among staff that translates to better relationships, longer tenured staff and more smiles. Isn't this the genesis of the industry? I'm hoping we can statistically prove this down the road.
What I think lies at the centre of it all however, is that it's hard to know if you're receiving a return on the so called investment of training and development. After all, what doesn't get measured, often gets overlooked.
Let's dive deeper into this topic for a second. Where do education dollars get spent? Well, we do know this...
(59club Study, June 2021)
Where are these funds going? The logical place to start is conferences. Each association and governing body holds one these days, nationally and regionally. I think they're great. They take many hands and years to prepare. I've been lucky enough to co-chair at the national level and volunteer at the regional level. Great experiences. There are speakers that inspire, sessions that make you reflect and radical ideas drawn. The networking is special and they are just flat out a lot of fun! From my experience, and I can't be the only one here, these trips are just as much of a packaged bonus as a learning opportunity. Of course, we'll never really know how accurate that is. How can someone possibly calculate a direct return on investment to an annual conference? Honestly, I'm not sure if there's a way to put a value on training or exact a return on investment on any education, but we're getting close!
We need to be able to measure improvement on training and development to progress. In order to do this we need a starting point. Enter the mystery shop. Unbiased, ground-level, it's thee best way measure your customer service. After a sample or first test is conducted, voila! You have your service benchmark!
After a year's worth of tests, your sample is even stronger but what's next? You have the data, some of your suspicions are confirmed and your strengths and weaknesses are highlighted. Celebrate the wins and develop the misses. It's time to train!! We can do this departmentally and right off the data captured. Best of all, it's consistent programming and an ongoing relationship, geared to incrementally boost club culture, one test at a time. Doesn't this process just makes sense?
Whether you use 59club or another service developing outlet, focus on measuring. It's available. From there, you will see training as an investment, maybe even a ratio, that you will get a return on. Bringing us back to what the industry is all about, relationships.