Discussion Point For Your Next Sales Meeting - #4

Tipping the Scales to Make the Sale

A prospect seeking a caterer for a major event is looking for more than just menus. They are looking for a caterer that beams the level of professionalism they want. Most catering events are major purchases for buyers. Many weddings cost as much as a car! They can drive away in the car and resell it later if they wish, but the $20,000 event is gone forever the next day.

Once the shopper gets four or more responses from the caterers they contacted, they can sit at their corporate desk or around the home dinner table to inspect them under a microscope in privacy. This is why your response to the shopper must offer the information you wish them to get and an image that will beam your professionalism and quality. Not an easy task.

The easiest way to stand out in the stack of other proposal/bids is to look different and present the information in a unique manner. Your initial goal is not to be the winner, just to make the first round of cuts. The shopper, just like a person buying a tie or a sweater, needs first to remove the catering companies they have no interest in. When the stack is down to only two or three, the real shopping begins.

Please discuss the ways that your company can create advantages over the competition.

Sales Tracking By Order Size - Some Deep Thinking!

A caterer sells an incredible number of different product lines. Each one has different joys and problems associated with them. For example, a simple box lunch has different “manufacturing” requirements than a cocktail party. For that matter, a simple box lunch has a different impact on the business when it is for a group of 200 instead of for 20.

Speak with your accountant, or a selected member of your team, and begin to keep track on what you are selling by product line and order size. You will be amazed by what you learn. It will bring you much closer to both your food and labor costs and increased profitability because it may show you what you need to consider removing from your product lines or what you need to do about your minimum purchase policy.

Examples of Product Lines:

V.I.P. Box Lunches • Regular Box Lunches • V.I.P. Cold Buffets • Regular Cold Buffets • Self-Serve Breakfast • Full-Serve Breakfast • Cocktail Events • Weddings • Bar Mitzvahs • Picnics • Plated Dinners • Dinner Buffets

Notice, that if your company sells more than one kind of box lunch, then these are different product lines and need to be tracked separately.

As to size of order, I suggests that, in the beginning, you break your tracking down into groups of ten till you get over 100 and then group by 50 guests. For example, track each product line sold to clients in ascending groups of ten i.e., 10 to 19, 20 to 29, 30 to 39, ... and so on up to 100. After 100 track by groups of 50. You track sales by simply making a mark in the correct column. A box lunch for 26 guests would be marked in the column 20 to 29. When your tracking for a past month is down on paper (or excel spreadsheet), you can see the totals for each column.

After you’ve finished your tabulations, you will be able to see amazing ratios between what you are selling and your food and labor costs in the kitchen.

Be particularly aware of the following ratio:

Product line success = ratio of product line unit sales to monthly sales volume. In other words, how much of the company’s energies were used to create what percentage of the volume. Next, you will wish to review each product line breakdown to see what size orders are making up the total number of unit sales.

You may find such ratios as – only 12% of your monthly sales volume results from 55% of your labor costs in the kitchen – which is not a good thing! Or, you might find that simply by raising your minimums for certain product lines, you will increase your profit and lessen wasted labor hours in your kitchen.

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The Cost-Plus Pricing System - A Unique Way To Bid

Do read this post if you wish to learn about a unique way to move from your normal pricing methods into a bold pricing structure... especially when you’re dealing with a difficult customer or a giant company’s multi-day catering needs.

Let’s begin. It’s called “cost plus” in the same manner that contractors tell their clients that they charge “time plus materials”. So, a cement manufacturer might tell a customer “I’ll need to charge you for the cement you use, plus the labor I need to put it in place”.

In other words, in some catering situations, it is possible to tell a potential buyer “I could charge you a flat fee for my skills, as long as you reimburse me for the food and staff that I need to make your event happen successfully.”

