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Knowledge Pantry

April 8, 2013

Guest Post – The Profitability of Catering vs. Restaurants

The love of food is absolutely necessary for someone working in the food industry. You must love designing it on paper, preparing it in the kitchen, and serving it on the table. If that’s you, then I’d like to share a little information about the profitability of the two most common routes you can take, starting a catering service or opening a restaurant. As someone who has been involved with both I can honestly say these two routes are incredibly diverse, and the only commonality between the people who do them is their love of food.

Food Selection

When it comes to selecting food the advantage almost always lies with the caterer. This is because caterers work on a tight schedule and know exactly when and where their food will be prepared and served. As a result they’re able to choose ingredients that are fresher, require less refrigeration, and generally taste better. The food they purchase is often served immediately and has fewer preservatives. Unlike a restaurateur, a caterer has little need for a large stockpile of food because they know how many people to plan for every time they work an event.

Food Production

Unlike most restaurants that produce food on a per plate basis, caterers are able to make large batches of food all at once. This not only reduces the per-plate cost of the food but it also reduces the need for a large kitchen staff. One obstacle that restaurant chefs or managers face is that they never quite know exactly how many people to plan for. This means they must have enough food on hand to feed everyone who places an order for a specific dish. Since this variable is constantly changing on a nightly basis it can cause a restaurant to incur a greater per-plate cost due to the extra attention and food supplies needed.

Equipment

Purchasing and maintaining equipment is a large expense of doing business in the food industry. In order to produce food on the large scale needed businesses must invest in the specialized equipment that can quickly process large amounts of food. Although both the caterer and restaurant need equipment, their needs vary drastically. For instance, the average catering service will generally only cater a couple of events per week. They will know exactly when and where their events are, and how many people will be in attendance. Since they will produce all the food at once they will only need access to a commercial kitchen for a short amount of time. This means that unlike a restaurant which needs their own dedicated kitchen and dining space, a caterer is able to rent time at a commercial kitchen. Additionally they will be in a position to save money on energy costs associated with heating and cooking food because they will not need to keep the equipment running all day long.

Staff

The staff requirements for a catering service and a restaurant differ greatly. A typical restaurant needs a host, multiple servers, cooks, and a manager in order to run smoothly. The very random nature of a restaurant means that you’re never quite sure exactly how many people will walk through the door, and in a world where online reviews and public perception can literally make or break your business, it’s better to be overstaffed than under deliver. Because of this the expense to a restaurant is greater than the catering service. Since a caterer always knows how many people they’ll serve, they’re able to plan in advance and only have the required number of staff members on hand. This gives them another advantage over restaurants.

Final Thoughts

Although restaurants and catering services don’t typically compete for the same customer base, one thing is clear; it can take more money to run a restaurant. Extra expenses like preserving food longer, offering a broader menu, kitchen energy consumption, equipment wear and tear, and staff pay all take a greater toll on a restaurant’s bottom line than they do on a caterer’s. Add on top of that the extra headache and long hours restaurant owners undertake and you’ll soon find that the running a restaurant is a huge expense both financially and physically.

Trisha Jefford, is a self-proclaimed foodie and wine enthusiast who loves scouring the net for new ideas and trends in food creation and presentation.

Small Food Buiness welcomes Guest Posts that are relevant to the specialty food business industry.  To inquire about submitting a Guest Post please email info (at) smallfoodbiz (dot) com.

2 comments on “Guest Post – The Profitability of Catering vs. Restaurants

  • Paul Britton on said:

    Really great article. It made me think about the other side of the coin too: advantages of restaurants that could affect profitability. One qualitative advantage that restaurant owners have is the supreme ability to control the physical atmosphere of the product they are providing. Food service (especially at the higher ends) is an experience driven industry. Often times food service owners want the strictest personal control of the experience they are giving consumers because they want it to 1) reflect the unique personality they envision and 2) wholly reflect the deeply developed and consistent brand they are trying to market. Added control that results in a superior experience will require higher operating costs but could also alter profits in the long run.

    I’m interested (if Ms. Jefford writes future posts) to hear about some of the strategies that caterers employ when they are hired for an event at an unattractive location.

    Thanks for an insightful article!