Catering franchises deliver, set up, and sometimes serve food for groups of people at parties or events. Catering franchises offer many different solutions depending on the size of the party or the nature of the event, from corporate gatherings to family reunions, weddings, graduations, or other types of get-togethers. Catering franchises can be a dedicated operation or part of a more traditional food franchise.
Food trucks are a growing niche that can fall under the heading of catering franchises. On their own, food trucks are already a growing segment of the food franchise industry, essentially operating as stand-alone restaurants that can change their location by the day. Now, especially after the pandemic, they are rolling into parties and events with food that people love, providing their customers more convenience while showing how versatile their franchise can be.
In addition, another closely related franchise area that sometimes gets paired with catering franchises is the emerging industry segment of meal prep franchises. As personal schedules get busier, people are turning more and more to professionals to help them come up with healthy, convenient meals. Many of these franchises provide their customers meal plans, and kits, for a week. Other options these franchises provide include grab & go options at designated locations and event catering.
The Re-Emergence of Catering
When in-person functions all but ceased to happen at times over the past couple of years, catering franchises were obviously heavily impacted. However, now that in-person events are on the comeback trail, including returns to office work, the catering industry is bouncing right back.
Per ezCater, a platform that allows for companies to manage all their food ordering, payments, budgeting, and reporting, as much as 85% of catering business stopped overnight when the pandemic hit. But now, demand is way up. According to a Modern Retail article, monthly orders on the ezCater platform were up 77% in just the time period from January to August 2022. The company reports have nearly 100,000 catering partners available on its platform, which is a nearly 30% jump year-over-year.
The increase in the number of restaurants on the ezCater platform is unsurprising. As the restaurant industry emerges from the doldrums of the pandemic, even food franchises that previously didn’t bank as much—or at all—on catering before are poised to make catering a prominent part of their business going forward to diversify their revenue streams.
Take, for instance, Subway. The sandwich franchise has been doing catering for over 15 years. However, as the brand has been going through a well-publicized refresh, it relaunched its overall catering program “with the return of in-office operations and in-person gatherings in mind.”
“We enhanced our lunch box bundles as part of our refreshed catering program, to allow our guests to easily select meal options without having to choose every sandwich variety or topping themselves,” says Jenn Saunders-Haynes, director of catering at Subway. To facilitate in its catering efforts, over 10,000 of Subway’s locations joined the ezCater Marketplace with the hope of making it easier for large groups to order.
An example of a franchise entering the catering space is Outback Steakhouse. In fact, Bloomin' Brands CEO David Deno (Bloomin’ Brands is the parent company of Outback and others) told analysts in the summer of 2022 that his team is “ruthlessly focused” on executing key initiatives, which include expanding catering. Per FSR Magazine, Outback launched catering nationally in April 2022, following the successes of sister chain Carrabba’s, which saw its catering channel sales rise 46% in 2021 when compared to 2019.
As Saunders-Haynes says, “The future is bright for catering, and research predicts significant growth in the coming years as the world continues to recover after the pandemic.”
Initial Investment and Opening Costs for Catering Franchises
The amount necessary to open a franchise varies depending on the unique business system and execution requirements.
The opening costs for a food franchisee can depend on many factors, including but not limited to: the franchise fee, land and building costs, training expenses (such as travel and living expenses, not the actual training courses), grand opening advertising and marketing costs, and more.
One of the most important variables in how much it costs to open a franchise is the type of franchise being opened and how big it is. Commonly, the two types of food franchise offered are traditional and non-traditional. Traditional franchises are usually the biggest option. They are typically standalone buildings where the service of the franchise is the only business offering. Non-traditional franchises are smaller, and typically located within another building like airports or gas stations. Other food franchise types include kiosks, trucks, and satellites.
Most often, catering franchises fall into the latter category of non-traditional. In many cases, catering franchises are run from the franchisee’s home or from a small or shared kitchen facility, which lessens the amount of money the franchisee has to pay upfront to begin their business. However, some of the savings in that area may have to be put towards leasing or purchasing of a reliable vehicle, if you don’t already have reliable transportation.
Franchisors offer estimates in their FDD based upon their experience establishing, and in some cases operating, units. However, prospective franchisees should keep in mind these estimates are just that—an estimate. Prospective franchisees should review the figures presented with a business advisor, taking into consideration their unique circumstances, before making the decision to enter into a franchise agreement.
Ongoing Costs for Catering Franchises
Throughout the length of the agreement there are costs for being a part of the franchisor’s business system. These costs include items such as royalty fees, charges for technical support, and continued advertising/marketing costs.
The most common is the royalty fee. Royalty fees are assessed for the continued use of the franchisor’s trademarks and patented processes, along with certain types of operational support. In addition to regularly assessed fees, other fees are charged on an “as needed” basis such as audit fees, or costs for additional, non-mandatory, training.
For catering franchises, franchisees should pay special attention in factoring into their budgets upkeep of their vehicle(s) and kitchen maintenance. In addition, it’s important to note that while many initial and ongoing costs are detailed in the FDD, there are some costs inherent to business ownership, like employee wages or utility costs, that aren’t.