By leveraging a durable and flexible equipment package, foodservice operators who participate in the catering segment can adapt to their customers various demands to provide unique and custom solutions.
When it comes to expanding services they offer customers, many restaurant operators may be more likely to offer carryout service as opposed to providing full-fledged catering. Unfortunately, this may result in a missed opportunity.
"The revenue potential of catering goes unrecognized by operators," says Jody Birnbaum, a former catering company owner and current restaurant business consultant.
Granted, there is more at stake when providing a lasagna dinner for 20 versus a spaghetti meal for one. "Operators may think they can't convert quantities to feed the right size crowds, and there is a small learning curve when changing quantities, pricing and packaging," Birnbaum says. "But catering can prove to be a profitable revenue stream, if done correctly and promoted well."
The total market for prepared foods for social catering events was $33.3 billion in retail sales equivalent (RSE) terms, or operator sales to consumers, according to a 2009 survey conducted by Chicago-based research firm Technomic. The full-service restaurant segment represents approximately $12 billion, or 35 percent, of the catering market followed by limited service at $11.2 billion and 33 percent of the market. Traditional fast food operators comprise the largest proportion of LSR catering sales at $9.7 billion and quick casual operations represent approximately $1.5 billion. Independent caterers, at $6.1 billion in revenues, and supermarkets, at $3.5 billion in revenues, account for 18 percent and 10 percent respectively.
There is additional potential in the business-to-business catering market. In a 2008 Technomic study, off-premise catering to the business and medical markets was estimated at $18.5 billion.
"We interviewed numerous operators as part of both studies and found most don't separate their catering revenue out from overall takeout," says Melissa Wilson, principal at Technomic. "However, we believe this is changing because of an increased focus on catering these last few years."
Like the foodservice industry as a whole, the economic climate of the last few years has impacted this segment. "We've seen consumer catering grow during the recession, as people purchased platters for potluck dinners, rather than dining out," Wilson says. "In terms of the B2B market, catering was shifting to breakfast meetings as opposed to more costly lunch events."
The recession also has resulted in more restaurants focusing efforts on catering due to the growth potential and to add another revenue stream. "The QSRs, in particular, have seen unbelievable growth in their catering divisions," Birnbaum says. "These chains are putting more money into advertising and development than ever before, due to increased demand for these services."
To be successful in catering, it's important to take the right approach with these programs. Operators first need to recognize which of their menu items are appropriate for catering. When providing off-site catering, travel and holding times need to be taken into account, in addition to food presentation.
"An operator can make a bad impression if they are not thinking about both the food presentation and customer experience," Birnbaum says.
Foodservice operators are discovering that there is more equipment geared to the catering market than in the past. Innovations in insulated carriers and bags help keep temperatures consistent, for example.
Catering also provides foodservice operations with an advertising vehicle. "When operators design catering packaging with their logo or brand, they have an opportunity to reach new customers and provide additional exposure for their business and services," Birnbaum says.
Full-service catering programs that provide food, décor and equipment to prepare food at a location of the host's choosing have practically no limits on what type of experience they can create for their customers. "We are never in the same place twice, are completely self-sufficient in terms of our equipment and typically have a two-hour window to set up the on-site kitchen" says Wendy Pashman, owner of Entertaining Co., a full-service, off-site caterer.
Although off-site caterers are not limited by space or menus, there can be challenges to contend with, such as lack of running water and electricity in the areas where staff set up the kitchen and other service areas. With these operations, it's as much about the location and atmosphere as it is about the food.
Those looking to venture into catering have a number of options, from providing a select number of party trays to running a full-service event complete with food and décor.
There is profit potential for operators who find the right fit for their business. "Catering can be a very lucrative business if operators put a concerted effort into it," Wilson says.