Hospitality Is Brutal Right Now. Here’s How the Best Operators Stay Alive
Hospitality isn’t just “a bit quiet” at the moment. It’s survival mode.
On this episode of About the Green, I played a round with Michael Khu, founder of Cuckoo (three vegan Thai restaurants in Auckland) and someone who’s right in the thick of it. He’s also involved in wider industry work through hospitality advisory groups so he’s seeing what’s happening across the board, not just in his own business.
And with thousands of hospitality businesses shutting up shop over the last 12 months, the big question is simple:
What are the ones still standing doing differently?
Start Small — Don’t Lock Yourself Into Big Fixed Costs
Michael’s advice to anyone thinking of starting a restaurant was clear:
Don’t start with a full restaurant.
Restaurants come with huge fixed costs straight away, rent, staff, compliance, fit-out, and you feel the pressure before you’ve even validated the market.
If he was doing it again, he’d build it in stages:
Cook for friends first (test the product)
Sell at a market (prove demand)
Move to a food trailer (validate location + volume)
Then open a restaurant once the model is working
It’s the same principle as business finance: prove the cashflow before you commit to the overhead.
The Real Reason Restaurants Struggle: Too Many Moving Parts
People think restaurants fail because “sales weren’t high enough”.
But Michael explained it better: restaurants are hard because everything has a price and everything changes.
One dish might have 20–30 ingredients, and you’re constantly dealing with:
supplier price rises
staffing changes
seasonal demand
compliance costs
equipment breakdowns
and customers tightening spending
It’s not glamorous. It’s a machine with a lot of gears and when the economy turns, a few of those gears start slipping at once.
Don’t Try to Fight It Alone
When things get tight, most business owners go into isolation mode:
stop talking
stop marketing
stop collaborating
try “just work harder”
Michael reckons that’s the worst move.
Instead, he’s big on collaboration, because it’s cheaper and faster than chasing brand new customers.
His thinking:
The easiest way to make money isn’t always finding new customers… it’s making more from the customers you already have.
Partnering with nearby businesses, cross-promoting, sharing customer bases it can be a simple way to drive revenue without doubling your costs.
The Holy Grail: Average Spend (Not Volume)
This was one of the best insights from the whole round.
Michael says many restaurant owners obsess over more customers… but the real win is:
getting each customer to spend more.
Because when average spend increases:
you don’t need more staff
you don’t need more rent
you don’t create more operational stress
you simply lift margin
That could look like:
better upselling (drinks, sides, desserts)
training staff properly so they can recommend confidently
making add-ons easy (extras, premium options)
It’s the same logic as any business:
work smarter on margin before you work harder on volume.
One Simple Fix Most Owners Avoid: Pricing
Michael also touched on something most business owners know… but still avoid:
raising prices slightly.
Even small changes matter:
$1–$2 per dish across consistent volume
better margin without changing operations
compounded over weeks and months
A lot of businesses keep prices the same while costs rise and slowly squeeze themselves into a corner without realising it.
Using Finance Properly (Not as a Last-Minute Rescue)
We also talked about funding and debt and Michael’s view was spot on:
Too many businesses only think about finance when they’re already under pressure:
“I’ve got a bill tomorrow I need money now.”
The better approach is planning ahead:
map the seasonal highs and lows (summer vs winter)
forecast cashflow a few months out
build a relationship with a finance partner early
use funding to capture opportunities, not just pay bills
The key idea:
Finance should support ROI not panic.
Takeaways From the Round
If you’re in hospitality (or any tight-margin business) and feeling the squeeze, here’s the cheat sheet:
Start small and validate demand before locking into big costs
Know your fixed costs they don’t care if sales drop
Don’t isolate collaborate with nearby businesses
Focus on average spend before chasing volume
Train staff properly upselling is a skill, not luck
Review pricing small increases compound fast
Plan funding early don’t wait until it becomes urgent
Hospitality is tough. But the businesses that survive aren’t always the biggest they’re the ones that stay clear-headed, protect margin, and make decisions early.