A slumping economy means non-commercial operators who offer catering will have to work harder in 2009 just to keep pace with 2008. At least, that was the view on three college campuses in different sections of the country as the holiday catering season wound down. As a matter of fact, one operator frankly was surprised that 2008 turned out as well as it did.
“To tell you the truth, I had been thinking that our business was really down from last year, which was a record year for us,” says Abbot Albright, catering administrator for Dining Services at the University of Maryland. “Then I saw our recent P & L statement, and we are almost even. I do think, however, after the inauguration is over we will see a severe downturn. There are regularly scheduled events, such as football and family weekend, which people will attend. However, the extras such as off-campus clients coming in, or weddings at the Alumni Center, are simply not there.”
Albright predicts that business will decline as “state budgets clam up.” He also believes check averages will shrink for weddings and other special events.
Across the country, at the University of California at Berkeley, Shawn LaPean, director of Cal Dining, says his department’s catering business also has stagnated.
“We are seeing our business, which was building at 15% to 18% per year in revenue flattening out this year, to where we think we will only have sales that match last year,” says LaPean. “Most clients are not asking for the bells and whistles this year and instead are turning to simple lunch events versus expensive dinners. Everyone wants ‘austere.’ They are afraid to have events that look too fancy.”
He added that the percentage of clients who are asking for what he calls “freebies”—reduced rates or free decorations, for instance—has grown from 20% to as much as 70%.
In the Midwest, at Miami University of Ohio, catering has managed to “remain positive” during the last year, according to Donald King, assistant director of The Shriver Center for catering and retail sales. But he acknowledged that it has taken some off-beat business to achieve this.
“We did this by diversifying our sales mix,” King explains. “We had begun to provide daily foodservice to a fraternity house and based on our reputation we have been asked to provide this same service to another fraternity. In years past, we may not have done this, but we anticipated the slowdown and jumped at the opportunity.”
King says he believes finding new non-traditional revenue streams such as the fraternity business is essential for survival.
“It is a win-win situation so we plan to pursue other similar opportunities,” he notes. “Additionally, we will look to expand the services we provide to our regional campuses. Home meal replacement is another option that we will look to for untapped revenue.”
Other initiatives at Miami have included holiday meal packages and a new, low-cost menu called “Direct To You,” which King says was designed “to put us on even ground with restaurants that cater at a reduced cost.”
At Berkeley, LaPean says his department’s main focus will be on trying to attract more off-campus business because it can be more lucrative.
“Our check average for off-campus is nearly $50 per person, per event, and on-campus is approximately $22,” he explains. “But the off-campus folks seem to be having a harder time finding reasons to have events versus our on-campus clients. This is one of the reasons our sales are flat.”
On Maryland’s campus, Albright is considering changing the name and brand of the catering department to “generate some buzz.”
“We also are looking at added services, products and Web-based ordering to alleviate any hassles for clients and make it easier for them to order from anywhere they wish, such as home.”
But the bottom line for success, in the mind of Miami’s King, will always be maintaining a customer-centric approach to the business.
“We need to continue to do what it is that made us their primary choice in the first place,” says King, who, like many of his peers, is not the exclusive caterer to the campus. “I have given all of my managers a sign to hang by their desks. It has a wine glass with our logo on it. Under the glass it reads, ‘Our reputation is a fragile thing.’ Now more than ever this will hold true.”
The 2008 Catering Survey: With these comments as a backdrop, FSD presents its 2008 Catering Survey, begining with a snapshot of the survey respondents. The largest percentage of responders, 27%, were schools. Another 24% came from hospitals, 20% were from colleges and universities, 14% from long-term care and 12% from B&I or contract management headquarters. Demographically, 35% of respondents hail from the Midwest, 29% from the South, 21% from the Northeast and 15% from the West.
Seventy-nine percent of respondents offer catering: 45% of them report less than $100,000 in annual catering revenue, 29% have revenue between $100,000 and $499,000, and 26% have more than $500,000 a year in catering business. The average revenue among our respondents is $507,818.
