There’s no denying that it’s a rough time for restaurant operators. Competition is fierce, labor and rent are increasingly costly, delivery is taking a bite out of profits and new technologies are forcing operators to spend on smarter equipment and upgrades. To make up for some of those lost dollars and maintain revenue flow, more and more brands are ramping up their catering efforts.
“It can add significant revenue to a brand that embarks on doing it right,” says Melissa Wilson, principal for research firm Technomic. “It’s hot, hot, hot.”
The numbers prove it. The overall catering market reached upwards of $58 billion in 2017, from a strong $37 billion in 2011. The total foodservice industry brought in $537.2 billion last year, according to Technomic, meaning that catering accounted for 11% of the market. And the dollars from catering continue to increase, with Technomic forecasting a 5.6% compound annual growth rate through 2019.
“It is a really solid opportunity for operators,” Wilson says, but catering is not without its challenges. Operators need to learn and understand the space, as well as the need states of the decision-makers looking for catering options, she says.
A big part of that, she says, is understanding the two different parts of the market: catering to individual consumers and catering to businesses. Catering to consumers (also called B2C or social catering) makes up 63% of the total catering market, according to Technomic. B2B catering, serving institutions, accounts for the other 37%. While both are expected to show continued growth, the B2B arena is expected to progress slightly more each year. “Certain brands’ catering offerings are appropriate for a wide variety of social and office occasions, but others are more specialized,” Wilson says. She encourages operators to understand and identify which customer occasion is best suited for their brand.
Percentage of dollars spent in off-premise catering, by segment
Whether the customer is a party host, pharmaceutical representative or office manager, food taste and quality are a top priority.Other top concerns are order accuracy, ease of ordering, availability of delivery and price, finds Technomic.
Customers—especially in the B2B world—have to comply with a budget, which is frequently broken down per person, often in the $9 to $11 range, says Bruce Schroder, president of Moe’s Southwest Grill. As a percent of total sales, Moe’s catering revenue is in the double digits, and those sales have grown in the double digits for at least three years, Schroder says. He adds that in his experience, certain industries, such as financial services or law, have larger budgets and provide food for their teams more regularly than, for example, the auto industry. “You have to balance the high-check opportunities,” Schroder says.
Because of customer budgets, Moe’s has explored ways to upsell without pushing the final check over the limit. This summer, for example, the chain offered a package of seasonal salsas and quesos for an upcharge, which appeals to both the business and social catering customers—of which Moe’s sees about a 50/50 split. Desserts, too, have been a way to drive incremental sales, especially over the holidays, Schroder says.
No matter the cost, the decision-makers want flexible lead times, especially in the business space. While the person placing the order may know an event will take place, Technomic finds that many prefer to order the same day to fine-tune the headcount. If a restaurant requires a lead of more than 24 hours, it could limit its
number of customers, Technomic says. It’s why Jason’s Deli prides itself on “owning the same-day needs,” says Gracie Prasanson, the chain’s director of sales. Jason’s Deli—which does more than 20% of its business via catering—needs just 90 minutes for a group order of any size, she says: “We’ve produced lunch for hundreds of people within a 60-minute window.”
Jason’s Deli is able to execute on that promise due to its setup. “We start our days very early,” Prasanson says. Its secret, she says, is to have all catering orders executed—both produced and staged—prior to the store opening its front door. The chain also has a dedicated in-store team for catering and takeout. “Our delis are built for two different channels: the dine-in stream and the off-site stream,” she says. That way, a large last-minute catering order won’t cause a bottleneck.
“The big failures in catering are when people forget about the fundamentals. You have to show up on time, take care of the guest, and if anything is not right, you need to take care of it, because this is a high-touch business.” —Bruce Schroder, Moe’s Southwest Grill
As the catering business gets more competitive, a dedicated and disciplined approach is needed. Red Robin is working on a systemwide catering plan, currently in pilot. The chain hired a catering-focused sales team that came in with contact lists, says Jason Rusk, VP of business innovation. In addition to tapping existing contacts, Red Robin is trying to build word of mouth among its vendor partners, offering free burger bars in exchange for networking. Catering is key, he says, especially to the success of the chain’s first delivery-only unit in Chicago, which is a city it exited in 2016. The chain is betting on advance orders. “We can plan out our production for these large parties,” he says.
