With clients becoming more aware of their expenditure, caterers are being forced to work harder for their money. Eleanor Earls finds out how contractors are reinventing their offers and retaining the wow factor without breaking the bank
Over the past two years, business and industry clients have been asking caterers to tighten their belts so they can reduce costs and get subsidies down. But with caterers under pressure to protect margins in the face of rising food costs, it isn’t as easy as slashing 20% off the budget and everyone being happy.
Working together is essential in today’s tough economic climate, according to Charles Beer, managing partner of the Crown Group, which provides food services to clients in the B&I sector via its Kudos Cafés business. “It is up to the food company to ensure that their clients are up to speed on industry developments so they are able to make informed choices and demands from their suppliers,” he says. “There needs to be a great deal of trust and transparency between both parties to ensure the right package is developed.”
Foodservice Consultants Society International member Peter Pitham, managing director of the Catering Consultancy Bureau, agrees: “It’s a particular challenge for consultants to educate their clients so they realise that if they want a 20% cut in their subsidies, something must suffer. Sometimes budgets can be reduced by looking at the labour, or sometimes it’s about, say, replacing roast beef, an expensive cut of meat, with something more in vogue like a slow-roast belly of pork.”
Types of contract
There are two distinct types of contract in the B&I catering sector, cost-plus contracts, where the caterer provides expertise and invoices the client for all operational costs plus a management fee, and fixed-price contracts, where the contractor receives a flat amount each month and has to essentially live from the till. The latter means the caterer is taking on more of the risk and is, therefore, becoming more common.
For Tim Cookson, chairman of the Litmus Partnership, as far as the fixed-price market is concerned, the contractor has got to chase the consumer pound more aggressively now than in the past. “Therefore, they’re having to rely on innovation and finding new ways of capturing customer loyalty,” he explains.
In an industry with a ceiling on customer levels, it’s about attracting additional spend from your user base. “Clever caterers are encouraging ‘brown baggers’ [those who bring food in from home] to supplement their meals with extras they can buy from the contractor,” Cookson adds.
Enter the tea trolley. A sight that the industry grew up with, but which died a death when it was deemed too archaic, is making a comeback. “The return of the tea trolley is one of the upsides of this environment,” Cookson remarks. “Caterers have to take the goods out to the customers; they can’t rely on just opening their restaurant doors. They have to work much harder just to stand still financially.”
“Caterers need to get more from the customer’s pocket,” Pitham confirms. “And this is why we’re seeing the gradual rise of the cookie bar being positioned by the till.”
Beer always tries to promote products such as coffee with home-made cookies, rather than pre-packed grab-and-go items. “We place great emphasis on putting packages together that enable us to combine low-margin products with those of a higher core value,” he explains.
With high-street offerings ranging from serve-yourself sushi to dishes that wouldn’t be out of place in a fine-dining restaurant, workplace caterers are really having to step up their game in order to compete. “There’s certainly a move towards the commercial model,” says Pitham. “If the caterer isn’t offering what the users want, they will just go to the high street. So caterers are adopting and embracing the high-street offer and making it available in the workplace. But they have to do it with innovation.”
Customer-focused marketing initiatives in line with high-street campaigns have become par for the course, according to Dean Lindsay, managing director of Aramark Services. “The use of fresh, vibrant and abundant produce to ‘sell’ the dish has also become standard,” he adds.
For Nick Parker, managing director of Bite Catering, quality remains key. “We believe in quality being the route to all riches,” he says. “Rather than seek to save money, we invest in quality so we can drive up sales and, therefore, reduce subsidies.
“We’re not being asked to find 10% savings tomorrow, but clients are encouraging us to remove an expenditure in one area by doing something. For example, by restructuring your team you can get the same output for one less person; we can then keep our budget the same for the next year by moving money out of labour and into food costs in a time of rising food price inflation.
“We’re also being asked to focus on what sells and what doesn’t. It’s about getting closer to the customer so we’re selling more and wasting less.”
