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As we all should know by now, catering is complex. Our consumers are savvy and our franchisees are already overwhelmed. We need control, precision and scalability to successfully implement any off-premise catering business out of our restaurants.
In my last post, Catering in a franchise ecosystem, I wrote about the disconnect I'm seeing between franchisor and franchisee ecosystems. This disconnect, I believe, is leading to fragmented franchise systems when it comes to growing catering sales on top of current franchisee assets.
I also made the point that with a centralized catering model, franchisors can bring control and leadership back into their system.
The use of centralized services will enable ecosystem efficiency through control points and proper inflection during the catering service process. How else can we create symbiotic silos of responsibility using catering experts and specialists? Volume through centralization will drive specialization. When it comes to successful catering, specialization is key.
Once we have this infrastructure, we can really turn on the catering jets and push our energy into a system of sound business logic. This is when we can mitigate our service risk and rest comfortably in the knowledge that we have taken a complex set of business challenges and brought them to the most common denominator for guaranteed service execution.
We will then be in a position to grow sales as franchisors and franchisees if we can execute on something so fantastic.
Why decentralized services can be dangerous
My experience with decentralized critical control points for catering has been negative. It's difficult to not only control the conversation with the consumer, it's also difficult to train and scale because of the complexity of the transaction and the complexity of operations.
As a franchisor, if we really dive deep into the analysis, we will see how inefficient and expensive the distributed catering business model really is. However, nobody worries about it because the financial impacts of these costs are distributed throughout the operational ecosystem. So even though there is substantial financial pain in the system, because the pain is distributed, nobody feels the whole. Risk and inefficiency are present even though, if done correctly, there are fantastic profit gains to be made.
Layer the high risk of failure in catering with consumers and franchisee frustration and now we have come to understand the long-term dilemma we have created for ourselves. If we continue on this trajectory, we will never experience the economic value and power that catering can bring to our organizations if we standardize and specialize.
As a community, we understand standardization better than any other industry. As a matter of fact, our industry is made up of 13 million workers, conducts more than $650 billion in sales in the U.S., and as a community, we have almost 1 million restaurant locations. We have spent decades systemizing and standardizing.
To create more wealth in our community, we must drive more sales. The only way to drive more sales is to serve new and changing markets. Catering will grow as the demand for convenience continues to grow. It's a natural progression for our industry and the only way we can grow new sales on top of existing assets is to find new standards and methods.
We need to make room for these sales and the only way to do that is to invest in smarter infrastructure. Like any business, long-term growth takes investment and commitment.
As a franchisor, do not worry about the addition of fixed costs for providing centralized services to our franchisees. Focus on variable costs to ensure that with each catering transaction we are making money.
Certainly we will have to slightly increase our infrastructure and overhead to experience incremental sales growth. However, the incremental fixed costs will be offset by the long-term profits made as catering sales increase across the community. We will receive our royalties as sales increase and that will far exceed our costs in the long run. In addition, as we succeed with our franchisees, they will support nominal service fees to help scale the program.
What's even more special, is that through an increase in sales volume using existing facilities, we will experience even more profit lift from our catering dollars as the flow-through of these sales will be substantially higher than our in-store sales. This is true especially if we value add our services for the consumer.
Let's talk catering!
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