Common Money-Saving Mistakes Caterers Make

Every business owner should be watchful of their profit margins, but it’s particularly vital for caterers who must balance revenue with significant overhead. A team of experienced chefs and a fully-stocked kitchen don’t come cheap, so it’s wise to employ saving strategies to maximize profits as much as possible.

Yet, saving money can feel challenging in a business with such high liquidity. When the cash flow is always churning, it’s difficult to pinpoint opportunities to cut down on costs and stack savings.

Fortunately, we’ve compiled the five most common mistakes that leave caterers at a loss — and how you can cover up those gaps and grow your bottom line.

They don’t plan menus strategically.

When you’re juggling countless menus for countless clients, it becomes costly (and confusing) to keep everything covered. Your employees are working extra hard to source inventory, prep ingredients, and cook all the different meals — it might even involve overtime just to get it all done. You’ll likely end up paying more per unit when purchasing ingredients, too.

However, strategic menu planning allows your team to align client menus to get the best bang for your buck. For instance, you could purchase everything you need to make stuffed mushrooms for an intimate soiree of 50 and Caprese bruschetta for a 250-guest wedding. Or, you could simply prepare bruschetta for 300 people to get bulk savings. Plus, your team will be able to batch cook and streamline their workflow. 

Planning around seasonal ingredients and market pricing will also impact your cost of goods sold. More money in your pocket and more efficiency in your kitchen — and it’s all in how you create and plan your menus.

They skim their invoices.

You have better things to do than read every item on your invoices, right? Perhaps you review the costlier items on top to make sure you’re getting a fair market price on items like steak, seafood, and produce. But checking everything on a list of 150-200 items doesn’t seem worth your time.

Unfortunately, if you’re not reading down to the bottom of the invoice, you might not catch it if your supplier inflates pricing for items like paper, plastics, and other disposables. The same goes for bulk ingredients, like flour, sugar, and cooking oils. 

Suppliers often hide their profits down-invoice, so make sure to review the whole thing. Otherwise, it may cancel out any savings you think you’re getting on top-line items.

They undercharge for their services.

Pricing can be a fickle game, as you must be mindful of your company’s expenses as well as the average market pricing. If you notice shrinking profit margins, it’s likely a sign that supply rates have increased and you may need to increase your pricing accordingly.

It’s not just about the cost of goods sold, though. As you evaluate your pricing, be sure to factor in overhead expenses for employees’ pay and benefits, inventory management software, equipment maintenance, and other costs that often slide under the radar.

You may also consider marking up prices for increased health and safety protocols in response to COVID-19. The final price tag your customers see should include expenses for PPE, masks, sanitizer, and even additional time for setup and breakdown if applicable.

They don’t negotiate rates.

While caterers are experts in food and beverages, they aren’t always the first to stand up and negotiate with their suppliers. In many cases, they didn’t even know they can negotiate rates during the purchasing process. Consider this your permission to ask for better pricing!

The average food supplier recognizes that a minor loss on a recurring invoice is a much better scenario than losing your business to someone with more competitive rates. They do have to cover their own costs of doing business, so they cannot accept unreasonable rates like half-off your order of prime rib or crab legs. However, there is usually some wiggle room in down-invoice items, like spices, oils, and disposables.

Before hitting the negotiation table, do your research to make sure your requests are reasonable and in line with what the market has to offer. 

They haven’t hired an expert.

Overseeing finances and managing the purchasing process are essential tasks for foodservice companies, but that doesn’t mean they need to fall on the CEO, salesperson, or marketing specialist. If money is leaking from the gaps, it’s a good time to seek support from an expert.

Hiring an accountant is an investment that will pay in dividends, as they will understand the complexities of your financial landscape and provide recommendations to increase profit margins. They will also save you the trouble of figuring it out yourself, so you can dedicate your time and energy to more profit-driving activities.

In terms of efficient purchasing, joining a GPO (group purchasing organization) will save you money and time by grouping your order with other caterers’ orders to receive bulk pricing — even for ingredients that you don’t need in bulk. They’ll also handle the negotiation for you! 

Finding the right GPO can make all the difference in your bottom line, and the best part is that membership is free! (At least, it should be. Be cautious if a GPO is charging you on top of your purchasing order.)

Wondering what makes a GPO different than a rebate program? We covered that here!

As we continue moving into the later stages of the pandemic, it’s a great time to be shining a light on your company and saving as much as possible. COVID taught us the value of being lean and agile in business, and it all starts with your finances.