Major Adjustments Needed This Fall

Last week I had dinner with a friend of mine who works for a catering company in New York. His company's sales are 25% below last year. Unfortunately, last year's sales were 25% below the previous year. So with their sales off 7/16, how do they manage to stay in business?

The catering business has a project orientation. Each event is a separate job with a unique budget. As long as a caterer makes a profit on each event, the business has a good chance of breaking even. Managing fixed costs is the key to survival.

Several caterers I work with have downsized their offices and production facilities. These are off-premise caterers. They don't need a large footprint. They need enough space and equipment to handle sales, purchasing, production and accounting functions.

The lower the overhead, the better chances of making a decent profit. If you know your costs and keep your fixed costs to a minimum, you will have an edge on many of your competitors. On-premise caterers have additional fixed costs since they provide a facility for their clients. These larger fixed costs need to be covered with additional profitable business.

If an on-premise caterer can cover their variable expenses, almost any event is worthy of consideration mid-week. Wedding caterers may need to expand into other segments during the week and consider Sunday Brunch.

Restaurant Catered Affairs

Many restaurants have scrambled to increase their catering business. For many of these companies, a party simply requires an estimated guest count and a reserved table or room. The guests order off the menu and drinks are all charged by the drink. Rarely, the host may restrict their guests to specific entree choices. Usually, a printed menu is prepared with the limited choices specified with prices.

Some restaurants charge a set price per person for food but let the orders go through to the kitchen on the POS system. Often, these companies have separate PLU numbers to handle these orders. In this manner, the revenue is generated per person and the menu items selected are tracked to the specific party. These PLUs may be grouped to show party activity at-a-glance.

Restaurant operators using their facility for parties do not shut down their normal operation unless the group wants the entire space for the event. Occasionally, you will see an apology sign in the window letting guests know the restaurant is closed for the evening due to a party.

Generally, the manager adapts the service staff to the number of guests. The final count for the party is added to the base forecast. Since the guests often order off the base menu, the meal period is treated as normal with a higher covers forecast.

Extras like photographers, flowers, special invitations, etc. may be handled by the host or the restaurant. If the restaurant provides these services, they are usually added to the bill.

Caterers often have profit and loss statements with very low food costs. A 25% food cost is at the high end because they divide all revenue into their food cost. Beverage costs are treated similarly. Restaurants will show the traditional food and beverage cost numbers. Extras will be treated as other income.

While it is not always the case, caterers tend to use job costing principles and restaurants stick with periodic reports. Restaurants could increase catering profit by creating suggested packages. If guests were offered packages with higher gross margins, the positive impact of special events could increase.

Do It Yourself Special Events

I have been invited to 4 parties this year hosted at a home. All four events used the services of a caterer. In every case, the customers picked up prepared menu items and setup the entire meal on their own. The caterers were careful to keep hot food separated from cold food.

Taking a critical view, I believe these companies had some additional opportunities which were not offered to their clients. A few parties lacked a proper table for presentation and all parties could have used extra chairs. I noticed people scrambling to see who was in charge of buying ice.

Beyond the simple additions, I thought champagne glasses could be rented or perhaps a high quality disposable flute sold to these parties.

I was involved with two of the pickups. We all praised the local Italian restaurant for dropping the aluminum serving pans into well insulated deep dish pizza boxes.

Most of the hosts would have gladly paid extra money to help them save time on the day of the event. Delivery service and setup could have been offered and additional revenue would have been the result.

A few salads would have been better if the dressings were provided in containers rather than applied to the greens and veggies. In every single case, the caterer lost an opportunity to provide a dessert course. I asked the hosts if the caterer provided desserts and most were never asked if they wanted desserts.

In general, these do it yourself special events could produce more dollars if the sales team takes a consultative approach. Rather than taking down the order verbatim, the person could be taken through each course and given the options. Most of the parties ended with lots of food leftover. This is a chance to sell some take home containers.

All the hosts seemed relieved to be freed from preparing food on the day of the party. One caterer gave the host a detailed set of instructions on oven temperature and number of minutes. They suggested how to time each course and the suggestions were terrific.

Playing It Safe?

What happens in a large organization if everyone adds an extra 10% safety factor to their individual forecast? Let's use an example of an operation with a sales staff, a purchasing manager and a chef.

The sales manager needs to communicate the final guest count for each event several days before the meal service. The sales manager has a commitment for 90 plus guests and they give the kitchen a final count of 100. After receiving the count, the chef decides he does not want to run out of food and sets up production for 110 guests. Based on the production requirements, the chef asks the purchasing manager to order the perishable food. Our purchasing manager wants to be safe and orders 10% extra.

If 120 people show up for the event, the operation will exceed the budgeted profit. Unfortunately, actual counts frequently fall short of the early count. An operator could have 50% too much food if only 80 show up. Weather, a change in plans, emergencies, traffic jams, airport delays and other factors can cause a low actual count.

