Catering’s 5 Points of Differentiation
As consumer markets continue to converge, catering remains an important topic of discussion in the boardrooms of our community’s restaurant chains. Historically, catering was left to the “caterers” who focused on filling off-premise consumer demand, while restaurateurs focused on the in-store dining experience. Caterers had an advantage over restaurants, as they were not bogged down with the complex subtleties of managing advanced restaurant operations.
But things have changed. Not in a small way, but in a big way. I see it every day.
Multiunit restaurant operators across all dining segments are successfully exploring and layering catering on top of their existing business infrastructure. Some multiunit restaurant operators are now reporting that catering represents up to 25 percent of their top line sales. When I owned and operated my own deli, my catering channel represented more than 50 percent of my total sales. Even more staggering was the flow-through of these sales to my bottom line. Yes, catering is a big business and has a serious impact on the economics of any restaurant—even in a quick serve. Thing is, it’s less about catering and more about consumer markets.
Today, few, if any, quick serves have worked a catering strategy into their overall business plans. Some have put up signs in their windows, and perhaps have done the odd catering order here and there. But what I am talking about is serious. I’m speaking about the thoughtful design, planning, and implementation of a strategy that should one day represent 20 percent of overall system sales for the quick-serve segment. That’s big business, considering that the quick-service segment represents $188 billion of our industry sales.
I’d like you to consider five points of competitive differentiation within the quick-service catering segment that will provide a serious advantage to operators who want to pursue catering as a valid business strategy.
In my view, these points of differentiation are specific to the quick-serve world. By using proprietary quick-service opportunities wisely, these operators are positioned to not only win catering consumers in certain market demographics, but also to reframe the entire value perception for their brands by creating a new and exciting conversation with consumers. This will influence consumers’ mindset with regard to the brand they will select for their next “catering opportunity.” If we do a good job, then we will be rewarded by consumers with more sales.
These are the five points of differentiation catering programs present:
1. Media: Quick service controls much of the media: print, television, billboard, radio, and so on. Media provides a platform for consumer influence. Once operators join the conversation around catering, the segment lines will continue to blur. This will be especially true for the fast-food segment if they focus on winning back dollars from the grocery segment. In addition, this will lead to more market convergence toward the value proposition for healthier services by quick-service/grocery/ fast casual. Like any market, when profits grow, competition increases. From my perspective, this convergence is already taking place and is a good thing for the entire supply chain of our industry of which the consumer will receive the benefit as our services grow.
2. The Power of Brands: Because of quick service’s history, this segment continues to have the largest brand equity and awareness in our restaurant community among consumers. These brands have been in our communities for decades, and have spent billions of dollars keeping their brand promises in front of consumers. Catering provides an additional opportunity to extend these brands into the communities they serve. If operators deploy the catering strategy across their assets properly, and deliver services to the market, consumers will buy because of the trust and emotional connection that they already have to the brand. Of course, the services will have to fill the market demand for off-premise services. Do not underestimate the power of brands.
3. Consumers expect an off-premise experience: Quick serves have always had a well-defined take-out experience. This is a very important psychological aspect to conquering the catering market. When we add the business of catering to operations and focus on the consumer markets, a point of differentiation is made using language because catering is simply another off-premise service experience for the brand. Saying that, the entire service conversation and workflow is different between take-out and catering, as are the products and packaging and consumption experience.
4. Fixed Assets and Real Estate: Quick serves have the most fixed assets deployed in a multiunit restaurant environment. Each of these assets (restaurants) is a manufacturing facility. If you consider the pursuit of new markets to find more sales, then scaling the right business strategy and consumer experience across existing assets is simply good business. Operators have the greatest opportunity to shift the use of large-scale assets.
5. Scale in Operations: Many quick-serve businesses have large operational footprints. Billions have been invested in systems, procedures, and people. Once the market opportunity is understood, and the strategy deployed, quick servese are positioned to win big using their size and scale.
As a whole, the restaurant community is beginning to understand how and why the layering of catering and off-premise opportunities can alter their unit economics by increasing their revenue stream. As a quick-serve operator, focus on filling consumer demand for catering and experience a serious lift in sales.
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