Fifty-three percent generate all of their revenue from within the confines of their institution or company, while 44% offer their services both on- and off-premise. Of all respondents, only 3% operate off-premise catering exclusively.
As a percentage of business, 19% of respondents said catering represents only 1-2% of total revenue. Another 18% said it makes up 3-5% of revenue, and the largest percentage, 23% said it represents 6-10% of all foodservice business. For another 18%, the figure is 11-20%, for 11% it is 21-30% and 8% said it represents more than 30% of business.
In all markets except long-term care, operators who have exclusive rights to catering are a minority, with the industry average being 39%. Sixty-five percent of operators in long-term care say they are the only caterer allowed in their facilities. In colleges, that figure is 46%, in hospitals it is 45%, in B&I/contractors it is 27% and in schools the number is 26%.
Colleges and universities (60%) are most likely to conduct business both on and off campus, while long-term care operators are least likely (35%). Among operators who offer both, more than three-quarters of revenue is generated by on-premise events. Two-thirds of respondents say they charge more to cater off-premise events. Colleges/universities and hospitals most often charge a premium, at 76% each, while only half of schools and 40% of B&I/contractors do. The upcharge is usually up to 20%; only 20% of operators charge more than that.
All types of business: The types of services rendered can run the gamut from breakfast to receptions. Among operators who offer catering, 94% cater breakfasts, 89% do deli meat/salad/buffet lunches, 89% do break service, 87% do hot/cold buffets, 84% offer box lunches and 74% sit-down meals. Fifty percent do cocktail receptions, which seem to be a service for larger institutions or companies; only 28% of operators with less than $100,000 in annual catering revenue do such receptions, while 92% of operators with revenue of $500,000 or more do.
Catering business leans most heavily toward lunch, with 42% of catering revenue, on average, coming from that daypart. Another 29% comes from breakfast, 21% from dinner and only 8% from special events such as weddings.
College catering is the most expensive. The average per-person prices for college catering were $8.09 for breakfast, $12.27 for lunch, $21.26 for dinner and $30.01 for special events. (Only B&I/contractors was higher for dinner, $25.48, and special events, $37.86.) By contrast, school catering is the least expensive, with an average of $3.94 for breakfast, $6.68 for lunch, $10.72 for dinner and $15 for special events.
Drop-off catering, in which caterers make up and deliver platters but offer no service, makes up a sizeable portion of business for most, particularly at breakfast and lunch. On average, only 35% of breakfast business is full-service, as is only 41% at lunch. At dinner, however, full service makes up 69% of business, and 80% of special events are handled as full-service events. Drop-off service is most prevalent in hospitals and B&I/contractors. At breakfast, 75% of hospital catering and 78% of B&I/contractor catering is drop-off; at lunch the percentages are 69% for hospitals and 72% for B&I/contractors. Even at dinner, hospital caterers tend to do more drop-off than any other segment, 43% compared with only 24% for schools and 23% for colleges, for example.
Business up or down?: Half of our respondents said their catering business increased in the last fiscal year, and only 18% reported a decrease, with the rest saying business remained steady. The major reasons for increased business were more catered events (76%) and increased customer satisfaction (73%). Other reasons given were increase in customer base (37%), menu changes (32%) and better marketing/promotion (18%).
Among operators who reported a decline in business, most (76%) cited budget cuts. Another possibly related reason given was fewer events to cater (33%). A decrease in customer base was given by 12% of respondents, and facility issues were named by 7%.
When it comes to the environment, with the exception of colleges and universities, environmentally friendly disposables have yet to become an option for most. Sixty-three percent of college operators make such serviceware available, but only 19% of hospitals do. Forty-two percent of B&I/contractors offer such biodegradable or compostable service items, as do 40% of long-term care operators and 35% of school operators. But among operators who do offer them, the option is provided by most as a value-added service. Only 28% of operators charge extra for environmentally friendly serviceware.