Years ago, I enjoyed watching old episodes of Perry Mason. The drama that occurred in his courtroom really taught me that life is short and often there is a lot on the line. Each week, Perry discovered and believed his truth even when others didn’t. In his line of business, believing wasn’t enough so he had to build a case for the jury backed up by expert testimony and facts.
Today, I feel like Perry Mason. My truth is that catering is the next substantial sales-growth area for the multi-unit restaurant industry worldwide. Some of you may be skeptical of this claim but I’ve lived it and I have helped many operators implement a catering business strategy that is sound, scalable and continues to grow.
The Merriam-Webster dictionary, defines catering as: “To provide a supply of food or to supply what is required or desired.” This broad definition highlights a looming challenge that I believe touches a core fundamental business issue for the multi-unit restaurant industry. Catering means something different to each and every operator, yet many try to stuff the experience into a preconceived box of what they think it means. For the length of this discussion, I would ask that you step back from your idea of what catering is, and look at the bigger picture.
My first expert witness that can speak to the power that catering has to offer is, well, me! My entry into the food business 15 years ago was through the turnaround of Tony’s Deli. I worked that little deli into a $2 million per year catering powerhouse and I have experienced firsthand what the unit economics look like when catering connects at the brand level.
Now you may think that catering does not hold such promise for the pizza segment in the long run; in fact you may look at the program you have in place now and think, “We’ve been there, done that and it was marginal at best for us! We are not interested!”
I am not making these arguments today to convince you that a profitable catering program is possible. The reality is that catering is vital to your survival and I hope to get you thinking about all it has to offer.
Fact #1: Restaurant sales are at a mature point in their life cycle and we must find new revenue channels to survive.
Our consumers know exactly what they want when they walk into our place of business and buy from us. In the multi-unit pizza segment, unit sales have grown through delivery. Pizza operators have always known that delivery is a separate business with a different execution strategy and they have excelled due to that understanding. These results are unique to the pizza segment because operators have taken the time to fully understand the intricacies of the delivery business on every level.
Over next 10 years, our operators will have to dig back inside their existing infrastructure to look for more revenues. The entire multi-unit restaurant industry has done a poor job at maximizing every bit of profit from existing assets, but what if you could leverage your existing assets and add as much as 40% to your profit margin?
“That isn’t possible or realistic, we’ve tried it! It just doesn’t work!” You argue.
If you’ve ‘tried’ catering, and have not experienced success, it may be because there is a gap in understanding the business at a strategic level. Certain key elements such as strategy, leadership, sales, marketing, manufacturing and distribution must be in place to succeed in the catering channel and I argue firmly that this perspective is not well understood by many executives and operators in our industry.
Maybe you think you are better off having no catering program at all. Well, I would argue that if you don’t do it right and take yourself seriously, then that IS the right decision for you. However, it’s going to cost you money in the end because your customers will eventually buy from your competitors where they can get more variation in services and get their additional needs met faster.
Catering increases volume at the unit level and provides a multitude of benefits for cross-selling into the retail channel. More sales = more money!
Fact #2: Catering is not an add-on business. It’s a business unto its own. Run it that way!
“But Erle, you just said we’re layering catering sales on top!” You shout. “Of course it is an add-on business!”
The execution and business strategy of catering is layered on top of your existing assets and operations but catering requires a unique and specific business perspective that needs dedicated resources and strategies separate from existing retail operations. Catering must be intertwined with your existing operations and become part of your core business strategy. It must have equal importance and weight compared to your existing revenue channels, such as dine-in, take-out, and delivery.
Today’s consumers are very loyal to their preferred brands. However, they have a different set of wants, needs and desires based on “their need to feed,” which crosses all aspects of their lives. In order to win their catering business, a very different workflow and service experience is required. The beautiful thing about catering is that it fills the gaps in your daily operations because the timing of production and distribution is complimentary to your existing day parts.
Fact #3: A new business needs a new experience: Menus, Packaging, Pricing, Selling, Servicing.
Because catering has various logistical issues that are unique, some existing menu items may not represent your brand well at the point of consumption. This means your menus may have to be re-engineered. This includes products, portions, and flavor profile.
In addition, I argue that our operators need to adjust to the idea that pricing for the catering experience should be different from the retail experience. A catering pricing strategy should be based on the market demand for your brand and the intensity of the transaction that you are servicing.
“Now hold on a minute!” You say. “We have to buy more stuff? We can just use what we have for delivery and make do.”
There is an old adage in restaurant business, “Keep cold foods cold and hot foods hot!” It sounds simple, but delivery is a vastly different business from catering and if you try to use your delivery tools for catering you will not have a positive result.
If you are resisting the investment to even have cold offerings, I present you the following argument: The boxed lunch business is a large part of the catering sector so sandwiches, salads and other creative menu ideas will allow you to offer items exclusively in the catering channel that are profitable and represent your brand well. These cold items also give you additional flexibility by allowing your catering business and retail business to coexist during the busiest times of the day.
Fact #4: Catering is not a “hit and run” business. You have to chip away at it daily.
“We tried.” That is what I heard you say about catering. You tried.
You wanted something to boost profits that was quick, easy and didn’t take a lot of effort, right? That approach won’t work and it never will. We have all ‘tried’ and are tired of what doesn’t work. Get up and dust yourself off! If you have failed at it, catering is not the problem. Your mindset and execution are. This business requires planning at the strategic level – and lots of it. Catering has to be woven into the very fabric of your brand for you to be successful because it requires the full participation of your entire team on every level to maximize the opportunity. You must fully commit so that your people have a clear path to success and they understand what catering success looks like for your brand.
Fact #5: You need more sales!
Clearly, increasing sales is essential. Perhaps you have been at the helm of a multi-unit restaurant organization for decades, but until you educate yourself on the intricacies of catering, you are not maximizing the potential for better unit economics. Hiring catering experts in the multi-unit restaurant space is essential to your long-term catering success.
Guidance on what not to do, and which pitfalls to avoid, instills confidence for your team. Of course, I assume that you will follow sound business practices by paying attention to the key elements required to scale a predictable and sustainable catering experience across your infrastructure. The catering plan must be thoughtful, controlled, organized, logical and agreed to! Just like any other business venture.
Ladies and gentlemen, I wish to leave you to ponder these final thoughts. Market-transition points in our industry changed consumer behaviors. Think back to the development of drive-thru, delivery and take-out. At each inflection point, our industry grew and expanded. Catering is the next natural point of inflection.
So, how can you argue against catering in your multi-unit restaurant?
Ladies and Gentlemen, The verdict is up to you!