Catering can be a lucrative business for restaurants. It helps you reach new customers and supplement dining room sales. But it does introduce new factors to your business that, left unchecked, could become a drag on resources. That said, if you manage these factors carefully, your catering business could help your restaurant thrive.
It can be tempting for a restaurant to build an expansive menu showcasing each and every one of its culinary delights. A better approach is to thoughtfully consider a catering menu through the lens of protecting profit margins.
Speaking of profit margin, let’s take a moment to review:
(Revenue–Cost of Goods)÷Revenue=Margin
So if you sell a $12 meatball sandwich that costs $3 to make, your profit is $9, and your profit margin is 75 percent.
Sure, some menu items will have lower profit margins than others, and that’s okay. Have a signature dish that keeps people coming back, or one you simply enjoy cooking? Even if it costs more to produce, it deserves a spot on your menu—as long as you’re not losing money every time you make it.
It all comes down to finding the right balance of dishes that create loyal customers and drive profits, and you can start by looking at each individual component of your catering business. Here are four steps you can take to break down these components and ensure that catering is a reliable contributor to your bottom line.
Be Conscious of Packaging Costs
The cost of packaging is a sometimes forgotten part of a menu item’s total cost. Be sure you’ve included it, and then work to shrink it. Here’s a tip: combine similar items into a single package instead of wrapping them individually.
Firehouse Subs takes this approach. Their platters of cut sandwiches reduce packaging costs and look great to customers. Like so many things, balance is key. Some shortcuts like using flimsy packaging or packing dishes together too tightly can backfire. They make serving difficult and can make customers question the level of quality you provide. When cutting costs, be mindful of your reputation and customer retention.
Put a New Spin on Drinks & Desserts
Cookies, brownies, lemonade, iced tea—these and other low-cost desserts and drinks can be great for a restaurant’s bottom line. They aren’t difficult, can be prepared in bulk ahead of time, and don’t need any special packaging.
To pique interest in your drinks and sweets, try incorporating unique flavors that tie in with menu themes or the time of the year. Just look at the pumpkin spice phenomenon. Seasonal flavors add fun and variety, and they don’t cost much.
Make What You Already Have Work Harder
Increasing your catering profits doesn’t mean you have to completely reinvent anything. Really, all you have to do is examine what’s already working on your current menu and make strategic tweaks from there.
Let’s say a restaurant’s two best-selling sandwiches are steak and grilled chicken, but the grilled chicken is more profitable. What can the restaurant do?
Try improving the appeal of the grilled chicken sandwich with simple, low-cost upgrades. It could be as simple as adding some enticing toppings like bacon or avocado. You can also try the seasonal angle here too. Create a special limited-time version that incorporates seasonal flavors and ingredients. Small changes can make the grilled chicken sandwich more distinctive. This distinction helps customers gravitate toward the higher-margin sandwich.
Lower Your Labor Expenses
One of the easiest ways to increase the profitability of your catering business is to lower labor costs. That means cutting prep time.
This can be as easy as buying pre-prepared ingredients when it’s possible to use them without affecting the quality of a dish.
Another approach is taking an in-depth look at your food preparation from beginning to end. You might discover more efficient processes that let you spend less time on food prep. Efficiency and profitability go hand in hand.
Catering that’s done well can be a great revenue stream for restaurants. And it doesn’t have to be challenging. Restaurants that are willing to stay on track and get a little creative with their offerings are in a good position to succeed.
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