Even if you want a safety factor, make sure your safety factor is a combined 10%. Communicate with the entire team. Eventually, you may want to test a 5% safety factor. Depending on your market, the specific group of guests and season of the year, you may try a zero safety factor. Good forecasters know the cost of erring on the high side and on the low side.

If you receive a full payment based on the final count, should you always buy more food and produce more food to make sure you have enough for the event? The answer to this question is found in your garbage cans. Regardless of the guarantee, the cost of the wasted food impacts your profit.

Catering Books

If you want to research catering oriented books in a hurry, pay a visit to Google Books and run a search on catering. You will find over 12,000 hits. Of course, you may want to be more specific. A search on "catering menu pricing" yields only one hit. Nancy Loman Scanlon's Catering Management is the only book listed.

The results offer specific page numbers and you may click through to see a complete summary for the book. Many books have sample pages, current prices on Amazon, Borders and Barnes & Noble and other useful data. If there are any available reviews, you can check what other readers said about the book.

If you're not purchasing the book and want to go to your library, there is a "Find in a library" selection. You can even click through to locate the library closest to you on a map.



If you click on the "All sellers" link, you will find a list on all online sellers for the book. I noticed Textbooks.com was very highly rated. They had a great price for Catering Management. The $42 was pretty close to the lowest - eBay.

Catering Gigs on craigslist.org

I ran a Google search using 'craigslist catering' for the search string. The query returned over 500,000 hits. Many caterers are using craigslist for posting jobs, marketing, menu information, contact information, sale of business, ancillary services, self-catering and networking activities.



Noticing quite a few ads had $20 in the text, I added $20 to the search query. The search returned 239,000 hits. I then tried a list of different dollar amounts from $5 to 100. The search string with $100 actually returned more hits than the string with no mention of a dollar amount. The following table illustrates the various dollar amounts used with 'craigslist catering'.



Moving away from the Google search engine and into the current local craigslist postings, I found 89 in the services/event/catering and another 99 in jobs/food/bev/hosp/catering.

Lunch Buffets

Many conference groups order breakfast buffets. Special event caterers frequently offer elaborate buffet presentations. With the economy on the mend and clients watching their wallets, a lunch buffet may meet the needs of several demographic groups.

I just returned from Las Vegas and I had some time to try out a lunch buffet at Sunset Station's Feast. Henderson, NV is a popular retirement area and the buffet crowd was treated to 1950's music. My neighbors at the next table were nice enough to answer my questions.

I asked how often they go out to eat each week. The entire table said they go out every day once. Regarding the lunch buffet, they volunteered it is their favorite. The lunch buffet has many healthier options. They prefer to go to the brunch on Sunday for omelets, bacon and sausage but they tend to limit eggs to once a week.

The buffet at Feast is $9.99 for lunch and Boarding Pass(Station's free member card)holders get a $2 discount. You get tremendous value for $7.99. There are stations for salad bar, Asian, Italian, Mexican, American and dessert bar. Beverage is included.

My neighbors prefer the lunch buffet to the dinner version. They said the dinner buffet has more roast beef, shrimp and salmon. I never tried the dinner buffet but I went by to check the demographics. The dining room was packed with families. There were lots of high chairs. The music was more contemporary.

If you are trying to book events at lunch time, a simple lunch buffet could attract the attention of a frugal audience looking for a healthy and light meal with great variety.

Tailgate Season

The final Saturday in August is the peak of Saratoga Springs racing season. Thousands of customers descend on the track to see the Mid-Summer Derby - the Travers Stakes. After the races are over, the traffic is very heavy and many people stay in the parking lots and party. This is the reverse of the traditional football tailgate party which is before the game.

My friend manages a huge parking lot close to the clubhouse entrance and in the middle of the lot there is a large tent. As the crowd moves from the track to the lot, a local caterer pulls in with a van. They setup a set of 4 long tables with salads, cold cuts and rolls at the beginning table; entrees, pizza and vegetable dishes in the middle tables; and, desserts at the final table. Admission is free to loyal customers. Most people have coolers in their trunks and everyone shares.

I spoke with the caterer and he said they had 6 parties on Saturday and they had 4 on Friday night. August is his busiest month of the year with lots of parties each weekend. He also owns a year-round restaurant.

As we move into football season, tailgate parties will take place in many college towns and outside stadiums where the pros compete. Many groups prepare their own menu and share in the preparation. I'm sure there are also plenty of caterers who offer tailgate packages.

Caterers Take Advantage of Cheaper Leases

I have two catering clients who decided to move their primarily off-premise operations from pricey locations to less expensive alternatives. One company was expanding their operation so this was not a defensive move. Should you look at a less expensive location for your off-premise operation?

A really good exercise is to sit down and create an action plan for replacing your production facility in the event of destruction due to a major weather event.

You will immediately think through insurance issues and other required coverage issues. Go beyond a rebuild strategy and really think about your true needs. Many operations expand into a given space. You may find a smaller space is easier and cheaper to maintain and clean.

If you just signed a lease last year, you can approach the landlord and ask for a lower rent. Many landlords are dropping rent numbers for 6 months or more to keep good tenants.