In recent years, off-premise catering represented a rare bright spot for the ultracompetitive, tight-margin world of restaurants, thanks to sustained economic growth and home and workplace cultures that favor more—and ever-faster—on-demand dining.
The market reached an impressive $64 billion in 2019, up from $58 billion just two years earlier, according to research firm Technomic. Operators willing to invest the time and resources to treat it like the totally different animal it is have enjoyed stronger growth than the broader restaurant industry.
“For restaurant operators, there are many, many benefits, including additional revenue streams and the ability to maximize their physical footprints,” says Melissa Wilson, principal at Technomic.
Then along came the coronavirus and a subsequent cascade of dine-in bans that all but decimated the restaurant industry, forcing mass closures and millions of layoffs. Some eateries pivoted to survive—building carryout and delivery infrastructure out of thin air, offering pared-down to-go menus and heat-and-serve meal kits, and even hawking groceries and wine.
Against this grim backdrop, some two-thirds of operators suspended their catering programs, according to Technomic’s COVID Foodservice Impact Monitor for the week ending April 10. A third of operators still offered catering and, notably, about half of midscale chains.
COVID-19 could change the balance
To make some sense of the chaos, Wilson has been revisiting data from the 2008 recession, and sees pockets of social and business-to-business opportunity amid a bevy of unknowns.
Encouragingly, as of late April, 37% of operators were targeting new catering business, even if it looked a bit different. Forty percent were promoting their catering menus as family meals, smartly leaning into existing packaging and food offerings. Additionally, 27% had expanded their catering menus to include grocery items.
Though it accounts for a smaller slice of the market, business-to-business catering growth has consistently outpaced that of social (B2C) for the past few years on the back of a strong economy. But as restaurants edge toward reopening in various capacities amid a likely prolonged recession and to a wary public awaiting a vaccine, Wilson expects the scales to tip in favor of social catering.
“During and after the last recession people were entertaining at home more and dialing back on in-restaurant business,” Wilson says. “I do think that will play out this time. As restaurants start to open, it’s going to be phased and not super pleasant at first, with temperature checks and plexiglass barriers and limits on group sizes. But people are craving social connection. From a budgetary standpoint, so many people will be personally impacted or have friends who’ve lost their jobs, so we’ll see more people doing potlucks or socializing at home. ”
“One of the keys will be watching how long it will take to restore the type of face-to-face meetings that used to drive business catering.” —Melissa Wilson, Technomic
Amid the public health crisis, many B2B opportunities arising due to COVID-19 unsurprisingly have a charitable bent. Eateries are churning out at-cost meals to supply hospital workers and food-insecure residents in their communities. Nonprofit efforts are ramping up, such as chef Edward Lee’s The Lee Initiative to feed furloughed hospitality workers and Feed the Front Lines, which funds catered meals delivered by local restaurants to healthcare professionals and first responders and encourages consumers to donate. And so far, consumers have been supportive—over half (56%) surveyed by Technomic said they were interested in donating meals to frontline workers as a thank you.
Essential businesses likewise need affordable, hearty meal options to feed stretched-thin employees. Many warehouse distribution centers and supermarkets, for instance, have shut down their own catering programs and reallocated staff to keep shelves stocked. In late March, Kroger’s Columbus, Ohio, division placed a $50,000 catering order of more than 4,000 Donatos pizzas to feed its employees, the largest single pizza order in Donatos’ history.
The still-strong construction industry is seeking more breakfast options for busy first-shift workers. IHOP, for one, planned to aggressively target catered breakfast as a source of incremental sales this year, Dine Brands CEO Steve Joyce said in a February earnings call.
The biggest question mark remains the once-booming corporate catering realm, as sprawling open-plan offices, boardrooms and shared workspaces sit empty while most employees who are able to work from home.
“One of the keys will be watching how long it will take to restore the type of face-to-face meetings that used to drive business catering,” Wilson says, noting that many offices plan to shrink meeting room capacity for the time being.
In such a context, the anecdotes cited below now register as distant memories—of families, friends and tight-knit office teams congregating over buffet-style lunch or dinner. But the underlying tenets of investing in staff and resources to build a successful catering program remain unchanged. Indeed, reexamining 2008 ultimately left Wilson optimistic. “As we know, catering came back strong.”
Not for the faint of heart
St. Louis-based Panera Bread is a catering leader to the tune of almost half a billion in annual sales, and growing at a clip that mirrors the broader catering market. Before COVID-19, most of its business was breakfast and lunch, and slightly favored B2B.
“This business is not for the faint of heart,” says Chris Correnti, Panera’s senior vice president of catering and delivery channels. “If you are late, if the quality of food is not good or if there is an expectation not met, you didn’t just disappoint one person, you disappointed a whole group. Internally, if catering is not structured correctly, it can disrupt an important part of your day.”
The chain bases catering on four customer needs: quality, reliability, ease and accuracy. Does the product mix include high-quality ingredients and satisfy multiple dietary and lifestyle preferences? Does it travel and hold temperature well? If an order is scheduled to arrive Thursday at noon, are there sufficient delivery drivers to accommodate that during the lunch rush? (“Forget about late—you can’t be too early either,” Correnti warns.) Lastly, do customers have the ability to easily track orders from origin to delivery?
Panera has invested heavily in everything from technology to infrastructure—building unique catering menus that satisfy a range of diets, creating an end-to-end e-commerce platform that’s integrated with Panera’s loyalty program and building a dedicated sales team of more than 100 employees who regularly interact with customers, plus a fleet of drivers to accommodate growing off-premise demand.
