New Year, New Budget: How to Budget Effectively for Catering Business Growth in 2022

• We will continue to be affected by the supply chain and labor shortage for the first half of the year.  

• Inflation will still be around 3% in 2022, whereas the rise in 2021 was 5.3%.  

• Consumer spending is anticipated to grow 4.7%—which is good news.  

• Pay hikes will increase by 3.5%; overall for 2021, the rise was 4%. Wage gains will be the highest in construction, travel, retail and food services—so it’s important for us to pay attention to this!  

• Gas and diesel will continue to be 5-10% higher than 2021—we’ll see this in food delivery costs as well as inflation for off-premise caterers.  

• Electricity will continue to carry a 5% increase.  

• Container costs will see a decrease of 5-10%, which understandably is not much with the high rates. You can expect ocean freight to slowly fall as the existing ships are unloaded; however, chassis and container shortages will linger.  

Step 2: Review Sales Forecasts to Build Your Budget Development Foundation  

Your next step to creating your budget is to look at your sales forecasts and your pipeline to predict what you’ll see coming in this year. On average, most catering companies are predicting 50-60% of 2019 revenues. So, if you’re not sure where you are land, this is a good statistic to consider based upon other ICA member predictions!  

Step 3: Incorporate Direct Costs & Overhead Expenses  

Next up for building is costs. These are the direct costs and overhead expenses you want to factor in, as well as watch closely throughout the year. Plus, pay attention to the anticipated markup you should use to guide figures based upon industry and global inflation.  

Direct Costs

• Warehouse Labor - Hourly Employees (1–5% markup)  

• Kitchen Labor - Hourly Employees (12–20% markup)  

• Event Labor - Hourly Employees (50% markup)  

• Food Cost (18–25% markup)  

• Soft Beverage Cost (50% markup)  

• Liquor Cost (35% markup)  

• Disposables Cost (1–3% markup)  

• Vendor Costs (35% markup)  

• Venues and Third-Party Commissions (10–15% markup)  

• Service Charge (50–100% markup)  

• Payroll Taxes - Hourly Employees  

• Workers Compensation - Hourly Employees  

Overhead Expenses  

• Rent (10% markup)  

• Sales Expenses (1–2% markup)  

• Meals and Entertainment  

• Transportation  

• Travel  

• Education  

• Dues and Subscriptions  

• Client Gifts  

• Marketing Labor and Expenses (1–3% markup)  

• Outsourced Services  

• Advertising and Promotions  

• Open House  

• Sponsorship  

• Print Media and Social Media  

• Salaries (30–40% markup)  

• Sales  

• Administrative  

• Executive Chef  

• Operations Director  

• Finance/Accounting  

• IT  

• Employee Health  

• Utilities/Telephone/Data Processing  

• Building Maintenance  

• Equipment Maintenance  

• Vehicle Maintenance  

• Gas and Mileage  

• Human Resources and Training  

• Uniforms  

• Audit and Legal  

• Property Taxes  

• Bank Charges  

• Interest Income and Expense  

• Depreciation  

This is a lot to consider when the world is so fluid. Right now, the traditional annual budget process has been replaced with a cash-is-king mentality. Due to unreliable supply chains and other pandemic-related service disruptions, you can’t be afraid to charge what’s necessary to cover your increased expenses. If this feels overwhelming, invest in resources like this book by Christian outlining all the ins and outs of budgeting to help you become an expert that’s able to budget for success.  

Step 4: Use Your Budget as a Guide to Doing Business in 2022  

So, now that you have your budget outlined, how do you implement it to ensure it provides that ROI you’re working towards?  

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The first step is transparency. You can:  

• Set up initial budgeting meetings with each department head to review in-depth the numbers for spending, as well as the expected ROI, so they can operate their departments accordingly.  

• Have bi-weekly budget reporting meetings to review direct costs, payroll expenses, sales numbers and up-to-date P&L statements to track progress. This way, everyone has a clear understanding of where the business is at and what needs to be done to achieve budget and business goals. In these meetings you can cover things like:  

• Food cost vs. food revenue  

• Beverage cost vs. beverage revenues  

• F&B cost vs. total F&B revenue  

• Event labor cost vs. event staff revenue 

• Warehouse/operations cost vs. total revenue  

• In-house costs (food, beverage, staff) vs. total revenue  

• third party/vendor revenue vs. misc. revenue  

• Delivery/setup costs vs. delivery/setup revenue  

• Admin fees vs. commissions staff cost and service charge vs. staff revenue and service charge revenue  

In doing this and consistently updating, reviewing, and collaborating, your team will pave the way to a profitable year-end!