Here’s the foundation of the cost plus pricing system for catering:

1. The buyer pays a predetermined flat fee based on a per person charge.

2. The fee is based on your need to capture your normal profits and gross margin. So, if you normally have a margin of 40% of sales, this is the formula you would use in deciding on what your fee, or plus, will be. As an example, let’s say you normally would charge $10 per person for a particular menu. In the cost plus pricing method, if your margin was supposed to be 40% of sales, you would charge the client $4 per person.

3. Now comes the cost. The client is told that in addition to the fee, or plus, they will need to reimburse you for all of your base expenses pertaining to the event. These costs are not marked-up and are based on the invoices that you receive from your purveyors.

So, if you purchased products that cost $365 from your poultry purveyor the client owes you $365. If you spent $265 with the produce purveyor, they now owe you another $265. If you used three bartenders and seven servers who normally get $100 per job, the client owes you $1,000. One caterer I know simply takes the customer shopping at a large price club, or at the market, and lets the client pay for all of the stuff that is purchased!

4. Finally, it is important to remember that you are simply packaging your price differently during your sales approach. In fact, the amount of margin you make is the same as you would if you used your traditional pricing systems. Now, when do you use this cost plus system? When the buyer is a friend who thinks you owe them a huge discount, or one that desperately needs to think that they are getting a “deal”. The cost plus system is ideal for any bid where you need to cater over several days, i.e a golf tournament, grand openings, training sessions, etc.

For example, say you are asked by a Fortune 500 type company to bid on a four day golf outing that would include three meals a day, full bar, snacks, and other undetermined food needs. The expected number of guests would be between 450 and 600.

Your preliminary figures tell you that the job would be billed out at between $200,000 to $300,000 when priced in your normal fashion. In fact, all of the other caterer’s bids will reflect these figures.

Why not be different? Take your 40% margin, or whatever your margin is, and offer your bid as a cost plus price. Your projected price of $300,000 times 40% margin gives you $120,000 margin.

You simply type into your bid the price in this fashion:

“ABC Catering will be pleased to professionally cater your golf outing for a one time fee of $120,000 plus the reimbursements of all our costs. These costs would be without any mark-up or increase in price. In this manner, you will be controlling all your costs for food, beverage and service. You will pay only for what you use, so you will not need to worry about paying for a guaranteed number of guests.”

Well, what do you think? Are you disappointed or glad that you read this post. Remember, in the example above, once you get your check for $120,000 dollars, why worry about how many people come. Obviously, you can put in extra safeguards dealing with minimum numbers if you wish. Give it a try.

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Preventing Kitchen Kingdoms

I hope I don't tick off anyone with my view below. I believe in what I have written, but I'm the first one to admit that most caterers don't have a problem with "kitchen kingdoms". It is important to remember that the problem could "creep" up on any caterer at any time so it is wise to keep looking for situations that may cause an unhappy kitchen.

The kitchen and its staff are really the indisputable heartbeat of any catering company. The kitchen is a complex combination of skills and egos. It is easy for a single person (often the owner) to crown themselves ruler of the kitchen.

This isn’t bad, but if the ruler becomes a dictator, problems are created. If the owner is the chef and becomes the kingdom-keeper, little can be done to prevent or cure the situation. I can’t tell you the number of times co-owners or spouses have called me in for consulting to deal with exactly this, but I have never had great success in solving this problem. When I’m there, everyone agrees that a kingdom is not good for the company and the person in question always promises to change. Once I leave, everything goes back to the way it was.

A hired staff person may take over the kitchens as an executive chef or kitchen manager in a dictatorial manner, but this should be avoided first of all in the hiring interview. Appropriate kitchen management needs to be part of the job description and discussed during the first and last interviews for the job.

“Chef, if you were to be hired, we need you to understand and agree that we are not looking for a take-over type of leader. Your job is to build a team with active participation by all the culinary staff. We are not seeking a dictator in our kitchens. We want our kitchen leader to maintain control through teaching proper procedures and exerting a mutual respect for everyone. If you need assistance in special situations, ownership needs to be involved. Do you have any questions on what we are seeking? Are you in total agreement with this policy?”

