For the first time in history, consumers will spend more money with restaurants in the U.S. than they will on grocery—think about that. We are now seeing a change in how consumers interact with restaurants, with technology being at the forefront of these changes.
What is important to understand is that your customers hold the power of ordering within their own hands. It’s a brand new dynamic that creates a very complex operating environment for the restaurant industry as a whole. As we go along in the conversation today, understanding the complexity that sits with the restaurant operator is critical to building out a new, successful restaurant catering strategy.
Catering has to be defined for your brand, and that means taking a look at what already exists within your restaurant portfolio offerings. This process starts with creating new consumer solutions on a menu level. For example, when you compare a platter of sandwiches versus a sandwich in a bag, there’s a very clear differentiation in packaging, product, sizing, and price. And it’s imperative to get each one right.
The key is to develop new customer solutions that leverage the same raw ingredients and idle assets already at work within your restaurants. This will deliver an incremental revenue solution set so that you can scale your sales across all channels, such as retail, takeout, catering, drive thru, and so on. Additionally, online ordering and automated ordering are changing the entire dynamics of how customers are placing their orders. So, it’s also important that restaurant operators drive customers into the right ordering channels.
Catering Channels: B2B & B2C
As of right now, there are two ordering channels to consider: the business to business (B2B) channel and the business to consumer (B2C) channel. Everyone thinks B2B is the golden nugget, but the truth is that maximum sales potential is on the consumer side. Why? Because the data shows that $19 billion to $20 billion is spent on B2B transactions, while $23 billion goes to consumer catering. Of course, the brand has to execute at the business to consumer level to capture these sales dollars. Therefore, the business logic, the step-by-step workflow of how you take an order, what you do with an order, how much food you make, and knowing where the delivery is going all needs to connect.
Who’s Doing Catering Well?
Catering is still fragmented among the independent brands, although there are many brands doing this well. The big question is: What does it look like at scale? The early adopters of catering as a new sales strategy, such as Boston Market, know what the strategy is all about. Panera Bread absolutely understands the strategy and they’re doubling down on the technology and on catering itself to make it a success. However, there are still a lot of short falls within these companies as well, as there’s a disconnect on technology, there are talent issues, and more. While they are investing at a very strategic level because they understand what’s coming in the future, they have yet to figure out what is going to work at a level that is consistent, scalable, and factors in delivery.
The data shows that delivery is key to off-premise sales success, and that’s a huge area of interest right now for our entire industry. However, there are still many unknowns surrounding the best ways to make delivery work. This is because third-party contractors, such as Uber, DoorDash, and Postmates, have disrupted the space, and their involvement is creating an oppositional dynamic further complicating delivery services. They need to make money and are finding innovative ways to cut into their portion of off-premise profits. Margins are being eroded for restaurant operators as consumers push down on price and are unwilling to pay high costs for delivery service charges.
For small-value orders in the delivery space, we will have to wait and see if restaurant operators need to deliver the orders themselves or if there is a market for third-party services to represent the brand, execute properly, and still make everyone money.
All of these issues, of course, are being driven by new and emerging technology tools designed to make off-premise sales easier to access.
To become a success, brands that have invested heavily in their off-premise channel should review their technology investments and options to ensure they have a solution that handles the catering execution of their business. The infrastructure has to be there to execute at volume and so does organizational transparency.