Pricing and Maximizing Profit in the Catering Space

Developing pricing for your product and services in such a way that it generates sustainable profit is a multi-layered process for industry professionals in the catering world. We have to think about labor that goes into crafting menus and dishes, the quality of ingredients, and market trends that dictate our offerings. So, how can we elevate profits to ensure that we’re getting the best ROI possible?

Consider markups

It’s no secret from market to market that business owners generally pay wholesale prices and then mark up their prices according to the value of the final product. However, there are correct and incorrect ways to do so when it comes to determining what will produce the largest profit. For example, if you go to a store and see that they’re selling a plain t-shirt for $15, but you know that wholesale prices (or even production costs to physically make the t-shirt) are as low as $1 for the same shirt, you might feel a little cheated out of the price.

Think about supply and demand, and even marketplace value as it relates to your product. Sure, you may have hand-picked your produce and ingredients for free or dirt-cheap (pun intended), but the popularity of your meals, the labor needed, and quality of service allows you to mark up the price to balance out the costs. Just be mindful that when doing so, you should make your prices sustainable and avoid taking advantage of customers that are willing to pay at higher markups. Otherwise, the higher the markup, the less you’ll likely sell, and the more you’ll be at risk of operating at a loss.

Make sure everyone is on board

Something you may not think of that can affect your profit is simple miscommunication between your employees. The sales team doesn’t necessarily know the time, effort, and costs that go into preparing the food that they are required to sell, so integrate some one-on-one time between them and the culinary team when possible.  

Doing so allows the sales people to see the reasoning behind pricing, and they’ll likely be more steadfast when questioned by clients. They’ll be able to answer from a behind-the-scenes perspective, and clients will respect the amount of work that produces the product and services that they are after for their event. Being uneducated and alienated from the backbone that is the culinary team can easily translate to a client and you could lose the sale.

Look at your ‘evergreen’ food staples

There are different areas that we all specialize in, but we each have our specific items that never go out of style. Lately, we’ve especially noticed a spike in locally-grown and/or organic products that our clients request. Because we want to cater to their wants (another pun), it can seem like an easy choice to purchase products like organic salad dressings to keep that business coming in.

But when you look at the content of your dishes, the focal point isn’t necessarily on the condiments or even the garnishes – it’s generally regarding the integrity of the entrée, like whether or not the beef is grass-fed. So, the effort you put into an expensive syrup, honey, salad dressing or otherwise is probably being overlooked, and you really aren’t taking away from the client experience by substituting a cheaper alternative. Think about what the star of the dish is, and prioritize from there. Doing so over a business year or even a quarter can accumulate real savings and thus – more money in your pocket.

Sometimes the answer to a larger profit isn’t simply raising prices. So many more factors come into play, and raising prices isn’t sustainable in the long run. Think about realistic changes you can make, and be sure that those are in line with the ethics in which you run your business! 

Clint Elkins is the VP of Sales of SB Value, a group purchasing program designed toreduce catering, kitchen and food-service costs by leveraging the collective buying power of thousands of companies.