What is the Typical Profit Margin for a Caterer?
A caterer, like any other business, has to make a healthy profit margin if it is going to cover its overheads and grow for years to come. The typical profit margin for a caterer is hard to predict simply because it depends entirely on what sort of events the caterer specialises in; assuming it specialises at all.
Without fixed premises, in most cases, caterers can expect their profit margins to be higher than other businesses in the food industry. In this article, we examine this complex subject.
Not as High as you Think
Most caterers will make a small amount of money on catering equipment in the UK. They will often hire it out at roughly the same price as they paid for it. Most of the money comes from food. They buy food on a wholesale basis and mark it up. This is where the vast majority of their profits come from.
Bigger caterers will also make a significant amount on labour costs. For example, hiring out waiters will involve paying a larger amount on the part of the customer to both cover the wages of the waiters and the services they provide. Take note, most people who work in the catering trade are on minimum wage and little more.
In total, you can expect a caterer to make about 10% in profit. This is not as significant as you think.
Variables
There are variables that affect profit margins. In many cases, specialist equipment will lower profit margins. Few catering companies will ask the customer to pay more for specialist catering supplies in the UK. The catch is that most catering equipment suppliers will charge huge amounts for specialist equipment.
Another variable is specialist dietary needs. Wholesale food businesses will provide huge discounts on common meats and vegetables. They will not do the same with gluten-free and soy-free foods. If you are catering for a wedding and you have to offer these special dishes, it is often bad for business to simply pass these increasing costs onto the customer.
Caterers realise it’s not as simple as passing higher costs onto the end user. They have to weigh up whether increasing their prices for certain packages are going to affect their ability to beat out their competitors for business.
Wastage and Inefficiencies
There are always hidden costs you cannot take into account immediately. These could include repair costs and any disasters that might occur during the running of a catering package. Again, it’s considered bad for business to pass these extra costs onto the customer, especially if it’s a problem on your end.
Wastage and inefficiency can cause big hits to the profit margin. This is why if not everything goes off correctly it can lead to a caterer seeing their profit margins wiped out completely. This is why caterers must plan so meticulously before beginning any new job.
In conclusion, caterers must tread a fine line when determining their prices. With this highly competitive industry relying completely on efficiency, its vital caterers have well-trained staff if they are going to maintain healthy profit margins.
