A veritable feast
Outsourcing your catering can seem as tricky as getting the perfect rise on your soufflé. To help simplify the process STEPHANIE CLIFFORD-SMITH breaks down the two pricing models.
Picture this: your company has decided to tender out catering and the project has landed on your desk. There’s a lot riding on it too; the culture of your entire company is reflected in the hospitality you provide to clients and staff, an impression that’s set the moment they step out of the lift. Faced with this assignment, Carly Cumming, general manager of Sydney catering company, Gastronomy, says a facilities manager will be choosing between two pricing models – ‘per plate’ and ‘cost plus’. It can be confusing and your decision will depend less on the bottom line and more on your company culture.
“The options are similar to those in the building industry (fixed lump sum and cost plus) and both models have their time and place,” says Cumming.
In a ‘per plate’ model the caterer quotes and charges a set price for each product. It works the same in a restaurant, when there is a set price for a two-course lunch or a sandwich.
“This model is great for certainty of costs and where the company culture works on a user pays system; i.e. where every item ordered from or through the caterer is charged to the cost centre or department that used it,” she says.
Unlike in a restaurant though, when you order a ‘plate’, the costs of waitstaff to serve, set up and clean up are added separately, according to the level of service a user is looking for, which may not be clear to the end users whose cost centre is being charged.
Similar to the system within the building industry, a caterer will provide a quote for an assumed level of service. Any variations to the initial service can be more expensive, so requesting to use alternative sub-suppliers or increasing staffing levels can result in potentially increased costs.
“An advantage with this model for your company is that the caterer carries the risks of shrinkage. That said, they’ll also get the benefits of economies of scale in growth phases,” Cumming says.
Companies that either subsidise services or want flexibility to direct service levels and quality tend to choose the ‘cost plus’ option, Cumming says.
“Subsidised models are where a company is prepared to pay to increase service levels or where the catering is used as a staff benefit and therefore sold at lower than market rates,” she says.
Sometimes a company will want greater control and this model also allows for this.
“For example, you may have sub-suppliers and products you want the caterer to use. You may have an existing preference for grass-fed beef from a supplier in the Hunter Valley, and want the caterer to continue using that beef, not the beef they would use as a standard in their two-course pricing.”
This arrangement operates with the caterer on-charging all inputs plus a management fee. Say your organisation needs coffee and cake for 100 people, you would be charged for the flour, milk, eggs, coffee and sugar etc at cost, plus a negotiated percentage management fee and labour. In the ‘cost plus’ model the caterer negotiates to get you the cheapest possible price on, for example, milk and adds their margin. It’s still cheaper than doing it yourself and the caterer does everything for you and provides a consolidated invoice and reporting.
As catering use increases, the corporate gets the benefit of scaling rather than the caterer. Of course, this means they carry the risk of shrinkage too, so the decision needs to be in line with business plans and forecasts.
This model is commonly used, but isn’t without its complications. One risk is that some operators will tell the customer they’ll charge a lower percentage when, in reality, they’re getting rebates from their suppliers and not passing them on.
Cumming believes if you’re going to use the ‘cost plus’ model you need to have contract conditions requiring the caterer to either guarantee they’re getting no other rebate from suppliers than what they show the customer, or split profit sharing rebates with the customer. “Obviously that’s complicated, so transparency from the outset is vital,” she says.
WHAT’S YOUR STYLE?
Your answer shouldn’t be based on price alone. Your decision should be based on the culture, future plans and forecasts of your company and that of your catering partner – after all, you want a long-lasting partnership that makes you look good.
“Either way, like managing every other supplier, your relationship with your caterer depends on unambiguous communication, open channels and clear objectives,” says Cumming. “We can do everything from chips and dips one day to a 10-course degustation the next – you just need to tell us your brief.” ●
Stephanie Clifford-Smith is innovation manager at Gastronomy.
This article also appears in the August/September issue of Facility Management magazine.
Images courtesy of Gastronomy. Food created and styled by Gastronomy.