Opportunity knocks

The combined total catering and banquet market is measured using a number of different yardsticks, but most arrive at approximately the same conclusion: this revenue pool represents approximately 6% to 8% of overall foodservice revenue in North America. This includes most types of catering: retail catering, hotel banquets, 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 size of the foodservice in the US as of 2015 is slightly over $700B, even at 6% to 8% this is a substantial revenue pool (between $42 and $56 billion annually). And catering can, if managed effectively, be as profitable or more than restaurant operations. The industry standard for catering profitability approaches 10% net EBITDA; though certain types of caterers can capture even higher bottom line income.

Adding catering to the menu

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. The most successful restaurant-to-catering crossovers have been undertaken by the restaurateurs who understand the catering and banquet business the most intimately, either through in house development or by taking advantage of outside expertise. A la carte restaurant operations and catering have many similarities as hospitality entities, but the skill sets required for each diverge in many areas. One of the biggest risk factors is that some restaurateurs assume that the systems, products, and personnel that have made them successful in the a la carte restaurant business will work in catering as well, while this is provably not the case.

Some other areas to consider when making the decision to enter the highly competitive catering field:

Knowing 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 catering, even though this is one of the largest catering segments.

Having the expertise necessary to execute the culinary challenge. It’s important to note that in off-premise catering particularly, the full service caterers’ kitchen personnel 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 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 without banquets or private dining will be at a disadvantage in this area, and may be required to use less skilled contract agency staff.

Finding an opportunity to leverage restaurant accomplishment 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.

Knowing which catering opportunities to avoid. Over the last several decades a number of large scale foodservice operators have entered the catering market, and then given up within a few years. High profile restaurateur catering successes have been balanced by those who have not done as well, mostly as a result of lack of understanding of the catering market.

Overall, while the restaurant industry is much larger than the catering sector, the catering opportunity for restaurateurs is an important one offering a substantial profit opportunity.