Thoughts On The Dreaded Refund

Refunds and requests for refunds, are part of the business. No client wants to lose money. As a business grows larger, so does the chance of being confronted with a request or demand for a refund. Most caterers view the client’s request as a personal loss, or even as an insult towards the company. This should not be a professional caterer’s attitude. All refund requests are not equally valid; sometimes you need to hold firm on not giving them.

There are at least two types of refund situations. The cancellation refund is when event is just not going to take place or is cancelled. Sometimes the caterer can’t rebook the date or the ballroom, resulting in a loss of profit. The performance refund is when the customer believes—true or not—that the caterer has placed them in a bad situation during the execution of the event. A performance refund might be demanded for such things as running out of some food items, stale rolls, the wrong color frosting on the cake or an unprofessional staff member.

When you are faced with a refund situation, ask yourself:

1. Why is this particular refund happening? Did the wedding couple break-up? Was there bad weather? Was the cost of the event too high for the client? Is there a rumor going around about my company? How many extra people did they invite that weren’t in the guarantee? Is my customer being influenced by anything that I said or did before the event?

2. What are my real losses? Is the event canceling with just two days to go, or is it six months out? Can I resell my space or date? Are they leaving me and moving to a competitor? Can I get credits from my suppliers? Can the stuff I already bought for this event be used at a later date for another catering?

3. What are the consequences to my business if I don’t handle this refund properly? How will my image be affected if I say no to the refund request? How will it be affected if I say yes? Is this a local group? What will future customers do if they find out what I did for someone else? Will it save my relationship with this buyer?

4. What is the potential refund? Do I need to give it all back? Does it have to be cash, or can I give a credit towards a future event? Can I just send some extra food after the party? Do I send cash or food?

5. How should the refund be paid? Should it be a credit towards a new event? Should it be paid back only if the date is resold? Can I give them a refund account to eat in my restaurant? Can I make a donation to a charity in their name? Can I give them more food? Should I deduct a professional fee from the refund amount for my planning time? Did I give them anything free during the planning and selling that I can now charge again.

6. What are the real costs associated with this refund? What are the chances that I won’t be able to resell my date or space? Do I still have to pay for any staff because the cancellation came so close to the date? How much volume will I lose from the community once they find out about my problem?

Refunds are not a happy topic for either caterer or client. When money and image are very important, a caterer needs a policy that is fair to both parties. (Some states and cities have laws pertaining to the amount of money that a caterer can keep if an event cancels.)

Consider Postponing The Final Menu Selection

Buyers of catering from hotels and banquet facilities generally don’t select a final menu until sometime in the last 30 days before the event. This is often called the “finalization.” (These clients have all paid deposits and are definitely using these caterers.)

These hotels and banquet facilities find it’s to their advantage to have buyers hold off on menu selection until close to the event. The buyers don’t mind because they sign the original contract with a clear understanding of how much the various menus and packages will cost. They look upon it as an advantage.

In the off-premise world, the opposite seems to be the rule. The client who doesn’t balk for a second at the on-premise caterer’s rule of waiting until after the sale to pick out the final menu will not even think of saying “yes” to an off-premise caterer until the final menu and every detail is decided. This creates a long and sometimes tedious process of back-and-forth negotiations that slow the final decision for weeks and even months.

Off-premise caterers need to adopt the on-premise idea of putting off menu selection until later, in order to stop the prospect from shopping aimlessly with other caterers or delaying a decision to select a caterer and pay the deposit. This will never happen unless the off-premise caterer makes an attempt to convince potential clients to wait. Here is a script that might help:

“Mr. Jones, with respect to the menu selection, I’ve shown you a wide variety of successful menus and you seem to like many things that you’ve seen. But I’d like to suggest that we wait until thirty days before the event before you make your final menu decision. I will guarantee the prices you’ve seen here today when we sit down to make the final selection. In this way, you will be able to see the newest menus that our chef creates between now and then and I can keep an eye out for special items that will add to your party’s success. Does that make sense to you?”

If you start using this script, some—but not all—of your buyers will follow your lead and will wait to see what newer offering your chef may have before making a final decision on the menu.

