Catering – An Opportunity for Restaurateurs

The catering/banquet market is measured using a number of different yardsticks, but most arrive at approximately the same conclusion – the catering revenue pool represents approximately 6% to 8% of overall foodservice revenue in the US. This includes most types of catering including retail, hotel, restaurant private dining, off premise and on premise. It also includes certain areas of non-commercial contract foodservice where food is provided on a per event basis.

Since the total revenue for foodservice in the US as of 2017 was just short of $800B, even 6% – 8% is a substantial revenue pool. And catering can, if managed effectively, be as profitable or more than restaurant operations. The industry standard for catering profitability approaches 8 – 9% net EBITDA, though certain types of caterers can capture even higher net income.

Searching for the pot of gold at the end of this particular rainbow, many restaurateurs have made the decision over the last several years to enter the catering arena. These include restaurants in the quick serve and fast casual sectors, as well as more upscale restaurants.

The most successful restaurants to catering crossovers have been undertaken by the restaurateurs who understand the catering/banquet business the most. This is typically either through in-house development of catering or through taking advantage of outside expertise.

Among the key factors for success is matching your existing restaurant products with the appropriate market opportunity:

  • Understanding your place in the catering bazaar – a mid priced family style restaurant or restaurant group would be unlikely to be able to make much of a dent in the upscale catering market. By the same token, a prime steakhouse operator would not want to spend the effort and resources pursuing retail or delivery catering, even if this were one of the largest catering segments.
  • Having the expertise necessary to execute the culinary challenge – it’s important to remember that in off-premise catering particularly, the full service caterers’ kitchen staff are always playing an away game. The best restaurant-line chef in the world may be lost when working in a field kitchen, sometimes literally out in the middle a field.
  • Understanding the difference between a la carte and banquet front of house service – restaurateurs with existing private dining business go into full service catering with a built in advantage, having maître d’s and wait staff who understand banquet service. Many restaurants with a la carte business only will be at a disadvantage in this area, and may be required to use contract agency staff.
  • Finding an opportunity to leverage restaurant success into a catering opportunity – there are a number of examples of successful restaurateurs taking on restaurant projects that also bring catering opportunities – such as museums or performing arts venues that have a need for restaurant or café operators and are willing to trade catering exclusives for this amenity.
  • Understanding the state of the art in catering – this includes constant improvement and learning from the experts in the catering field.
  • Bringing in outside expertise when necessary and appropriate – virtually all large companies use consulting services for a variety of purposes. The goal when bringing in outside experts is to drive the learning curve for the catering venture down to the point where it is almost flat.
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