Pricing is one of the more challenging areas of running a business, as you must balance the market value of your offerings with the costs of operating. For catering and foodservice companies, such a calculation gets trickier as the cost of ingredients and other products are subject to change with the market.
Supply chain issues, shortages, and other external influences can increase the cost of doing business, which must factor into menu pricing accordingly.
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Yet, pricing increases aren’t always favorable for sales activities as it can cause more objections with prospective clients. It also may not provide additional profit if the increases are solely for breaking even with market costs.
If you’re looking to maintain (or boost) high profit margins without adjusting prices unfairly, follow these four strategies for smart selling and purchasing.
Don’t jump to a proposal.
A lot of sales advice tells you to have a proposal ready to go before a consultation so you can push for the close right away. However, the hospitality and catering industry rely on highly customized requests, so a standard proposal fails to meet most clients’ needs.
Before focusing on what you can offer, spend time listening and nurturing the relationship. Building rapport before making a hard sell establishes trust, winning over your client before you even start talking about numbers.
By the time you’re ready to close, your prospect will be warmed up and convinced of the value you can offer. Then, you can prepare a fully customized proposal that hits on everything they want and they’ll be eager to sign on the dotted line.
With upselling, you don’t have to change pricing to increase your value per customer. Instead, each client pays more for added value (keyword: value). Most people start the booking journey with little information of what they need or what’s even possible.
As a salesperson, you are also filling the role of an educator. It’s up to you to explain why a certain upgrade will add value to their event. For example, they may be quick to jump on the lowest bar package available. But if you sell them on the benefits of higher-quality liquor, more beer and wine selections, or additional staff, you could earn hundreds or thousands of extra revenue.
You could upsell upgraded tableware, linens, decor, or menu options that elevate the final result and increase profit margins—all for minimal added effort on your end.
Purchase in bulk.
Buying small amounts of many ingredients will rack up a significant price tag, just as it does in your kitchen at home. By planning menus strategically, you can align what you need and purchase inventory in bulk to take advantage of wholesale savings.
For instance, instead of serving three types of fish in a given week, stick to one so you can buy in bulk and prepare them in different ways.
Alternatively, joining a group purchasing organization (GPO) allows you to benefit from wholesale pricing without actually buying ingredients in bulk. By pooling your needs with other foodservice companies, GPOs leverage the power of large-scale purchasing to help you save as much as possible while buying only what you need.
Negotiate with food suppliers.
Many restaurants and catering companies accept inflated pricing from suppliers, simply because they don’t know that negotiation is on the table. Instead of increasing pricing, you can save by working out a better agreement with your distributors.
Spend some time researching the market value of the products you buy regularly. Then, cross-check those rates with the actual costs you’re spending! Review your last few invoices to see where you may have been upcharged (hint: it’s usually down-invoice). Think paper products, disposables, oils, and other inventory you purchase regularly.
If negotiation is not in your skill set (or your schedule), a GPO can help to ensure you’re getting the best rates possible. While you work directly with the GPO, they’ll handle negotiations directly with their suppliers so you don’t have to question a thing.
While these strategies can effectively help to increase profit margins, the first thing a caterer should do to maximize their revenue is simply to know their numbers. Use an accounting software or consult with a bookkeeper regularly to stay updated on where the company’s finances stand. Outsourcing is great, but it doesn’t exclude you from knowing where your money goes.
Once you have a solid understanding of your financial status, begin implementing these techniques to start earning more and spending less—then, watch those numbers grow!
Lead photo courtesy Richard Emmanuel Photography