The goal is to have a kitchen that is based on company-wide policies and systems instead of power or personalities. During your interview, you can quickly get a sense of the candidate’s degree of understanding by learning about their views on having recipes written down or keeping them in their head. If they believe that their recipes are theirs and are reluctant to share them with others, it’s a good sign that they are a kingdom builder.

Some caterers engineer a situation during a chef’s employment interview where the interviewer is interrupted via the phone or with someone entering the interview room announcing a particular problem that just happened in the kitchen. The interviewer then asks the chef being interviewed if they have ideas for a solution. While this is a staged situation, you can learn a lot by how the interviewee chef responds.

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Your Cash Position - A Very Simple Explanation

Debt is a company killer. What follows is a simple answer to a complex situation. It should concern about 40% of catering businesses that are experiencing some of these concerns. As always, you may contact me to discuss the content of this post without paying any consulting fees. My desk phone is (773) 549-7210. Or, email me at mikeroman@cateringguru.com.

“What is the status of your cash reserves?” This is one of the first questions I ask when starting a consulting project with a new client. To a large degree, having the right amount of working capital determines how you operate your business. The owner’s cash position, lines of credit and overall personal wealth determine what they can and/or should do and not do.

Caterers whose businesses were undercapitalized from the get-go rarely catch up. They pay the costs of the materials and staff for an event from the customer’s payment or the deposits from future events. This pay-as-you-go mentality is adopted with the belief that “things will get easier” later. Sometimes they do get easier, but often the caterer simply digs a deeper hole of debt.

Many new caterers get themselves in an even more tenuous position because they begin to skip their various sales and payroll tax payments, which creates not just a deeper hole, but a valley of debt it is almost impossible to escape from.

One of the main causes for a poor financial condition is slow payment from customers. Sometimes caterers let customers take sixty or more days to pay their invoices. Very few professional services allow customers that much time to pay. The “keep the client happy” thinking of some caterers is to not rock the boat by insisting on quicker payment.

Caterers must resist overextending financially, especially if the way they hope to catch up is to somehow dramatically increase business. You don’t catch up by just booking more events—it may actually lead to more debt. Slowing down bookings, cutting back on staff hours and making quick or prepayment of events a requirement are the best ways to get back on track.

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Establish a User-Friendly Postponement Policy

In the aftermath of Hurricane Irene, it might be wise to "sell" a user-friendly postponement policy to your prospective buyers. A postponement is different than a cancellation. If you develop a fair postponement policy that clients understand, you’re likely to see fewer outright cancellations and lose less money. Clients never think that a postponement is permissible from a caterer until the caterer tells them it’s an option.

Postponements permit the client not to lose their deposit, which they tend to like. They must, however, confer with the caterer to set a new event date the caterer agrees to. When it comes to postponements, the caterer is in the driver’s seat.

Some caterers actually sell “postponement assurance” at the time of the original sale, giving the client the right to postpone the event with at least 48 hours notice. The fee charged is either a flat rate or per person. Many corporations booking for an outdoor picnic would be happy to pay an additional fee for the right to postpone if necessary.

Yes, this concept may seem negative for some caterers. So, think of it carefully before using it. My point is simply that  this is a method that has some usefulness. You can expect buyers to be concerned with this issue for a long time in the aftermath of Irene.

A Strange Selling Tip From Roman!

This post has been moved to CateringGuru.com.

Head over there to learn a lot more about catering sales!

Make Your Policies & Rules Part of the Sale's Presentation & Paperwork

Let buyers know and understand all your rules, policies and expectations during the selling process instead of describing them after the sale is made. Explain your rules and remedies in a casual and professional manner that lets the buyer see that you are aware that these types of things sometimes happen and, as a professional business, you have solutions and options for them if and when they do.

Examples of talking points would be deposits, guarantees, damage to property, overtime (if needed) for staff, and a bunch more. Some caterers simply place a sheet of paper (single page) in front of the prospect and explains them. Yes, one can get in "trouble" by doing this, so you need to think this out carefully.

