Don’t Leave Your Catering Profits Up to Chance

Bite-sized salmon cream cheese spirals from The Festive Kitchen.

Steps to set up your company for long-term, predictable profitability

By Sandy Korem, The Catering Coach

Feedback is so important! It helps you evaluate your strengths and weaknesses, and improve what you have to offer. This is true of catering, and it’s true when speaking.

For example, I recently spoke at a national conference for caterers and restaurant owners, and as is the usual practice, the show organizers provided me feedback from the audience after the show. I read every one of the comments because it helps me figure out what the audience liked and what they didn’t. Overall, the feedback was really positive. But one of the comments from an attendee made me pause. The comment was that I was mean-spirited in my response when no one knew the answer to a question I posed to the audience. The commenter said I should not have “berated” them for not knowing the answer.

What was the question? I asked the audience, “What is the national average net profit of a foodservice company?” Or, put another way, what is the net profit that you, as a CEO, should have as the minimum goal for your company?

No one in the room had a clue of the correct answer.

My response? Shame on you for not knowing! You are putting your family and your employees at risk because you don’t even know what your goal is. No wonder you are spinning your wheels in the “no profit zone.” You don’t even know the minimum standard! If that’s mean-spirited, then so be it. I think it’s just direct.

Why am I so direct? As a coach I have a responsibility to help others elevate their businesses, and sometimes it takes a hard dose of reality to get CEOs to take action. I used to be that person that was “hoping for the best” in my company’s profits, if I even generated any. I didn’t have step-by-step goals to make profits a reality. As The Catering Coach, I tell people all the time that I learned how to cater the hard way, aka the “no-profit” way, but I want to teach you how to cater the right way.

Many caterers’ most important goal is to make things pretty. As caterers, that’s just what we do. I am the same way. The more creative the presentation and food design, the more I look forward to that event.

But pretty does not equal profitable.

Here are actions you need to be taking for long-term, predictable catering profitability:

  • Make sure you have up-to-date accurately costed recipe cards for EVERY food item that you serve. Currently, my company has more than 1,700 up-to-date accurately costed recipes. We use SMART Systems Pro, an online management software, to manage them all and keep them current. Yes, it is a grind to always cost every recipe, and it takes many man-hours to initially cost all your recipes company-wide. But there is no other option, because a large portion of your catering profits is based on cost-of-goods-sold profits. If not accurately costed, you are only guessing. I refuse to guess about our profit and put my future and my employees’ futures at risk!

 

  • Create multiple revenue streams. You can’t just be a wedding caterer, or a corporate drop-off caterer, or the caterer for a local hotel without acknowledging that one day, when the economy tanks, you are going to experience a huge loss in profits. It’s happened many times before, and it will happen again. My company currently has more than 10 revenue streams. We offer drop-off catering; catering for corporate events, private social events, weddings, funerals and NCAA athletics; boxed lunches; two food shops; catering for a local church; wholesale food manufacturing; and two more new revenue streams in the works. Multiple revenue streams ensure that when revenues are lower for two or three of the streams, the other streams compensate for the difference. During the Great Recession, our company had a growth of 1.5 percent. It was unheard of to have growth, even a minimal percent. Many caterers and restaurant owners had losses of 25 to 45 percent. And, sadly, many went out of business.

 

  • Keep a lean inventory 52 weeks of the year. Why pay for olive oil on the shelf when that money could be in your bank account? For a caterer, this means charging your client for the entire case of those special cups they want you to purchase vs. charging them for only the amount they will use for their event. Why should you pay for the rest of the case and not use it for a year or even never? Plus, keeping a lean inventory means actually counting inventory every week, not every month.

 

  • Analyze your profit and loss (P&L) statement month to month compared to the same month last year. Look at every line item on your P&L, not just gross sales and net profits. How did your sales compare to cost of goods? Is it better or worse than last year? Are your office supplies higher this month compared to the same month last year? This knowledge guides you in your decisions.

 

  • Review every event proposal before it is sent to the customer to make sure of the exact profit. This is a big one. You must know—to the penny—what profit you should make before a proposal can ever be given to a potential customer. Once that proposal is sent, you are committed. Make sure you show the right percentage of profit, and work for profits you deserve. Do not give it all away!

 

  • Spot-check and audit AFTER an event to compare actual profitability to front-end proposal profitability. On Monday, after an event, take the time to look at the exact amount of money spent for the entire event. Compare what was spent to the initial proposal. If there are discrepancies in what the profit should have been, then adjust immediately. Did you calculate the proposal wrong, or was there poor execution, which resulted in more costs to the company? Acknowledge that, and make sure it’s right on the next proposal.

 

  • Audit events to see if employees are performing to your expectations. Show up at an event where they’re not expecting you. Repeat customers are a must for any caterer to be successful, and if your employees are not performing to your expectations, clients will not call you back.

The Festive Kitchen’s beef tenderloin baguettes with arugula aioli.

Operating a successful, profitable catering business doesn’t happen by chance, and don’t ever assume it is an easy task. It takes diligence to know everything, all the time, about the back-of-house numbers. I’m not talking guest-count numbers; I’m talking profit numbers. You are in the catering business to make a profit, not just to execute a fabulous party. This is only a partial list of items that will sustain your catering profitability. If you want to know more, I’m only an email away! Email me at sandy@thecateringcoach.com.

(By the way, still wondering what the average net profit is for a foodservice company? It’s 4 to 5 percent.)

ABOUT THE AUTHOR

Sandy Korem is the owner of the Dallas-based catering company The Festive Kitchen, which operates multiple food divisions, including catering, food manufacturing and gourmet food shops. Korem 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 and a contributor to several national food publications, and coaches restaurant owners and caterers on developing a profitable catering revenue stream. For more information, visit thecateringcoach.com