Two Steps to Profitability

By Sandy Korem, CEO of The Catering Coach and The Festive Kitchen

Caterers who know their actual costs, and follow up their events with audits, set themselves up for success

As an independent caterer or restaurant owner, you likely spend a lot of time looking at the bottom line. You worry about the dollars in and the dollars out. How can you fix it so that everyone who works for you is worrying about the bottom line? In restaurants, the back-of-house employees are educated about spending, but are you educating your catering sales team on the same issues?

If not, you’re in good company, because most caterers don’t.

A great place to start teaching your catering staff about the importance of paying attention to costs is in the development of proposals. First, I need to mention an important caveat. To develop accurate proposals, you must use accurate recipe costing cards. Assuming that system is in place, this is the process most caterers follow to develop and execute their proposals:

  1. Proposal is created, with recipe costing cards aiding in pricing.
  2. Proposal is presented and accepted by client.
  3. The event is confirmed.
  4. Twelve weeks later, it’s the week of the event, and your staff places the order for the food.
  5. The end.

Comparing Proposals to Actuals

In my catering company, step number five is not “The end.” It’s a time to look at the “actuals.” Most catering companies never compare what they estimated the food would cost to what it actually cost, but this process is essential to keeping your catering business profitable.

I find that most caterers are confused about how to figure this out because they aren’t sure how to calculate what they spent when they have so many events going on at the same time. Having many events in one day or one week overwhelms many caterers, and they are just “too busy” to find time to audit the price of food for each specific event.

But here’s what is really going on: Most caterers are guessing about their recipe costs when they put them into the proposal in the first place. They just toss out a figure for the food that “sounds good.” That is a financial disaster waiting to happen. There are many catering companies out there that follow this potentially disastrous strategy, but you don’t have to be among them any longer.

My catering company checks every price for every event before the proposal is sent out and after the event order is sent to the kitchen team. Here is our process:

  1. The catering sales team meets with the client and presents a proposed menu based on accurate, up-to-date recipe costing cards. (Our version of “up-to-date” is every month, not every two years.)
  2. Using an in-house profit generator form, we know—to the penny—how much profit will be made on that specific event.
  3. The week of the event, an order is sent to the kitchen team with the number of final guests and the final menu.
  4. By noon on Monday after an event, all orders have to be costed with the actual amount of food that was ordered for that specific event and submitted to our general manager.
  5. Each of these are reviewed against what was proposed for the event.

If you don’t do “actuals,” then how do you know how much profit you really made on that last event?

Performing Audits

We perform two types of audits: food audits and staff audits.

Food audits: For catered events, audit the amount of food that is actually being served to the guests. The best way to do this is to always serve the guests the food, rather than letting guests serve themselves at a buffet or station. If you always serve the guests and inform your captain of the exact amount of food each guest is to receive, you really don’t need a surprise auditor to show up. It’s automatic.

But there is a time to do surprise audits, too. It’s a chance to find out if the kitchen produced the right amount of food. Or did they produce too much food, which translates into lost profits? As a backup, we do perform surprise audits in our kitchen. On the day of an event, the audit is done, and full pans of food are weighed to see that they match the recipe. If a batch of a dip has been prepped, the batch is weighed to see that the weight of the batch matches the weight on the batch recipe.

Side note: If you cater, you must have several recipes for the same food item being made in your kitchen. You must have a batch recipe for the mac and cheese as well as a full-pan recipe and a half-pan recipe (if you sell it in full and half pans), and a cost per ounce for the mac. You can’t just send the kitchen an order for mac and cheese for 400 unless you have the mac recipe costed as a batch and per ounce. (If you need more info on this, please contact me.)

When I speak at conferences, it is rare in an audience of 100 that there are more than three people who have all of their recipes costed. And very rare for one of the three to have recipes that are updated each month. A caterer that has no costed recipes is a caterer that has no idea of how much profit is lost!

Staff audits: These are also very important. We have one division of our catering company that has three to 10 separate events per day. The catering sales member in charge of this client sometimes arrives at the event unannounced to check on the quality of the staff’s presentation of food and to get feedback from the client.

As the CEO, one of my personal favorite things to do is to go party-hopping during the height of the holiday season. On the busiest Friday and Saturday of the season, I get dressed up and pop in on multiple parties just to see how the staff is doing. I check specific details, such as: Have they set up the prep area right? Is the food presentation up to our standards? Is each staff member’s uniform and personal appearance in line with our policies? If it’s a crowded venue, many times they don’t even see me, but I definitely see them in action.

It’s a great feeling to contract for an event and deposit that check into your bank account. But it’s even more important to know that what was proposed was actually delivered, and that your company did not lose profits due to not following established systems for pricing and recipe production.

Actuals and audits—they should be standard operating procedure for your catering company.