Bite Catering asked everyone in one particular building to fill in a food diary, which was an invaluable exercise, according to Parker. The company discovered that healthy eaters felt there was not enough information at the point of sale about whether the food met their healthy-eating criteria, and this was then changed accordingly, reducing wastage.
Constant review is also high on the priority list at Aramark. “The real emphasis is on responsible income and cost management with a structured procedure put in place to ensure that the service offer is reviewed on a regular basis,” Lindsay notes.
Risk and reward
The increasing emphasis on costs has essentially meant that clients want their caterers to take more of a risk contractually. “We can say to clients that although we can’t put up our fixed fees, we are prepared to back what we believe, and if we do a better job, we’ll earn money on improved performance,” Parker explains. “We’re creating more win-win situations. We’ve always put a lot of risk and reward into our contracts, but it’s certainly an increasing thing going forward.”
It’s certainly not a one-way street. “The smart answer to this is that the client and contractor need to work in partnership to introduce change in order to offset the financial pressures brought about by the present economic situation,” Cookson concludes. “The right contract is the one that works for all three parties – the customer first, then the contractor and finally the client.”
How to reduce costs without compromising on quality
● Write risk and reward into contracts and share the risk and reward with the people in the catering team. This gets everybody focused on greater customer service excellence.
● Conduct a cost-of-sales analysis to see which products are selling and which aren’t. Use this to cut out wastage.
● Carry out a labour-productivity analysis. This will help you to identify where you’re being labour-efficient and inefficient.
● Conduct a customer survey. This demonstrates to the customer that you are going through the motions of trying to understand their needs and react to them.
● Take a pragmatic approach to procurement by going back to basics. For example, when it comes to meat, don’t order pre-cut ingredients.
● Be more creative with menus. Make ingredients work harder by using them several times in innovative ways. For example, buy a whole duck instead of just the breasts, use the bones to make stock and confit the legs for a garnish.
● Don’t buy expensive catering-specific display ware. Choose retro items instead or other less pricey options. This also goes for chairs, cloths, table linen )and so on.
● Remember that people are still spending, so it’s worth offering items such as chef’s specials at a premium – even if you have only 6-10 portions.
Doubling daily sales as subsidies drop
Yes Dining, soon to be renamed the Genuine Food Company, aims to bring the high street into people’s workplaces. One of the caterer’s key offerings is the Genuine British Bento, a one-pot meal in a take-away container. “It’s ideal for places that have large numbers of staff and small areas in which to feed them,” says managing director Chris Mitchell.
In December the company won the contract to cater for Asos.com. “It’s a very edgy company, but the previous caterer was still trying to serve cartons of Ribena,” says Mitchell. “The facility there is challenging; there are 1,000 people and a canteen with 32 chairs, so it’s all take-away, which was a fantastic opportunity for us to try our offer of having no space.”
The daily sales have now doubled and the subsidy has come down. “It’s a great example of how we’ve managed to save the client money and deliver a better product,” Mitchell remarks. “The way we see our business developing is to open up high-street locations with the same offer. In the workplace that adds a lot of value; you can walk into your canteen and buy something for 30% cheaper than you’d get it on the high street because of subsidies.”
Tightening margins without taking a hit
Dish, a leading London-based event caterer, started doing Christmas events for three departments of a large international company four years ago. Initially these dos were fully themed black-tie sit-down dinners that partners could attend, including entertainment, spirits and Champagne. Two years ago the client halved the budget and didn’t allow guests to bring partners.
“So we had a stand-up food show showcasing food concepts from two different parts of the world,” says Dish director Nick James. “It was very informal, including no spirits or entertainment except a DJ, and finished at 11.30pm instead of 1am. The margins were very tight compared to when we first started doing the event, but we didn’t take a hit on it.”
For James, this is a classic example of what’s happening in the current economic climate. “People are still doing events, but on a much-reduced budget,” he says. “We’ve certainly had to revisit our budgets with repeat clients.”
This has also meant changes in the food being offered. “Where they were having fillet steak a couple of years ago, they might have slow-cooked beef now, which is half the price. The key thing for caterers at the moment is to be adaptable to client needs,” James notes.
Published by: The Caterer