Contract Opportunities for Independent Caterers
Just as nearly every business requires catering services at some point, most government entities have catering needs as well. These opportunities range from single catered events, to short term meal service arrangements, to catering or concession contracts that can last for years.
Even in difficult economic times, these public sector contracts continue to be available. In some areas they are actually increasing in both size and availability.
Many government contracts are targeted at small businesses through set asides. For example, for all goods and services purchases costing between $3,000 and $100,000, the federal government is specifically required to use small business vendors. The only exception is when no two qualifying small businesses can compete under the terms of the contract. In the catering sector, a small business is defined as a company with less than $7M in gross revenue.
The federal government is not the only source of these contracts. State and local governments, as well as quasi-governmental entities such as port and highway authorities, medical and educational institutions also purchase catering services.
Some caterers have been so successful with these contracts that they have given up their regular party or delivery catering businesses to focus on them exclusively. However, most caterers see these opportunities as supplementary to their core business rather than replacing it.
Most government contracts are awarded through a competitive bidding process. These bids, known as RFP’s (request for proposals) are almost all available on line. This has been a great leveler, enabling small independent caterers to have access to the same opportunities as large multinational companies.
It is important to note when considering these opportunities that most catering contracts are rarely as profitable as full service catering – though there are some exceptions to this rule. While each contract sector has its own competitive environment, most long term contracts are typically likely to generate net pretax profits much closer to the 5 – 6% average for the foodservice industry, as opposed to the 10% that many caterers are able to achieve.
The financial arrangements for these contracts vary widely. Some long term venue contracts require payment of rent or commissions, while others do not. Some are entrepreneurial in nature, while others may be subsidized.
For caterers interested in contract opportunities, there are several actions to be taken to improve the odds of securing a contract. As is the case when developing new business opportunities, the first successful bid is likely the most difficult to secure. Therefore, any effort to break into this market will be most effective if it is focused on achieving a first contract of moderate scale, proportional to the size of the company.
Certified Catering Consultants provides advisory and implementation services for caterers interested in the government contract business.