What a caterer doesn’t want is for a buyer to say, "I didn’t know about this rule.” Or, “Why didn’t you tell me this before I purchased?” Often, the issue is not who is right or wrong when problems arise, but whether the caterer’s image will suffer as a client shares anger and disappointment with the community.

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A Basic: Your "Mission Statement"

Every company needs to clearly understand what business it’s in and what the company is trying to do. A mission statement is a concise declaration of a company’s goals and values. It sets the tone for what a catering company does and how it does it, every single day.

A mission statement also lets your staff understand what is expected of them. Catering owners and managers need to spend as much time thinking about their staff as they do about everything else. Every staff member has concerns, fears and frustrations with his or her job—even if they enjoy what they do and do it well. The mission statement helps bring clarity and confidence to your team.

An example of a mission statement:

“The mission of ABC Catering is to sell, produce and serve outstanding catering for the people of (city), while offering its staff opportunity for personal and financial growth and making a proper profit for the company.”

Notice that this mission statement speaks to opportunity and success for the caterer’s city, staff and clients plus the company’s bottom line. Help staff learn and believe in what the company does through discussions in both group and individual conversations. By establishing shared goals through constant communication, managers are able to make everything that happens at the company part of every employee’s responsibility. It is normal for staff to be part of and subject to gossip and misinformation on an almost daily basis. If you make sure they have correct information, it will help prevent any inaccurate or premature judgments that can complicate their contributions to the company and the company’s overall goals. Think through, understand and teach the company’s mission statement.

Your mission statement should be displayed prominently where everyone, including clients, is able to read it. Place it in a frame on your wall, print it on the back of your business cards, put it on your letterhead—or even on your invoices.

Discussion Points For Your Next Meeting - #3

The price of a hotel room depends on the size, style and location of the particular room. A room with a view of the beach sells for more than the exact same room looking at the parking lot. A room with a separate parlor is sold for more than the standard style room. A newly decorated room has more value than one that has not been refreshed. Can you see the ways in which a caterer can use the same type of logic as it applies to pricing?

Sample Copy for Contracts/Agreements - #5 - Miscellaneous

These are simply educational examples of possible contract language. Don’t use any of these clauses without approval from your attorney.

Miscellaneous

a) All food for the event must be supplied by (caterer) or a licensed vendor approved by (caterer).

b) If the venue does not provide garbage and recycling service, we will arrange for the garbage to be removed. Garbage removal prices will be quoted. Garbage or recycling materials may not be transported in (caterer) vehicles.

c) Gratuities are not automatically added to your invoice unless we are specifically instructed to do so. They are left to your discretion.

d) Exact amount due will be calculated after final count, exact menu, etc. is determined, ten (10) business days prior to the event. A 20 percent surcharge will be added if more than a 5 percent higher count arrives on the day of the event.

e) Should the host choose to engage outside vendors directly to provide decorations etc., it is the host’s responsibility to ensure that the vendor follows all fire codes, safety codes and health department regulations. The host will require the vendor to schedule a meeting a minimum of one month prior to the event in order to determine that the installation of decorations etc. will be allowed by (caterer). The use of rice, birdseed or confetti will result in a $200 cleaning fee.

f ) (Caterer) reserves the right to refuse service, exclude or remove from the premises any individuals who in (caterer) sole discretion violates the conduct requirements established by county and state laws. (Caterer) appreciates and expects the host’s assistance before a situation elevates to that level. The host’s cooperation to prevent underage drinking is requested. The bar will not be open beyond the end time of the event and in accordance with state law the bar must close no later than 1 A.M. and guests must leave the premises no later than 1:30 A.M.

g) Food put out for service but not consumed remains the property of (caterer). Wedding cake remaining is available to the host. No open bottles of alcoholic beverage may leave the premises with guests or host.

