Comeback for off-premise catering feeds operators’ profit needs

Comeback for off-premise catering feeds operators’ profit needs – News

Sarah E. Lockyer

Restaurateurs’ heightened outlook for increased capital spending and their ever-present need for additional revenue streams are giving rise to expectations that off-premises catering is poised to surge as a new or expanding profit center.

A perceived comeback of corporate demand for catering, after the sharp downturn that followed the terrorist attacks of September 2001, also is fueling the movement by restaurateurs to augment their businesses by launching or expanding off-premises services.

Seen in part as a reflection of steps by some restaurants to set up catering operations, the National Restaurant Association’s monthly Restaurant Performance Index in January recorded its highest-ever level of near-term planning for new spending on equipment, expansion or remodels. Sixty-four percent of the RPI’s polled operators said they were budgeting such expenditures for the next six months, the monthly NRA survey indicated.

Some restaurant operators, including the 92-unit Famous Dave’s barbecue chain and D’Amico & Partners Inc., an 18-unit “gourmet” Italian group, saw substantial growth in catering sales last year. Both of those Minneapolis-based companies reported a 20-percent year-over-year surge in their off-premises business.

Others, like national bakery-cafe chain Panera Bread Co., are now getting into the catering game, with markets throughout the country testing off-premises operations, called Via Panera. The St. Louis-based company, whose brands currently have more than 600 outlets, said Via Panera would be introduced into all company markets by this summer and in franchised markets by year-end.

Outback Steakhouse Inc. also is stepping up its catering activities, with off-premises services already available in the Tampa, Fla., area and other locations testing such operations, according to a catering salesperson at the Tampa company. A spokeswoman for Outback said the company would not comment on its future plans in the catering arena.

With many national chains tight-lipped about corporate strategy, it can be difficult to gauge how many players are interested in expanding operations into catering. But it is clear that restaurant operators are looking for ways to reach additional customers and improve sales, and catering is one way to do both.

According to Hudson Riehle, NRA senior vice president of research and information services, off-premises catering for most segments of the industry, from fine-dining establishments to fast-casual restaurants, is seen as offering vast growth opportunities.

Catering as an arm of a restaurant operation “really is becoming a much more important component in the sales mix,” he said. “A lot of operators cite off-premises catering as having the potential for a higher-than-average growth rate.”

The popularity of catering–and its proportional revenue contributions to restaurant practitioners–has risen substantially compared with the situation even a few years ago, Riehle said. “A median of almost 10 percent of sales among certain operators is now related to off-premises catering,” he said.

According to some industry veterans, the growth won’t stop there.

“Catering is on the move,” Michael Roman, president of Catersource, a restaurant and catering consulting firm in Chicago, said. “Restaurants have to do it now; it is the logical thing to do.”

Roman said catering activities and sales among restaurants is nearing and perhaps exceeding the levels they generated before Sept. 11, 2001, after which the rate of catered events took a pronounced downturn. The number of national chains getting into the business also is increasing steadily, he said.

“There aren’t many statistics on this area, but if I were to guess, if you take 100 percent of all restaurants a few years ago, I’d say less than 10 percent would have been into some form of catering,” Roman said. “But now 25 percent to 35 percent of all restaurants offer some form of catering.”

Indeed, evidence of increased off-premises activity and sales is largely anecdotal, as many companies, especially national chains, combine catering sales with total restaurant sales. Panera said it plans to attribute its catering sales that way when its units introduce the service as early as this summer. Others that have been in the arena for some time, like Corner Bakery Cafe, a Brinker International Inc. concept whose 90 units all offer catering, do not disclose the respective proportions of off-site and restaurant sales. Officials of Corner Bakery, which does much of its catering in the form of corporate deliveries, did confirm that both cafe and catering sales have increased steadily, however.

“I can tell you catering sales this year are very strong,” Nancy Hampton, vice president of marketing for Corner Bakery, said.

Another Brinker concept, On The Border Mexican Grill & Cantina, which offers full-service catering services from all of its 132 units, said 2003 was “one of the best years” for the chain’s off-premises operations. Wendy Ruebel-Ewers, catering director for the brand, said sales increased at least 10 percent from the prior-year level.

On The Border, a 26-year-old chain, started to offer catering services 10 years ago, Ewers said. At that time it was a big move to marry a company’s restaurant business model with off-premises operations, she said. That still is one of the largest impediments for restaurants today, Ewers commented.

Catering means “creating an entirely new infrastructure,” she said. “It is putting food out the back door as well as you put it out the front door, so to say. And you need to do that with incremental profit and make sure it won’t affect the restaurant operations.”

Ewers said On The Border stepped into catering when most restaurants weren’t even thinking about competing with traditional caterers, high-end banquet operators or mom-and-pop shops.

“There were no chains doing this back then,” she said. “They were barely doing ‘To Go’ well. But people will want different ways to get their food, and I wanted to model On The Border’s approach to appropriately meet that dynamic.”

Ewers said the expansion into catering was spurred mainly by consumer demand.

“We had brand recognition, and people were knocking on the door,” she said. “I knew we could be a great caterer and a great restaurant. We had a good kitchen and good operators, and those were the first necessary steps.”

Ewers said she’s not surprised to see restaurant chains looking into catering because it is such a natural growth extension from current operations and could lead to additional revenue.

“You have to extend the breadth of your offerings,” she said. “If you can’t evolve, you’ll be left in the dust. Plus, there is a lot of money in it; I think a lot of the chains are starting to see that.”

Panera Bread clearly is mindful of those potentials. In a Feb. 19 conference call with analysts after the company released fourth-quarter earnings, chairman and chief executive Ron Shaich said Via Panera would be “the most significant sales-building initiative the company will roll out in several years.”

He said off-premises activities have the potential to generate 3 percent to 5 percent or more of total sales in the near term, based on the company’s own test markets and other concepts’ data.

But Panera is aware that expanding into catering is more than spending money on delivery vans and additional staff. Shaich said the company is being “respectful of the potential disruption inherent in such a program.”

Indeed, Corner Bakery’s Hampton said chains that have already established themselves as purely retail operations could have a difficult time in introducing catering services.

“It is a different aspect of the business,” she said. “Now you are transporting food and making sure you are doing that while maintaining the integrity of the product. You also need to know your ability to fulfill catering orders while not affecting the in-store retail business. All this can be tricky to layer on.”

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