Testimonial From A Happy Reader

Below please find an email I received from Harold Kelly who shared with me the success he had with one of my ideas that appeared on my blog:

Hi Mr. Roman,

I want you to know that I read your blog every day and I love it!!  We all read it here every day.

I wanted to share with you about two events I was bidding on for a venue here in Houston.  I really didn’t think I was going to be able to compete against the catering company I was bidding against since they seem to have a leg up on some aspects of the facility we work together in (they have the exclusive beverage contract).

So I thought I would have nothing to lose by trying out your coaching of letting them know that if they didn’t book with us, I would forward a copy of our recipes for items they may have liked from us, to the other catering company.

The loved it!  She called me and said she had never been told that before and thought it demonstrated such a desire to really take care of them and their important event.  She originally told me that she didn’t have anything to do with the decision process.  She only was gathering the information for the top person choosing.  But after that email, she became our champion and highly recommended us to the person making the choice.  I consequently booked the piece of business with them and am completely delighted (as are they!)

I can’t wait to try more new ways of thinking you are showing!

You make me think outside of my own very small box and you get me going!

Selling really has become a bigger expression for me and it excites me now.  I haven’t been this excited about selling in a long time.  Thanks for showing me a way to tap into my passion again!

Thanks for ALL you do for our industry and who you are for us.  It’s great to have this connection with you!

Warmest regards,

Harold Kelly - Melange Events - Houston


Thanks Harold - here is the link to review the blog posting that Harold is referring to:
http://romansopinion.blogspot.com/2011/09/discussion-topic-for-your-next-sales.html

Use Team Selling

One salesperson is good. Two salespeople are better. Add a chef and you have the best selling situation of all. No, not for every sales situation, but for any super important or super large potential sales, consider creating a multi-person catering team designed to impress the prospect and bring several sets of skills to the negotiations.

“Mr. Jones, for an event like yours with so many unique and special elements, our company, unlike other caterers, will provide you with an exploratory team consisting of myself, Chef Sims and Robert White from our operations department. In this way, you will have access and input to all the elements of your event.”

Most corporate buyers are impressed with the fact that only one company of the four they called has offered a professional team of skilled staff to assist them. This makes them feel important and often will get your company closer to victory.

ONE MORE THING: 

AUTOMATICALLY GET MY DAILY POSTS DIRECTLY WITHOUT COMING TO MY BLOG

Just give me your email in the field directly under my photo on the right. Then, just confirm/reply your request once you get your confirmation email and you are ready to go! All posts will arrive directly to your email. Thanks.

Thanks Larry & Randee Estes

Bernice and I had a great dinner with Larry & Randee Estes of Max's Hospitality Group of Chicago last evening. It was fun, interesting, and an overall great evening! One of the coolest things about the evening was that they treated us to dinner. This is a very good thing.

K-Value Is Important When Setting Prices

Pricing takes into account many different elements. One of the most important is the idea of value from the buyer’s point of view. Another is how much the buyer thinks they need of what they are considering buying. When you develop or revise your company’s pricing philosophy, try to think from the perspective of the buyer instead of the seller.

Buyers of catering wish for many things. K-value is the term economists give to the ratio between the increased price of a product or service and its perceived increase (or lack of increase) in value to the buyer. The “begrudging index” is how the buyer relates to the actual price; do they perceive it as a rip-off or as proper.

For example: A driver on vacation using a rental car needs to buy gas. He pulls off the interstate and sees two gas stations to select from. One has gas for $3.95 per gallon; the other has gas for $3.65 per gallon. What station does the driver head for? K-value tells us that since it is a rental car, the driver doesn’t see any need to buy the more expensive gas; there’s no increased value to him in putting the better gas into a car he doesn’t own. The same driver might purchase the more expensive gas if the car were his own.

Another example: A buyer is trying to choose between two bids sent from different caterers. Caterer A has event staff that costs $14 per hour, while Caterer B’s staff costs $18.50 per hour. To the buyer, is the $18.50 staff better than the $14.00 staff? Which staff charge creates a higher K-value in the buyer’s mind? If the buyer’s event is extremely important from a show point of view, the $18.50 staff will have a higher K-value in the buyer’s mind, because if you pay more for staff, the staff must be better.

