How can we generate extra revenue streams from our restaurant?

09 November 2006
How can we generate extra revenue streams from our restaurant?

We run a successful 100-cover restaurant and want to generate extra revenue streams, possibly
a deli or outside catering operation. Any advice?

The solutions

Carl May, Catered4

There is always a temptation when you own a successful catering business to look for ways of increasing income.

It's an enviable situation to be in. You should consider whether the success of the restaurant is down to any particular resource that you may be jeopardising to establish your new venture.

Will you be watering down your level of commitment to the existing business in order to create the new one?

Will your chef be required to spend less time at the restaurant to develop your new ideas and will you have to reduce your financial commitment to the restaurant, starving it of all-important financial support? What ever you do, do not "rob Peter to feed Paul".

The idea of the deli would depend strongly on your location and the capabilities of adding a retail outlet to your current property. You should also consider strongly what unique selling points your products will have over your competitors and how you will package the range you wish to offer.

Setting up an outside catering business that would generate adequate profits to make it worthwhile will involve a great deal of commitment both in your time and your finances.
It is a very different animal to
a restaurant and involves great dedication to succeed in an already well-saturated marketplace.

If you feel that your staff will not be overstretched in the current business, start small with your ideas and test the water. Establish with your existing customers if there is a need in the area for the style of outside catering you are planning.

Treat it as a separate business and attack it with a detailed business plan and marketing strategy.

Ann Elliott, Elliott People

It's great that you want to build on your success. In terms of options, consider:

1. What do I want to achieve? Plan your targets over a
one-, three- and five-year period

2. Where is there a gap in the market? Perhaps there isn't a gap in the market for some of your ideas - be honest.

3. Is there a demand for what I want to do? There may be a gap in the market but no demand for the idea you have to fill that gap. Check if your idea has been tried before.

4. Who is the target market? Understand your potential target market and have a feel for how you might sell your product to them.

5. Who are my competitors? Your competitors aren't always the most obvious.

6. What is my positioning? You will have a number of options - eg, a cheap/no frills offer, an added-value premium offer or somewhere in between.

7. What do I enjoy doing most? All your analysis may point you in a direction that your heart tells you isn't you. Don't go there.

8. What skills do I need? Think through any new skills you (and your team) might need. How will you acquire those skills?

9. How much time and resource do I have and do I want to invest in a new operation? A new operation will need time and money. It may not start to pay back for some time.

10. How will this impact my current business? You cannot afford to compromise your existing business, so think carefully about the impact of your new idea on what you are doing now.

Carol Godsmark, restaurant consultant

Have you identified your market? Is there a need for a deli? Is there a glut of outside caterers already in your area? Do your homework before embarking on another strand of your already successful business. Ask yourself if the business can stand extra strain on the kitchen and staff as well as management. Or do your plans - and space - include a separate kitchen and hiring extra staff and management?

Other considerations include:

  • Will you be able to give a fair share of your time to discuss catering clients' needs?

  • Work out carefully what the staff and space can handle.

  • Plan your outside catering menus or deli food around these constraints.

  • You may be able to offer hot and cold food; a canapé and buffet service; sit-down dinners; wedding parties; hamper service; staff; equipment hire; alcohol.

  • Open accounts with companies for delivered breakfasts, lunches. Stipulate payment terms, a minimum order and a 24-hour cancellation notice.

  • You will need extra equipment - or will you hire in plates, cutlery, glasses etc?

  • Communication with your client, partners and staff is vital. Failure to do this may put your core business and your existing customers at risk.

  • Don't jeopardise your business by stretching it to its limits - and beyond.

There are slack times in any catering business, be they seasonal or a result of geography. It may be possible to consider other routes such as daily, weekly or seasonal cookery classes, wine-tasting evenings and chef and local produce masterclasses instead of embarking on major changes such as a deli or a catering business.

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