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Wednesday, July 12, 2006

Caterers: Unappetizing Pricing

Catering is expensive. At some point or another you will be in charge of planning a very important special event and most likely you won’t be able to prepare and serve food for dozens or hundreds of hungry people. Caterers know that and won’t let you forget it. Because there is not necessarily any relationship between the price you pay for catering and the quality of the food or service, it is your duty to do a little investigation in order to avoid unpleasant surprises.


The catering industry is very competitive and believe it or not, many caterers operate on slim margins. The initial investment in kitchen cabinets and appliances can be substantial, and then each event comes with its own costs for food, labor, equipment rental and travel. Caterers need to keep their prices in line with other caterers of similar size and reputation in the area and so it is understandable, although not acceptable, why many caterers cut corners or just plain lie to your face to increase their profit margins.

In complete honesty there are hard working, honest, amazing caterers that want nothing more than to make your event out of this world. However in every industry there are those with no conscience and this article will help you to recognize both.

What it costs:

Depending on the size of the affair, a client would hire a caterer between two weeks and six months prior to the event. When the client feels comfortable with the caterer he puts down a “date deposit” to reserve the caterer for the event while he works out the details of the event with the caterer. The date deposit can be between $100 and $500 depending on the size and date of the event. It takes between a week and a month to finalize the details and agree on a contract, depending on the size of the event. Usually 50% is due upon signing regardless of when the contract is signed (for a wedding this could be six months before the wedding day) and the other 50% is due around the time of the event – frequently the same day.

Catering is quoted at a fixed price per person. Full-service catering including rentals, food, servers, travel and non-alcoholic beverages generally ranges from $20-$150 per guest. Alcoholic beverages are usually priced separately, or included in an enhanced beverage package. Caterers who do not include any beverages or rentals may start at $10.00 per guest. Usually a large catered event such as a wedding for 150 guests can run anywhere from $2,500.00 all the way into the tens of thousands, making catering one of the largest event-related expenses – for weddings catering is usually estimated at 15 to 20% of the total cost.

What your own price will be depends on how much the food and labor will actually cost the caterer, how much money the caterer thinks you are willing to spend, how busy the caterer expects to be at the time of your event and how large and prestigious the caterer is. The actual cost to the caterer depends primarily on what kind of food you order and how much service you will require. For example, pasta costs less than filet mignon and a buffet requires far fewer waiters than a sit-down meal with several courses. If you’re deciding between a buffet and a sit-down meal ask the caterer to give you price quotes on both so you can see the difference in price.

The venue is also a substantial factor in determining the price. One of the first questions caterers will ask you is where the event will be held. The more famous and exclusive the venue, the higher your price will be. Tell the caterer that you are not sure yet what the venue will be but let them know the general geographic area. Once you’ve negotiated a price and seen the contract you can disclose that you’re representing Bill and Melinda Gates in planning for their anniversary party at the Ritz.

When you hold your event makes a huge difference in the price. If the caterer has nothing else to do, you’re going to pay bottom dollar. If the caterer has a few people seeking her services on the same night you’re going to pay top dollar. Generally speaking, the weekends are more expensive than the weekdays, dinner is more expensive than breakfast or lunch and the summer is more expensive than the winter.

The size and prestige of the caterer makes a big difference, as well. Caterers know that having the event go well is extremely important to you and that you’ll pay extra to know that it is being done right. Large caterers are frequently less capable than small caterers but people don’t realize that and so they pay an arm and a leg to work with a name brand.
Small caterers know that they’re at a distinct disadvantage as far as trust goes and they’ll often go out of their way to give you lower prices and better quality, which they can do since they don’t have to deal with labor unions, employee health benefits, payroll taxes, overtime and all the other components of overhead that are unique to larger companies.

Other less important factors affecting the cost will be the extent of the menu (the more variety, the more effort required for preparation), the travel time, the length of the event, the amount of dishes and other equipment that will be required, and the amount of set up and cleanup necessary.

The Caterer Says:

“Let me take care of every detail. I will make planning this event painless, and I will have no problem working within your budget. We may need to bend it slightly by 5% or so. I have a vision that your event will be spectacular. I am thinking filet and halibut, oh yes a carving station, and at least 10 servers. Let’s get the contract started and I need your date deposit. Let me work on the proposal and I will get back to you within a week. You can make the check payable to “Service Provider” we will be in touch. This deposit is not refundable.”

