Successful catering is about profits, not sales. Many times, operators only see the dollar signs when considering a potential catered event. Three of the mistakes restaurants and caterers make on a regular basis are: taking every catering order that comes through the door, matching catering pricing to a competitor, and selling catered food at the same price as the restaurant’s menu price.
If you're guilty of any of the above, don't worry, most operators are. Think about it. Boxed lunches for 500 people at $8 per person during a slow week can sound very enticing. Who wouldn’t want to deposit $4,000 in the bank during an off week? Everyone would. Until you realize that the $4,000 that hits the bank one day is debited $4,300 two days later to pay for those boxed lunches.
Want to get past these mistakes in your catering business? Here are three guidelines that will fetch your pizzeria more profit in catering.
Number One: Minimums
Everyone in the restaurant or catering business has been approached about catering an event for 10 to 12 guests. It’s tempting to jump at every catering inquiry that comes through the door, whether it’s 100 guests or 10 guests.
However, unless you’re charging the customer a huge amount of money for food and staff for 10, there is no way you are making any money on an event for 10 to 12 guests.
For a simple boxed lunch with a sandwich, chips and cookie, the cost of goods sold is a minimum of 40 to 45%, if all of the sandwich flavors are the same. Assume that your customer wants three kinds of sandwiches for the 12 guests to choose from, and you, out of the kindness of your heart, throw in delivery as part of your pricing. If you add up your food costs, packaging, napkins, fork, delivery bag, and delivery costs, there is no profit.
What should your minimum be? For me, our minimum for drop-off catering and boxed lunches is 25 guests. For off-site events, it is 30 guests. For years, I had no minimum guest count, and I paid for it with no profits for small events. In fact, we lost money. Will you turn down business? Absolutely! But, you are turning down gross sales. You are not turning down profits.
Number Two: Not competing with “the guy down the street”
I know a restaurant owner who makes excellent food and has exceptional staff and customer service. The competition in his town charges a ridiculously low price for their catered food and service. There is no way that company is making any real profits, yet the operator I know will not price the menus higher than the competitor because he says, “no one will use us.” Is he making a profit at the end of the year? No! He's losing money because he won’t step out of his fear box to be paid what his product is worth.
When it comes to making profits in your catering business, don’t let the competition rule your company profits. Be paid what your food and service is worth. Do not compromise, or your profits will fly out the window. Catering is not easy. If someone tells you it is, they have never catered an off-site event for 100 guests. Be paid what you are worth, and you will make a profit.
Number Three: Catered food is more expensive than restaurant food
Any food that is catered off site from your pizzeria costs much more to serve. In addition to the traveling of the food, there is staff, plates, cutlery, equipment, small wares like lighters, Sterno, etc., that all have to be paid for to accomplish a successful catered event. If you only charge the $16 menu price for your pizzeria's version of the lasagna, I guarantee you have lost profits because of all of the other expenses involved in a catered event.
Don’t give away your profits by throwing in staff costs, plates costs, even ice costs, to your client. If you do, you will be working for nothing!
This is just the tip of the iceberg when it comes to finding ways to make the most profits in catering, but these three are the lessons I see caterers learn the most often. Have confidence in the numbers and your profits will follow.
Sandy Korem, The Catering Coach, is the owner of the Dallas-based catering company, The Festive Kitchen, which operates multiple food divisions, catering, food manufacturing and gourmet food shops. Sandy and The Festive Kitchen have received numerous awards, including “The White House Food Service Medallion” for outstanding service to a sitting president. She is a frequent speaker at national restaurant shows, a contributor to several national food publications and coaches restaurant owners and caterers on developing a profitable catering revenue stream. For more information about Sandy, visit www.thecateringcoach.com.
Opinions expressed by PMQ contributors are their own.