For operators to really grow their catering business, they need to devote time and resources to the operations, Wilson says. That includes dedicated catering managers and champions at headquarters, she says. Chick-fil-A, which is ramping up its catering efforts, has found that having a dedicated catering director on staff helps its catering operations run smoother, says McKenna Carter, consultant, beyond restaurants, for Chick-fil-A. “Capacity continues to be one of our biggest challenges,” she says. While it’s a good problem to have, she adds, it does add complexity to the operation. And it’s why Wilson suggests a dedicated approach. “Operators need to develop an entire system, from menu to ordering and confirmation systems to reassure the customer base.”
Consumers' top decision-makers when ordering catering for business
Jason’s Deli is using that approach. “If you’re going to do it, you have to have a strategy built around it,” Prasanson says. “You need marketing behind it, you have to have staff and supplies.” It’s easier to invest in supplies and put in effort upfront, versus learning as you go, she says. Jason’s Deli runs catering from its individual units. All orders are called into the store, and the team there fields and executes them, allowing the individual operators to get to know their customers. “We have built a lot of relationships, credibility and practices that allow us to operate smoothly,” she says.
For Moe’s, its strategic marketing efforts include branding on all packaging as a way to step up merchandising efforts and emulate the in-restaurant experience outside its four walls as much as possible. Without knowing where a catering order will be set up—a kitchen, at a doctor’s office, on top of a file cabinet—it’s hard to deliver a brand, says Schroder. So everything from the chip bags and beverage bladders to tablecloths and utensil holders are branded. “We have Moe’s show up on-site,” he says.
Chick-fil-A, too, has set the goal to “deliver a Chick-fil-A experience where and when the guest wants it,” Carter says. But creating awareness of the availability of that experience is one of the chain’s biggest challenges—and a large part of its strategic plan. “Once customers try our catering, we have a high return rate, so a big focus for our 2018-2019 marketing and communications efforts will focus on getting the word out about our catering,” she says.
Delivery has also continued to change the game. Gene Lee, CEO of Olive Garden parent Darden Restaurants, has been openly critical of delivery over the in-store, service-driven experience—but catering is a different story. “We are still very attracted to the large-party delivery catering in Olive Garden, where our average order is $300,” he said in December during a corporate earnings call. “That makes a lot more sense for us to market and pursue than running around delivering $10 entrees at this point in time.”
That last-mile delivery is an important part of the experience for Moe’s team. While the chain uses third-party delivery vendors for its traditional delivery, it handles its catering orders in-house. Each restaurant has to have a catering vehicle, Schroder says. “It has to be wrapped; it’s the best form of advertising,” he says of the branded cars or trucks.
“The number of companies, beyond the Silicon Valley set, bringing in complimentary meals and snacks at least on occasion is rising. Forty-one percent of companies are doing so.” ---Melissa Wilson, Technomic
Jason’s Deli also handles its delivery in-house. “We’re not contracting with third-party services, so we’re still giving that Jason’s Deli service,” says Prasanson. Keeping drivers on staff, though, has been one of the main challenges for the brand. “With third-party, it’s taken the driver pool and spread them thin,” she says. “We need to be competitive in what we’re offering to stay staffed with drivers.”
One of the big challenges in catering is beverage sales, Schroder says. Moe’s initially offered just lemonade and tea. “You have to stick to noncarbonated drinks, unless you sell 2-liters, which some of our franchisees do,” he says. That challenge led to the development of the Moe-Rita: a proprietary drink created in partnership with Coca-Cola, which can be served nonalcoholic or mixed with tequila. “It’s helped amp up our beverage sales.”
Schroder points out two more areas of opportunity: breakfast and snacks. A few Moe’s franchisees are dabbling in breakfast, especially as its breakfast bowls grow (see Page 28 for its latest breakfast bowl LTO). “And from a Focus Brands perspective, snacks are really interesting,” he
“Everyone in our business is making catering a priority in their daily operations—from creating new platforms to better engage with customers to reinventing how they cater. It’s a healthy competition for us.” —McKenna Carter, Chick-fil-A
adds. Focus Brands, Moe’s parent company, also owns Carvel, Cinnabon and Auntie Anne’s, among other brands.
Prasanson suggests that operators do their homework before getting into or expanding catering. “It completely changes how you operate your business,” she says. After all, catering can be a critical marketing vehicle, says Schroder. “It allows us to reach nonusers,” he says. To capture those customers—especially those making the ordering decision—Wilson recommends marketing to encourage trial. She suggests operators bring in sample platters in midafternoon to get buy-in from office managers, for example, or reach out to medical office managers, who often influence the decision of pharma reps. “It’s also a lot easier to find and approach an office manager than a rep,” she says. Even if these workers have experienced a restaurant brand for lunch, they need to see how food is presented for catering. That’s key in getting buy-in and trial, she says.