A few days ago I received a note from a desperate catering chef complaining that his boss expects to reap 50% profit from all catering sales. If I read the letter correctly this is including labor, liquor, rentals, and the whole shebang. The chef who wrote me said that it is impossible to meet the owner’s demands. All I can say is that based on the information at hand my chef friend is correct; his boss is off his rocker.
I will attempt to shed some light on the subject, but I have to say that catering is one end of the food industry where an ever changing list of variables based on each event, can serve to cloud the big picture. It is absolutely imperative to cost each event separately based on the criteria of the event itself.
Unlike a restaurant where the bottom line is relatively easy to keep track of providing of course that your customer base is consistent, catering is a whole other ball game. For all intents and purposes a caterer is asked to set up a restaurant in a person’s house or outside venue for one evening and often this is done several times a night when multiple events are scheduled.
Consequently having a solid handle on the logistics and costing required for each separate event are of key importance; even a small oversight can cost the caterer hundreds and maybe even thousands in lost revenue.
We all know what its like to have the dream customer who spares no expense to have a party catered, and we also know that these types of customer are rare indeed. For the most part clients expect the best of everything for half the price. For me there are some basic steps I take when bibbing on a party, which help to assure profitability. I also have to understand that some parties might make less money in the short run in exchange for future business down the line etc:
I could easily write a book on this subject, but I will attempt in this blog to touch on what I can.
- Rule number one in my book is to never give a quote over the phone. Often a customer will ask me to give them a ball park figure and I have learned to refuse to do that until I have been given the full picture of what a specific party will entail, up to and including a site inspection and a personal meeting with my prospective clients. Many times I have off handedly mentioned a ball park figure only to have that dollar amount treated as if it was carved in stone when it came time to present the proposal. Don’t sell yourself short. There are so many aspects to catering a party that can cost money from rentals, ice, flowers, extra labor etc;
- When it comes to costing a menu I come up with an estimate for each food item separately from Hors D Oeuvres to Entrees and Desserts and then add it all up on the bottom to come up with a rough dollar amount of food cost. Let’s say the cost of my menu is $15.00 per person. I will then triple that figure to $45.00 per person and then add an additional ten percent to cover contingencies for a total of $49.50. The problem is that a party for 400 guests at $49.50 can make you allot of money, where as that same menu for 60 guests can be a whole different ball game. Often I will have to raise my price significantly for smaller events, because realistically my labor and even food costs might not vary all that much.
- In addition I will break down all of my estimated labor costs, from the prep hours required to the hours of party time. Party time hours are billed separately to the client and are estimates only, if my staff ends up working more hours than planned at a particular event the client is billed for those services.
- I break down my equipment and rental needs. Often the rental requirements for any given event might equal or even exceed the food cost. Although rentals are usually billed to the client it is important to keep this in mind. Both clients and even caterers are often naïve to the fact that rentals are so expensive. If I have a strong working relationship with a particular rental company it is not uncommon to receive a percentage kick back based on sales of each party. This is the same for all other vendors as well and this can be a good source of revenue.
- I add an operations charge to my bill of 18% which is used to cover the use of my own equipment, overhead, fuel costs etc.
Long story short before I bid out a party I try to document every possible cost that might be incurred and put it down on paper. Some parties I can make a pretty penny on, but more often than not I am happy with a 15 to 20 percent net profit after all is said and done. This of course does not come close to the 50% your boss is expecting, so either he is a genius and I am a fool, or he is saving up money to hide in Mexico when the creditors come after him.