- Your career took off once you began working in a local deli while going to school in Canada. You became an owner a year later and in a short period of time this 1700-square- foot deli generated annual sales of $2 million (in 2001). How did you do it?
Tony’s Deli was a turnaround opportunity. The way to make it profitable was to turn over every stone in the business. The food business is a “nickel business” and if you can create the right volume for your unit, you can make thousands of nickels along the way. It was a process of streamlining every single process, better purchasing, better recipe control, and driving more sales through catering. And it took a lot of hard work and dedication. Never give up.
- Restaurant marketing consultant Tom Feltenstein writes in your book’s introduction, Get Catering and Grow Sales! that “dumb guys make so much money.” How so?
This introduction really makes me laugh. Tom is a satirical writer and so what he is pointing out in the introduction is that it is not the big and expensive plans that make money. It is the practical business logic, the ability to see the vision and then applying basic tasks against the daily operations that works. What Tom is saying is that you don’t have to be so “smart to make money”; you just have to be hardworking and stick to the basics.
- Your new book strongly advocates that multi-unit restaurant owners should develop a catering strategy because this revenue stream could soon account for up to 40% of their gross margin. Why do so many restaurants do little or no catering business?
I ask myself the same question. I think the real barrier is that mentally; restaurateurs have a very difficult time understanding the flow-through of catering dollars to the bottom line. They don’t want to work on something they don’t understand very well. An incredible amount of education and awareness work needs to be done before our community really starts to see a major lift in revenues in the catering channel.
- Please explain what you envision catering to be and how it goes beyond having a take-out or delivery service.
The community that I am focused on is specific to multi-unit restaurant operators in the QSR, Fast Casual and Casual Dining space. For me, catering is focused primarily on the business-to-business relationships that these brands can create. The demand driving these sales is completely different than the demand driving the take-out and delivery business. For these brands, catering impacts their entire operations and is a horizontal revenue channel that is yet to be defined well by this community. It all begins at understanding the strategy and the business, and then differentiating the products from take-out and delivery.
- How will catering provide restaurants with a new revenue channel without sacrificing income from the core business?
The key success factor will be to make sure that operators understand how to layer these services on top of existing assets. This process requires deep investigation into all business processes, documenting where the gaps are and then fixing those gaps. In addition, if done right, an increase in catering sales can actually drive more sales for their core business. But a deep commitment has to be made at the strategic level to pull this off successfully.
- How have you worked with companies to use catering as a successful turn-around strategy?
To begin with, my own deli was a turnaround opportunity. I became involved at a time where the assets were being seized at Tony’s Deli and Catering. Focusing on the catering revenue channel allowed us the margins we needed to re-invest back into the business. I have also worked with multi-unit restaurant operators where many of their existing units were marginal and operating at break-evens or even losses. I have helped them focus on those stores to use catering as a way to get back out into their communities and drive sales. In each case, they succeeded in fixing the economics of that store. The key element there was a commitment to leadership in the catering channel.
- As the deli business took off, thanks in part to software you had created to help expand the catering business, you began to develop a software business. After selling the deli in 2004 to give MonkeyMedia Software your full attention, how did you go about growing this new venture?
At first it was very grassroots. We simply began showing other operators the technology and discussing how catering impacted Tony’s. We picked up a client here and there. Our steady growth as a software venture came about by just never giving up. We just keep on going each and every day, and our full focus is on our customers. As we became successful at deploying our software, our reputation also began to build and we had more credibility as we went along. We brought in a professional technology management team and focused on our customer service processes and invested heavily in infrastructure to support enterprise clients. I applied my business skills against the software company, and we grew. We are still making adjustments each and every day, just like any business.
- You say that catering, in order to be a successful tool, may require well-established businesses to tinker with their product line. How can this impact a brand?
The key to remember here is that the experience of the brand in this channel takes place outside the four walls of the restaurant. As such, each product has to be well thought out from packaging to temperature to portion sizes. What we are looking for here is a highly scalable service channel and in order to do that we may have to offer a subset of our products that we know we can execute well on. If operators try to offer their full menus, they raise the risk of failure at the execution level and as such, risk diluting the brand experience.
- In a downward or stagnant economy can multi-unit restaurants afford to experiment with the launching of B2B catering?
I might argue here that the time to invest in this “experiment” is when sales are sluggish. We cannot change what we can’t control. Catering, if done properly, can put the control back in our hands to some degree.
- Why do you state unequivocally that catering will be required for all brands in the years ahead for survival?
As consumers become more sophisticated, markets open up. As such, if our multi-restaurant community does not service this market properly, some other community will and we will be playing catch-up instead of leading the way. It’s crazy to allow our customers to go elsewhere to get their needs met when they are already fans of our current services. In addition, because of competitive pressures and an increase in consumer options, we must find new revenue channels like drive-thru, take-out, and additional dayparts in past years. Catering is a natural horizontal extension of services and as operators we need more sales. The only way to get a substantial lift in sales, is to look to new markets. Every business has to do that to survive in the long run.
- How do prices and the way restaurants charge for their menu change when catering is in play?
Catering is a different business. As such, the products can be different, the prices can be different and the portions can be different. Each brand will need to have a consistent look and feel and flavor profile. However, the differentiation of services will be critical to a staggered pricing strategy. Catering should be sold at higher price points due to the reward that operators will deserve for successful execution. There are implicit costs in this channel that simply are not present in their current operations.
- There isn’t a lot of hard data out there to demonstrate the catering channel’s success story. Why are you so convinced this is the next big thing for the food industry?
I am convinced because I have not only experienced the results in my own business, but we have customers who are following our strategies and are having the same results. Low cost of entry, rapid increase in sales. It just makes sense at the unit level. When done properly, the entire economic model of the restaurant providing these services will be positively impacted. As such, the market will open and there will be a window of opportunity to take a lead position and increase profits.
What type of marketing strategy would be needed for a restaurant chain to introduce a catering service?The catering service must be distinctly different from the in-store experience. The story must get defined and material must be produced to educate the consumers. Social networking, in-store signage, web-presence and good old fashion radio, television and billboards. It’s all about visibility to the consumer and helping them understand the demand that you are filling. They already have the need.
14. What will be the driver behind a restaurant successfully implementing catering sales?
- They must have a strategy.
- They must invest in a catering leadership position.
- They must invest in education of their people.
- They must invest in technology to achieve scale.
15. You suggest that multi-unit restaurants should create a proprietary beverage. Why?
Beverages are a great “add-on” to the catering sale. The standard beverages available at grocery stores are very price sensitive and as such, the market is very savvy to these price points. If as a brand, you can create a proprietary beverage flavor, for catering you can sell it by the gallon. If the product is great in flavor and the packaging is right, having a proprietary beverage will attract brand fans and may actually be the difference between the consumer selecting your brand over another.