The Snitch Says:

"She’s setting you up for the standard sucker-punch of the catering industry – promising you an amazing deal to get you “hooked” and then trying to fast-talk you into signing a contract laden with hidden charges. Don’t even consider signing a contract until you’ve worked out all of the details with her. When she learns that you are not going to supply your own silverware and dishes or serve all the food yourself, the price will go way up. Doing your homework, and knowing the prices in your area can save you a lot of money. You need to have a frank discussion about each detail and have her justify her costs.

One of her best income sources is people like you defaulting on deposits. Deposits are a huge way caterers make money without spending money. The date deposit is a non-refundable payment of $100 to $500 given well in advance of the event date and prior to negotiating the contract with the caterer, so people walk away from the date deposit all the time. During the contract negotiations she will reveal that the price will be significantly higher than her original quote. If you have plenty of money then you can just smile and nod with each new expense and everything will be alright. You’ll get your food and she’ll earn a nice profit. But if you already committed to spend every dime you had in reliance on what she told you before you put down the date deposit then you’ll go find someone else, letting her keep your date deposit.

‘But that makes no sense’ you protest, ‘even if she catered the event at the price she originally promised, she would still make a lot more money than if she just kept the date deposit and let the client go elsewhere!’ Well, yes, and that’s why last week she booked three other clients for the same time slot that you reserved her for. She knew that there was an excellent chance that two or three of you would forego your deposit and one or two people would pay the extra money. In the event of such an “accidental” overbooking, she would then just hire someone else who charges less to handle your event and she would make the difference as profit.

While we’re on the subject of deposits, the date deposit is just the beginning. Once you and her agree on the details of the event (buffet vs. sit-down, filet mignon vs. pasta, etc.) you will be presented with a contract to sign. Upon signing, you will need to put down a 50% deposit, of which only half is likely to be refundable if you need to cancel, and then only if you cancel within the allowed period under the contract (usually two weeks to a month prior to the event) and for a reason permitted under the contract. Deposits are not regulated in any way. The terms upon which you might be able to get a refund upon cancellation are determined by the contract and you have no other recourse – so read the contract and negotiate this point if necessary.

So, well before the event you will have paid at least 50%, but if more than a few weeks prior to the event she asks you for additional money, know that she is taking advantage of you. She does not need the money at this point to buy food or reserve rentals. Most caterers have an operating budget to carry small costs up until a few weeks before an event.

Another way that she is likely to take advantage of you is by tacking on all sorts of miscellaneous fees that really add up, such as cake cutting fees and corkage fees. If you are already paying for labor, then why should you pay on average $.75-$1.00 per person for cake to be cut? Similarly, if you supply your own wine or champagne, you should not be penalized by having to pay the caterer her lost profit on the alcohol through a corkage fee. Corkage fees range from $2.00-$9.00 per bottle, but can be significantly higher when you use the in-house caterer at an expensive venue.

As a side note, you can get hit for corkage and other miscellaneous fees not just by the caterer, but by the venue itself. So ask the venue about any fees that you will incur for using an outside caterer if you choose to do so. Here’s a story for you demonstrating how I learned this the hard way:

One time I stayed at the venerable St. Regis Hotel in New York City and had a cocktail party in my large suite. I asked the butler to deliver cocktail glasses to my suite, which he did. He apparently also counted the bottles of liquor when he wheeled the glasses into the room. The hotel charged my credit card $80 per bottle as a corkage fee, totaling about $1000. Needless to say I came back for a meeting with the hotel manager, who had the catering manager with him.

The hotel manager explained that the catering workers and the butler are in the same union and that under the hotel’s contract with the union, the union has the exclusive right to serve alcohol on the premises and so the hotel would not reverse the charge. Then the hotel manager left the room and the catering manager suggested that he’d like to step outside with me for having the nerve to bring so much alcohol into the hotel and cheat the in-house caterer out of its rightful profit.

So if you ever have an event at the St. Regis you might as well use their caterer since you’ll be paying for it, anyway.

Getting back to the main point of the article, let’s talk about the venue’s effect on pricing.
Typically, one of the first questions a caterer will ask is where your event is going to be held. Many events are held in affluent areas at expensive venues and she might assume that you have enough money to pay a higher price. To avoid answering this question, mention that you have not decided on a venue yet and to please send an initial estimate without location information. Then when it is time to tell your location she cannot skyrocket the price without good cause.

