Once upon a time, a long time ago, you thought your restaurant could make some extra money by starting up an on-premises catering side-business. The idea started up when you went to a country club or a hotel. You thought, “I could do this. I wouldn’t even have to pay for the extra overhead.” But then, when you tried it, you started losing money. And you kept losing money. Now you’re about ready to give up because you’re convinced that country clubs and hotels know some secret that you don’t. You know what? If those places had a secret in the first place, they certainly won’t anymore. This post talks about simple steps you can take to make your on-premises catering services challenge the country clubs and rake in the cash.
Step 1: Use a bulletproof contract
You know that your on-premises catering operation needs a contract. You know why you need that contract (because tricky jerks will try to slither out of their responsibility to pay you). If you’ve already been running a catering business, you’re nodding your head right now because you’ve dealt with those tricky jerks—and your reaction has got me scratching my head. If you already understand that catering contracts are made to hold slippery customers to their commitments, why haven’t you spent the time and money to make those contracts rock solid?
The first step to any good money-making venture, especially one that deals in perishable items, is to ensure that you get paid. No more excuses: hire a lawyer, a good one, and have him or her look over your catering contract this very week.
Step 2: Hold your guests to the guarantee
I can tell you something right now. If you’re wondering what a “guarantee” is, you’ve already lost a lot more money than you should have. A guarantee is a contractual arrangement between you and your customer, in which your customer agrees to pay you for a “guaranteed” minimum of guests—even if they don’t show.
Have you ever booked a large catering contract (or at least large for you), cooked all the food, scheduled extra staff… and then had almost no one show up to the event? If this has happened to you, breathe easy. You’re not alone. In fact, this happens all the time because catering clients tend to overestimate the amount of people who will show up to a their event… and hey, not everyone knows how to market a restaurant event like you do.
Avoid losing money on your future catered events—have every client guarantee that a specific and exact number of people will show up to their event. To align your guarantee with those of your competitors, you should agree to cook up to five percent more food than the guaranteed amount of guests can consume, and then charge a dollar amount for each extra person over the guarantee.
My last piece of advice with the guarantee? Don’t let your clients bully you out of it. If their total attendance is five fewer people than their anticipated (guaranteed) number, they will try to convince you that their forecast was “close enough” and that they should only have to pay for the people who showed up. Even though sticking to your guns can be stressful, remember that you aren’t asking them to do anything they hadn’t already agreed to do before.
Step 3: Require a deposit
Oh, by the way, get a deposit upfront for a percentage of that guarantee. Really. Don’t say I didn’t warn you.
Step 4: Negotiate fearlessly
If all this advice about using bulletproof contracts, requiring your guests to guarantee their event attendance, and securing a deposit upfront is terrifying, just relax. Remember, an on-premises catering business is an add-on business (read: extra moneymaker) to your restaurant. If a client begins to balk at the contract you’ve set up, you know you don’t want them to be your customer anyhow. Since the worst case scenario to a failed contract negotiation is that you have an extra room available in your dining room for your restaurant guests, you can fearlessly hold fast to your contract requirements and wait for the right client.
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