Fast casual operators are being put up against the wall by quick serve and casual dining restaurants as well as those in the retail foodservice market as they continue to encroach upon the fast casual space.
As a result, fast casual operators are seeking avenues that offer greater differentiation from the other players in the space as well as move away from the limiting reputation of only being a lunchtime spot.
At the same time, however, fast casuals have also cornered the market and positioned themselves as a place for convenience and high quality menu offerings. By leveraging this positioning, fast casuals are expanding and diversifying by pursuing new revenue streams such as catering.
Significance of Catering
Adding catering as part of an overarching business strategy represents a high margin sales opportunity – if done right.
Fast casual chains are leading the growth within the $43.4 billion catering segment and are expected to outperform all retail catering – which includes restaurants, grocery stores and big-box clubs. Growing 12% in 2013, almost a third of consumers now cater through fast casual chains.
Panera, for instance, has had double-digit catering sales growth. Raising 20% in 2012, catering now makes up 7% of the chain’s total sales. Catering for other chains, like Capriotti’s, represent 15% of sales – the growth primarily coming from businesses.
It’s Not All Bread and Butter
While increasing catering offerings is not a new business strategy, many operators are unaware of the complexities and careful planning that’s required when building catering sales in conjunction with existing restaurant operations.
Catering is unlike all other sales channels as it requires both consumers and operations teams to have different decision-making processes and standards.
Operators need to choose the catering format that will be offered, which can range from party platters to private parties and events. This decision must involve thorough planning and research as each format represents a different level of difficulty, required resources and equipment.
Furthermore, operators need to develop a menu that serves as an extension of their brand and offers the options their consumers want, but work around the constraints of transportation, preparation, holding and serving.
As a separate branch of a restaurant, catering needs to be marketed in the same ways operators run their restaurants – including a separate website page, social media, e-mail marketing and by building and maintaining a database of both individual consumers and businesses.
A Data Informed Catering Strategy Leads to Growth
Both consumers and corporations are investing more in catering. As 36% of consumers plan to entertain more at home, 20% are looking to fast casuals to cater those occasions due to lack of time and being cost conscious. Furthermore, as corporate spending increases, some fast casual chains are seeing as much as 70% of catering sales coming from businesses.
In order to maximize this channels’ potential, departmental models, similar to that of daypart models, can optimize operations by determining which daypart or department would be effective if opened and which would not.
Catering can be modeled as a separate department and drive-time gravity can be defined by utilizing either company profiles or consumer profiles, delivery routes, territory boundaries, core business/consumer types, the number of business/consumers in a given trade area as well as other variables.
From here the number of businesses and consumers in a given drive-time trade area that would be the best potential catering consumers can be identified and assigned a value – allowing operators to understand what markets to offer a catering service, what each of those location’s optimal catering performance would be and identification of actionable marketing targets.
Additionally, as operators begin to have a true and deep understanding of consumer profiles within this channel, it becomes easy to optimize menu selections based on the data from particular catering trade areas as well as know when and how to communicate promotions.
The Bottom Line
By leveraging the knowledge from analytic models, fast casual operators can make better informed real estate, operational, inventory, staffing and marketing decisions, resulting in improved efficiency and higher earnings. Furthermore, operators will also have the ability to understand the relationship between catering and other sales channels and discover how catering impacts overall total sales.