Another classic catering sucker-punch involves hidden fees for renting dishes, silverware, glasses, napkins, and tablecloths. Typically, people are so concerned with choosing the optimal type of food and service that plates and utensils never cross their minds - and if it does, they just assume that the caterer will take care of it. The caterer hooks you at the beginning by quoting a low price for great food and service, and by getting the date deposit. It is only once you’re hooked that you learn about the additional fee for plates and utensils. If she can get you to sign the contract and give your down payment before popping this huge fee on you, rest assured she’ll do that.

When you’re negotiating the contract, if you do not see the breakdown of additional costs such as equipment and utensil fees, ask for one so that you know what you will be expected to pay for. Between $8.00 and $15.00 per large tablecloth is fair. If you see that they charge $20.00 or more for a tablecloth then that should be a red flag. Plates and napkins should be under $1.00 per person. Silverware is usually less than $.50 per piece. Some companies do not have these items on hand and rent them for you, but they may tack on extra money for pick up and drop off. Make sure this amount is fair and not a quarter or more of the entire rental cost.

I’d like to take a minute now to reiterate what was discussed above about the difference in overhead between large and small caterers. Large caterers have large overhead expenses so you are not going to get a deal from them under any circumstances. Their bottom lines are going to be much higher than those of the smaller caterers who do not have such hefty employee, insurance and equipment-related costs. A large caterer is no more capable of providing good service than a small caterer so there really is not much justification for using a large caterer unless you’re a corporate buyer and you’re just in safer territory politically by using a big company. Most big catering companies will not touch a job for less than $5,000."

Protecting Yourself:

First, you must shop around. Every caterer is different and therefore they offer different services at different prices. Knowing what you are looking for is extremely important. Sit down ahead of time and plan an outline for your event. For example know if you need plates, tables, chairs, etc. and then target a company that supplies this with their food. Know whether you are looking for buffet or sit down style service. Think of what type of food you want such as California cuisine or Asian fusion. Always set out a budget a head of time. Think about how many guests you plan for, say 150, and then you can set a budget per person such as $15.00 per person plus gratuity and sales tax. As you obtain proposals find a company that fits your budget, your rental needs, your service needs, and has good quality food.

Returning phone calls and e-mails should be a priority for any catering company. Expect to have a return call within 48 hours and a returned e-mail within 72 hours, latest. This is more than enough time to get you the information you need. If the company is bad about returning messages think what stress this can add at the last minute when you need their attention fast. You are the client and they are working for you so make sure they do it in a timely fashion. Good customer service should be as important as good tasting food.

Find out about their sanitation habits. It is very important to know where they get their food and how long is it on hand before your event. Make sure to ask if they have a certified commercial kitchen. Many caterers just cook out of their home kitchen, where sanitation standards are far less strict.

Make sure everything is purchased not more that 72 hours before the event. And let them know that you don’t want the leftovers from the wedding they did the day before. Legally the caterer cannot package up the food that had been sitting out on the buffet - they must toss it - but the food in the kitchen yet to be served should end up with the client at the end of the night. You bought it and it is your property.

Free tasting should be offered by every caterer. You can expect to be offered to sample at least two items for free. The tasting is usually held at a caterer’s kitchen. This gives you an opportunity to see the kitchen she works out of and how clean it is. You also can determine how tasty the food is before you hire a caterer. Never sign a contract before you know if the food is worth paying for.

Make sure the caterer has sufficient insurance. Most obtain a one million/two million policy which means that their insurance will pay up to one million dollars per occurrence twice a year. It is honest practice to have this just in case an unforeseen problem occurs, such as fire damage in a kitchen, or an outbreak of food bourne illness. Ask to see a certificate of insurance to verify this. You also want to ask to see a business license to make sure that they are running 100% legit!

Just Because You Were Curious:

Caterers can gross any where from $100,000 into the multimillions each year, depending on the company’s size and ability to cater more than one event per day. Most caterers run at 20-30% profit, 25-35% food cost, 15% labor, 10% overhead, 10% rental and equipment costs. Most caterers do 5 to 15 events per week.

Posted by admin on 07/12 at 10:52 PM



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