h) The following are prohibited at (the facility): an open-seating format for receptions, use of bubbles indoors, open flames, scented candles, use of silk petals outdoors, confetti and/or glitter. Aisle runners are strongly discouraged as they often lead to stumbles.

i) The state sanitary code prohibits us from providing “doggie bags” or leftovers for your guests. There is a concern about food borne bacteria. The exception to that rule is if we cater a function in your home. Providing that the food has been maintained in the safe zone (a state-mandated range of temperatures), we are allowed to transfer excess food directly to your refrigerator. Our staff is instructed to maintain strict compliance with this policy. Leftovers from events are donated to area shelters and homes.

j) We reserve the right to refuse alcohol to anyone who, in our opinion, appears to be under 21 years of age, cannot produce a legal ID or is intoxicated. Our discretion prevails. In such instances, the host will be notified and the situation will be handled tactfully and discreetly.

k) (Caterer) reserves the right to adjust pricing for any requests to alter or in any way change the menu after this agreement is signed. (Caterer) uses the highest quality product and vendors. Should there be a local, regional or national shortage or substantial price increase of one or more of the ingredients of the selected menu (caterer) additionally reserves the right to offer a comparable or equivalent substitute for the approval of the host.

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Had Some R & R Over The Weekend!

Bernice and I spent some time in Michigan over the weekend visiting some family and friends.

When visiting our longtime friend Bill Reynolds and Mary Hess at their summer home we were greeted with a wonderful dinner in their beautiful garden. This is something that I usually shy away from, but it was simply delightful. Even the "bug" gods were on our side. When a dinner starts with a Shrimp Cocktail first course, you know you are in the correct place!

That's Bill on the left, Bernice in the middle and yours truly. The photo is being taken by Mary Hess who made an amazing dessert for the dinner! Food glorious food!

One Way to Send Proposals That Blow Prospect's Minds!

When presenting a proposal for a major event try involving the shoppers five senses of seeing, hearing, touching, tasting, and smelling. Consider sending a box or package, instead of just an envelope or email with the written proposal and some linen samples that involve the shoppers sense of touch and sight. Add a few dessert items that will involve their taste and smell senses and an example of a sample place setting that will possibly involve their sense of hearing when it hits an object. This will separate your company from the others, who just send an email.

Sample Copy for Contracts/Agreements - #4 - Payment

These are simply educational examples of possible contract language. Don’t use any of these clauses without approval from your attorney.

Payment

a) An initial payment of $1,000 is required to reserve your date. One half the projected total is due sixty (60) days prior to your wedding. The balance is due seven (7) days before the event. If payments are not received at scheduled times, the event will not take place.

b) Weddings must be paid in full ten (10) days before the event. This payment will represent 100 percent of the estimated bill with any balance payable upon conclusion. A credit card number will be kept on file to cover any incidentals or for additional deposits or final payment. All payments are payable to (caterer). Checks are required for the original deposit; checks and major credit cards are accepted for the 50 percent deposit and final payment. The 50 percent deposit and final payment must be remitted within ten (10) days of notification. Failure to pay will result in the credit card on file being charged in the amount owed.

c) At the time of booking, a $1,000 deposit is required to secure your date. This deposit will be applied against your final bill. This deposit is non-refundable. A second payment of $3,000 or an estimated 25 percent of your remaining balance will be due 90 days prior to the function. A notice regarding the second installment will be mailed. As above, this payment is non-refundable and will be applied against your final balance. The remaining balance is due one week prior to the function. We will bill you after the function for any additional expenses incurred the day of your event. Deposits and final payments may be made by cash, bank check or credit card. We accept Master Card, Visa and American Express.

d) Client agrees to pay the final balance three (3) days prior to (date) by cash, cashier’s check or wire transfer. Full final payment must be received by (date).

e) Client agrees to pay (caterer) for any meals provided to musicians, photographers or any other persons retained by the client to provide services during the course of the event at the rate of 50 percent of the per-guest charge. Except for youth events such as first communions and bar mitzvahs, children ages 10 and under are also bill.

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