Wagamama's use of technology delivers healthy returns

28 April 2005
Wagamama's use of technology delivers healthy returns

It's all go at Wagamama. The noodle-centric restaurant chain plans to grow its UK business from 25 to 60 establishments over the next three years while growing internationally using its franchise model, which has seen it take the brand to Ireland, Holland, Dubai and Australia.

Meanwhile, having abandoned plans to float the company on the Alternative Investment Market, the current owner, private equity financier Graphite Capital, is actively looking for a buyer.

This period of frenetic activity is in marked contrast to its previous approach, which operations manager Jerry Marks describes as "methodical and well thought-out". Indeed, the company's growth since its formation in 1992 has certainly been "considered" but, as Marks explains, it was determined not to overexpand too soon.

"What we do revolves around three things: providing good, value-for-money food in a clean, friendly environment, delivered with good service. And if we get those basics right, we can take it anywhere around the world," says Marks, who admits the company is "very interested" in breaking the US market.

To his list of three things Marks should probably add IT. Over the years Wagamama has developed an enviable reputation for using technology to achieve its business goals. Waiting staff have been using hand-held PCs to take orders since the first outlet opened in 1992, and in 2000 Wagamama updated the original mobile system - based on ESP hand-held devices which communicated using radio frequencies - to a more reliable wireless solution. At the same time, staff were issued with Compaq iPAQ handhelds running the Microsoft Pocket PC operating system and an updated version of the point of sale (PoS) software application from Geac.

Now the company is trialling a new PoS system from software firm NFS. Called Aloha, it is operating in some of its recently opened branches, using upgraded and more suitable "ruggedised" hand-held PCs from manufacturer Symbol.

The idea itself is a simple one, but the time and cost savings are considerable (see panel). Waiting staff take orders electronically at the table and transfer them to the kitchen and bar staff over a wireless local area network.

Marks says IT is central to the company's long-term drive to cut costs and stay ahead of its competitors by offering customers faster, better service with value added. An early priority is to set up a loyalty card scheme for Wagamama's regular customers, using Aloha's built-in functionality. A wider aim is to improve the company's systems integration by having its new PoS software work with other functions, such as accounting, so information can be exported from one to the other. This way the manual data input is reduced, avoiding costly keying errors and reducing labour demands.

Because Aloha is web-based, a lot of data will be held off site, hosted by NFS in the USA. Meanwhile, accounting data that needs to be accessed more rapidly can be held on Wagamama's on-site servers. This means the company will not have to invest in "a huge wall of servers" to run its local networks. And Wagamama can instruct NFS to "drill down" into the data it hosts and pull out the specific information required to run the business effectively.

Another planned IT project involves issuing waiting staff with Bluetooth-enabled printers that fit on their belts, so they can print out payment slips at the table. The sticking point here is chip and PIN, the incoming system designed to cut credit-card fraud. The problem is that existing wireless chip and PIN-enabled solutions are not designed for restaurant environments.

"We don't want to invest thousands of pounds only to find out in six months we've made the wrong decision," says Marks. "But once you integrate the systems with chip and PIN, adding payments at the table, it'll make the whole process of credit and debit card handling a lot more secure - which, I think, is something our customers are really going to be looking for."

A long-term goal is to streamline Wagamama's supply chain - currently the company is heavily reliant on Microsoft Excel spreadsheets for this - by integrating a stock-management system. "As we're growing there's more of a need to have the facility to be able to keep track of our stock and see how price changes affect the business," says Marks. "We serve over 90,000 people a week, so a couple of pence on a particular product can enter into pounds quite quickly and soon move into hundreds of pounds."

In time, the company would like to link its IT systems with those of its international franchisees. As well as enabling the core UK arm to access the franchisees' data, it would enable it to achieve purchasing benefits by constructing buying deals for the whole company rather than dealing with individual suppliers.

Not that Wagamama's innovative approach is restricted to IT, of course. In the UK the company is about to launch a new menu with four new items and is "constantly looking to add new things" through its specials. Marks stresses the company is very customer-focused and listens to the feedback it gets both in the restaurants and on its website.

Two years ago it started putting desserts on the menu after an absence of 10 years, because customers kept requesting them. And having the online function means it can respond to customer comments "on the day or the day after".

In the future Wagamama hopes to further integrate the customer-feedback function to enable it to find out where things are going wrong as well as reward the staff when things are going right. "It's very important to reward the good sides of service and not just reprimand the bad," says Marks, who points to the company's impressive staff-retention record, with a 5% turnover at management level. "That's important, as you really need to build on the knowledge and experience of your managers to expand the business."

Since the first Wagamama opened in 1992 the marketplace has become a lot more competitive, with a whole host of similar offerings launching in its wake, but the resolutely upbeat Marks is determined to present even this as a positive.

"We have a good name in the business, but we're not complacent with it," he says. "We will always look and strive to do something else, something a little bit different, and we're constantly refocusing on the service we provide our customers and finding ways to make that better and faster. If you don't have competition in your business then you don't have competition leaders. It keeps us on our toes."

Return on investment
When Wagamama opened its outlet in Kingston, Surrey, it put in a fixed point of sale (PoS) system rather than a mobile network, because the installation was cheaper. But, long-term, it proved more expensive.

When the company introduced a mobile network six months down the line, operations manager Jerry Marks says sales quickly increased by £1,000 a week. And there were labour savings as well. Marks estimates that the waiting staff saved about two-and-a-half hours a week - time previously spent walking from the tables to the kitchens and the tills - leaving more time to take orders.

"The IT side of things can be expensive if you make the wrong decisions, but if you make the right decisions you can get a good return on investment fairly quickly," says Marks. "At Kingston we got a return on our investment in between three and six months. If we went back to pen and paper now, the business would run at 50% of its current efficiency."

Wagamama facts - The company was set up by Alan Yau, whose other ventures include the London restaurants Hakkasan and Busaba Eathai.

  • The first Wagamama opened in 1992 on Streatham Street in central London.
  • It is majority owned by Graphite Capital. Executives, including chief executive Ian Neill, also hold stakes.
  • Head office is at 23-25 Eastcastle Street, London.
  • It has 25 outlets in the UK, 16 of which are in London. The company also has seven franchise operations: three in Sydney, two in Dubai, one in Amsterdam and one in Dublin.

Website: www.wagamama.com

The future of Wagamama Behind the scenes, the future of the company remains unclear. Back in June the majority owner, private equity financier Graphite Capital, dropped its plans to float Wagamama on the Alternative Investment Market. Through Deloitte it is courting venture capital firms and other industry operators in view of a takeover.

Last month financier Hutton Collins, widely viewed as the frontrunner, withdrew its £50m offer, leaving venture capital firm Apax at the head of the chasing pack. The long list of companies that have been linked to a potential bid also includes the Restaurant Group, Noble House and TDR Capital, owner of the Ask and Zizzi restaurant chains. The names of several pub operators, including Spirit and Scottish & Newcastle, have also been mooted.

Contactswww.nfs-hospitality.com or telephone 01920 485723
www.crystalreports.co.uk (product used by NFS to construct reports using hosted data)
www.chipandpin.co.uk (useful background on the new anti-fraud measure)

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