Arguably, the biggest payoff has come from building out digital ordering. Not only do the majority of catering orders come through Panera’s e-commerce platform—many of them same-day—but “it has become the way we drive business today,” Correnti says. The platform allows customers to see the assortment, nutrition info and price with the ability to customize, and also features end-to-end tracking that brings peace of mind to the end user, which is key to driving repeat business.
Adapting the FedEx model
New York City-based Dos Toros Taqueria got into catering like a lot of restaurants: by cobbling together bulk-order requests from customers—which co-founder Oliver Kremer would then deliver himself on a branded tricycle. The 24-unit chain’s catering segment, which specializes in dropoff corporate lunches, has grown steadily every year and now accounts for 10% of overall sales, or more than $5.5 million in 2019, up from $900,000 in 2014.
In 2015, the brand tapped 20-year industry veteran Dana Vandagriff as director of catering to restructure its catering arm, starting by shifting to what she calls “the FedEx model.” Everything flows into and out of a single headquarters that houses logistics, sales and marketing—which all work closely together.
“With catering, you have to have buy-in from the top for it to work and be a priority,” Vandagriff says. “I would also say that the relationship I have with catering headquarters is huge.”
Orders originate with a dedicated online ordering form where customers give their name, the date and location of the event and the number of people. When they click the payment link, the order shows up on Dos Toros’ cloud-based platform developed with Salesforce, which features a customer relationship management tool. Catering leads and captains create schedules and prep sheets to send to restaurants, whose only responsibility is food prep.
Dos Toros accommodates orders until 3 p.m. the day before (and occasionally day of), allowing the kitchen to portion more shelf-stable sauces the night before and prep meats and guacamole the day of. Because catered items are the same as what’s served on the line, portions can be measured by weight, which helps runners check for accuracy before delivery.
“You become a destination when people want your product because of the health and wellness associated with it. People don’t want to have that feeling of regretting what they ate, especially at work.” —Chris Correnti, Panera Bread
What’s made the brand most successful—it counts streaming network Disney Plus and the production teams of popular TV shows including “Saturday Night Live” and “Last Week Tonight” among regular clients—is customizability. A catering spread is made up of 20 ingredients laid out assembly line-style, in the same intentional order of the restaurants. Special-diet options abound: lettuce and tortilla bases, slow-simmered beans and Impossible ground beef are offered. Cheeses follow hot ingredients in the line to make sure they melt.
“There’s something about building your own bowl and having control, which you don’t always have much of when you get a free corporate lunch,” Vandagriff says.
Correnti echoes the importance of customization, adding that an abundance of better-for-you choices in particular makes brands a popular repeat option. “You become a destination when people want your product because of the health and wellness associated with it. People don’t want to have that feeling of regretting what they ate, especially at work.”
Get it here faster
One of the most powerful effects of living in the Amazon Prime era is that consumers don’t just want everything delivered—they also want it now. A qualitative survey by Technomic found that more than 20% of business catering decision makers have less than four hours’ notice of when they need food for a group or event.
Given the inherently short lead times of its products and investment in catering staff and infrastructure, Panera offers turnaround in as little as two hours. Brazilian steakhouse chain Fogo de Chao similarly leaned on its existing model when it launched dedicated catering delivery last spring—now available at 42 locations. It fulfills catering orders with as little as two to three hours’ notice.
“With our unique model, we’re constantly fire-roasting cuts of meat,” says CEO Barry McGowan. “This allows us to immediately carve, package and deliver orders in swift fashion so it can be seamlessly placed into our operations without additional line headcount.”
The company controls the entire delivery process from start to finish, including having a Fogo de Chao employee deliver to food to best replicate the experience beyond the walls of the restaurant.
Getting the word out
Yet for small, less formal orders of 10 sandwiches or salads in 45 minutes, businesses may turn to a third-party provider such as Grubhub or Caviar. Grubhub’s New York-based delivery arm Seamless has offered corporate catering since it launched two decades ago, through a dedicated platform for managers, administrative staff and employees to order catering for pickup and delivery. More recently, the company expanded into social catering to meet growing demand, using the same negotiable fee structure.
It’s hard to argue with the potential reach of a platform of 24 million diners nationwide.
“Online marketplaces expand the market for catering restaurants by reaching consumers that wouldn’t come across the restaurant’s catering capabilities organically,” says Brian Madigan, Grubhub’s vice president of enterprise clients. “If a company offers a service and isn’t easily found online, or isn’t online at all, they risk losing out on the demand from consumers online, and people may choose to go with another restaurant with an online presence.”
To that end, Dos Toros relies on its own resources—and not just by putting promotional catering materials on every napkin dispenser in stores. The catering team meets with marketing and sales every other week to discuss potential activations and other creative ways to get the word out.
That includes making a big marketing push around relevant holidays such as Employee Appreciation Day, which the sales team uses to boost corporate catering sales. It means going after high-profile events, such as last year’s NBA Slam Pre-Draft, at which the brand fed 10 of the league’s top 30 draft picks, resulting in a massive boost on social media. It means getting all three departments together to create a scripted commercial that amassed 10,000 views across its social channels—then doubling down via monthly “office hero” catering giveaways to the office team with the most unique responses.
“Without catering, we wouldn’t have a way to put our product in front of people in a lot of situations,” says marketing director Marcus Byrd. “It’s the biggest way to extend our brand beyond our four walls.”
UPDATE: This story has been updated to reflect the number of Fogo de Chao locations offering catering delivery.