During a 2010 earnings call, Panera Bread’s CEO Bill Moreton said the restaurant chain’s catering sales rose 26 percent for the year, contributing 1 percent to its same-store sales gain during the period. In the company’s 2010 fourth quarter, catering sales increased 34 percent for the chain and are expected to continue their upward trend in FY 2011.
Panera Bread's success in the catering category comes as no surprise to operators within the restaurant industry who have built solid-performing catering platforms.
Panera Bread, Einstein Noah Restaurant Group and Boudin Bakery have all been able to deliver solid sales gains based on catering sales, and have each made continued investments into their catering programs. And they are not alone. Salsarita’s Fresh Cantina, Boston Market and Atlanta Bread also have invested in their catering capabilities to ensure the success of this new restaurant retail channel.
To help multi-unit restaurant chains understand what it takes to develop a successful catering platform, Erle Dardick, the founder and CEO of MonkeyMedia Software, has written “Get Catering! One Monkey’s Perspective: Catering Defined for the Multi-Unit Restaurant Executive.” The book discusses the strategic elements involved in the development of a catering channel and the community needed to make it successful.
We asked Erle eight questions about the points he makes in his book and how restaurant operators can combine strategy, passion and energy to build a solid catering platform. Click here to pre-order a complimentary copy.
1. Throughout the book, you talk about the idea of community, as in, everyone working together to grow sales. Who do you see as being a part of this overall community?
Anybody who is in a multi-unit restaurant environment really has to stop and take a look at this. It goes down to the supplier level; it’s everybody in the chain. So the community is anybody that has an interest in growing sales with that concept in mind.
2. Pizza and local grocers have done a good job of capturing the lunch market, and one of the concepts you discuss is restaurants better defining their services. What do you think needs to happen for that to occur?
The very first thing that needs to be done is the coming together of the executive team to determine that catering is a business they want to be in.
They have to identify and agree that the market is there, which hasn’t been done. They need to understand the strategy and go through all of the steps to identify what that strategy is. It’s an ongoing commitment and investment to that business for as a long as it shall live.
There are people that are out there that are making a statement with catering. It’s a massive opportunity and many are just seeing it now.
3. Customers already visit restaurants they are familiar with because they trust the brand, the food, etc. And for many customers, they would spend more money at a particular brand based on that pre-established trust. How does that tie into the notion of giving customers what they need before they know what they need?
The notion of cross pollination is where this comes in. Because the customer trusts the brand, they are already buying the services from them. It’s being created by corporate America. Restaurants can tell the story that they need to tell the customer about what the market is and that need being fulfilled. And, your customers trust you to be experts in a certain area, otherwise they’re not your customers. So, when you tell them that you’re an expert in this service, they’re then going to want that service.
4. One of the other points you make is that a catering strategy isn’t necessarily about selling what’s being served on the current menu, rather, it’s about creating a new catering-friendly menu. How can operators overcome that critical factor of understanding?
What I’m trying to explain here is they have a brand, a culture and a flavor profile. Catering is its own business and requires the same thought process as their retail business.
5. You also touch on the high number of brands that talk about creating a catering platform, but never fully commit. What should operators focus on to make that decision?
It comes back to the executive agreement. They have to decide as a team that they want to be in this business. If they’re not willing, then they should get out of it. Part of that process is they need to look at the numbers, they need to understand the numbers and they need to understand the business case. They need to understand how it fits together before they can get to a place to consider it seriously.
6. You break down catering into three parts: strategy, passion and energy. How do those three ideas work together?
What we’re doing here is that without the strategy we can’t have the passion and without the passion we can’t have the energy. This is why the business strategy becomes so important. You as an operator have to be a believer in the strategy of layering catering as a revenue channel over your existing assets. If you see that strategy and agree to it -- and believe that it can impact your business in a positive way by generating more sales -- and you’re putting out a good experience for your customers, you now have passion for what you’re doing. And you’re putting the resources in place, which is the energy, to execute. That means your people have to be trained and you’re putting the energy in what you’re doing. And without those three things you’re dead.
7. You talk about your experience as a serial entrepreneur and about being good at finding the fastest way to profits. If a multi-unit operator doesn’t carry the same strength, how will this book help them realize this new revenue-creating potential?
The people who are entrepreneurial in terms of growing their business, they understand the idea of growing wealth in their organizations. There’s only really two ways to do it. Any business where you’re making an investment on a constant basis and you’re trying to figure out, it is very hard to make profits and at the same time grow. It’s a very difficult dilemma. So, the fastest way to profits is specific to strategy.
It has to do with understanding your business and making the right strategic decision. You can decide to be small or big. The whole premise of the book was the strategy of fixing a deli. Tony’s Deli was in trouble. When I got involved, I turned it around through the process of working on it every day. Not only on the retail side of the business, but we generated catering revenues. Those revenues, if understood properly, were higher margin-based items. The volume was substantial enough layered on top of existing assets, which turned it into a cash cow. That’s when it became profitable.
It’s the same problem all of these operators have: they're all scrapping for sales. The fix for any organization going through that kind of suffering is to layer more sales.
8. Another section of the book takes an in-depth look at how franchisors can help the franchisees in their system implement a strong catering business model. What are some of the steps that you discuss to help franchisors ensure a strong and reliable execution across the entire system?
So this is what’s happening in our community; this is a community-based system and this is new territory. This hasn’t been done yet. What needs to happen, the argument I make in the book and the focus I’m having there is the brand owner, which is the corporation, needs to protect the brand at all levels of the organization. And so what they need to do is to make the same decision at the corporate level that catering is not necessarily something that comes as part of the franchise; you have to earn the right for it. You have to maybe buy it.
These franchisors have a responsibility to their franchise community to put forward a strategic plan for catering as well as all of the operations manuals, policies and procedures, how they’re going to distribute orders, there’s a whole lot of fairness and discussion that has to happen in there. In return for them engaging and being a qualified catering franchisee for that territory, then the idea is to remove the excess fat from throughout the system. The challenge multiunit restaurant operators come into is centralized services. In my mind, there’s no way that a Subway franchisee should be able to take a catering order on behalf of the brand. That should become a centralized process that should be controlled; they should be into that program so that all the operator needs to do is focus on making the order and delivering the order.
What’s happened at the operations level is that they are already taxed for resources. They’re already running on thin margins. They’re already running on thin labor. What starts to happen inside the store is it starts to compete for resources internally because you’ve got your retail customers that come in and, you’re layering catering on top, and everybody’s pulling. And so, what needs to happen internally is you need to dedicate a catering lead person who looks after the catering orders. And so, by 11:30 a.m. everything needs to be out the door, which is just in time for your retail lunch rush, which is noon.
These franchisors have to take catering back because if they do not take back control over it, they’re diluting the brand experience down at the bottom and what’s happening is catering is inconsistent and you’re losing customers as a result.