I’ve spoken before about the restaurateur’s mentality:
“I can’t have too many customers; I need a line out to the street; the more the better–the busier the better; I don’t care if they are parties of 30 or single diners; I’ll take whatever comes in.”
This thought process, however, can be counter-productive to the financial health of your catering business. I remember attending Catersource seminars and conferences and when a caterer mentioned a 500 person party the crowd sighed longingly as they knew the large event’s monetary value. But sometimes we unwittingly hand these events over to someone else, and I’ll tell you how that happens.
The Nice Guy
It’s Monday in January and nothing is going on. Someone calls and says,
“I need to feed 50 people on Wednesday. Can you do this?”
You reply, “Sure, what do you need?”
“Well I need a light lunch but I have a problem.”
“I have a limited budget of $300”
You look at Wednesday and see there are only four orders booked. You know you can put a sandwich platter lunch together that might cost you $100.00. If you delivered it yourself you wouldn’t have to pay a driver. You remember when a consultant told you that “you put money in the bank—not percentages,” and you say, “sure, we can do this.”
What Happened Next
The customer really liked the order and set up a weekly lunch. You had already locked in the discounted, less-profitable price, so using your creative menu skills, you were able to provide a nice, varied and of course “cheap” weekly meal.
The Big Event
Some months later you found out that your customer’s company was hosting a 500 person holiday party. To your dismay, ABC Catering was doing it—not you. When you asked your cheap lunch customer why she hadn’t asked you to cater the big event she said, “Wow, I’m really sorry. It looked like you were such an expert at my smaller lunches that I thought that was your specialty. I didn’t even know you did large and more expensive events. I can let the committee know and maybe we will consider you in the future.”
What You Did
By undercutting yourself on the 50-person lunch, you branded yourself as a small caterer who accepted, even welcomed inexpensive orders. This happened to me many times as I would take orders for the desperate drug rep who would need three box lunches. By the way, I once asked Mike Roman what I should do about these three box lunch requests and he said say this:
“Mrs. Smith, I realize that you are in a bind and need three box lunches today. We both know that this does not meet our minimum order guidelines, and to tell you the truth, to set you up as a customer and initiate the billing process for three lunches is going to cost me a lot of money, so you can just have them for free.”
Right, this might be a little over the top, but you get the idea. If you are giving stuff away, make sure your customer knows you are doing it. The 50 person discounted lunch lady should have been told that you were doing her a favor. Obviously, at that time you also should have mentioned that you did larger events, but you were always willing to help with smaller ones if you could.
Do be careful, because the more you cut your pricing, the more requests you will get to do so, and the prime events will go to the branded big event caterer. Yes, there are times, especially when you are bidding big job against t other caterers when you might take the size of the order into consideration when pricing it – but honor and stand behind your product.
Did this ever happen to you? Have questions? Feel free to contact us at any time, and have a great July 4th catering weekend!