If the event is not deemed important, or special, the buyer may find that the $18.50 staff is a waste, since staff is staff. This means the buyer doesn’t feel more expensive staff is better for this particular event, so the staff price is not as important as what the buyer wants from the staff.

Let’s look at food. A buyer comparing two different menus of chicken curry, each made with boneless breast of chicken, will have greater difficulty believing that the higher priced menu has better chicken curry, since chicken is just chicken. However, if they are comparing the chicken curry with a boneless chicken entree that’s topped with fresh crab and shrimp, they will be expecting to pay more since this menu item has a higher K-value in the buyer’s mind.

K-value is how the buyer feels about comparative pricing in relation to the purpose and concern for the catering needed. Most American buyers know that, generally speaking, the more costly a bottle of wine, the better it is. When it comes to buying wine, buyers believe that the quality and value increase as the price goes up.

Buyers tend to think of value is something that is cheaper, or saves money. K-value affects the concept of value, because it puts impact into the equation. Buyers are willing to pay more for the same item or service when a high impact is required. When a corporation is entertaining a special client, it is willing to spend more for better service or menu items. On the other hand, if the corporation is entertaining its own staff at a party, the concern for higher prices and greater impact decreases because the K-value is low.

When a corporation is going to entertain the board of directors, the caterer needs to find the answers to some questions: Was it a good year? Was it a bad year? Has the company recently let go 2,000 employees? How is the stock doing? The answers will help determine the level of K-value to the buyer. Make sure you understand what the buyer is thinking, however.

When a company has just laid off 2,000 workers, you might think it would have a desire for lower K-value and lower prices. But perhaps the company needs to build the morale of the remaining staff, so it’s thinking in a higher K-value range. Don’t make assumptions; offer options on menu and services to the buyer that permit both high and low K-value decisions.

This is really not that hard to do. Besides the obvious option of a boneless breast of chicken with or without a topping of crab and shrimp, some caterers offer K-value options in the style of service and the level of staffing. Other K-value concepts deal with plastic vs. glass, paper vs. cloth linen, silver vs. stainless, tuxedos vs. casual, fresh vs. frozen, 8 oz vs. 10 oz, charcoal vs. mesquite, service vs. self-service, 25 percent deposit vs. 50 percent deposit and Friday vs. Saturday. Options are the answer to fulfilling the K-value concerns for buyers. Don’t be afraid of options!

ONE MORE THING: 

AUTOMATICALLY GET MY DAILY POSTS DIRECTLY WITHOUT COMING TO MY BLOG

Just give me your email in the field directly under my photo on the right. Then, just confirm/reply your request once you get your confirmation email and you are ready to go! Thanks.

My Shopping 101 Tips

Shopping is a profit-making activity. Don’t think of it as a cost-saving task. When shopping, keep in mind:

1. Unless you have a contract with a single vendor for everything you buy, check out all your vendors facilities with a personal visit. Meet the principals who own and operate the businesses that supply you with foods and materials. Think of it as your duty to know where your foods come from. While you are visiting, get cell phone numbers of key staff to use when you find yourself in an emergency situation for last-minute materials.

2. Don’t become a warehouse for your vendor’s stuff. There is no real need for most caterers to have a month’s supply of anything on hand. You probably have cans of soy sauce on your shelf that you haven’t used for months—or even years. Overstocking results from the talent of the route salesperson or order department of the vendor, rather than your needs.

3. To establish the lowest prices possible, ask your main vendors to send you a weekly bid for next week’s prices. This puts them on notice that you are a concerned buyer who is not letting loyalty to a vendor stand in the way of profit and/or quality.

4. Communicate your pleasure and displeasure with your vendors in an ongoing dialogue. Let them know you check the quality and freshness of the items they send and not just the count and weight. Never hesitate to refuse or send back inferior products—never.

5. Keep a log of the prices you pay so you can refer back to it when necessary.

Number 3 above is extremely important to turning shopping into a profit-making exercise!