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Food Delivery Takes Bite Out of Caterers' Business

Monday, December 11, 2017  
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'Tis the season for elaborate desserts and upscale confections. But there's another reason Calihan Catering has launched a line of holiday goodies, ranging from $24 for spiced popcorn to $150 for a caramel-covered cream-puff tower, available for pickup at its Goose Island central kitchen.


Sales at Calihan are down about 20 percent, partly due to the proliferation of services such as Grubhub and Grubhub for Work, Amazon, UberEats and DoorDash. "This is a new problem," says Nash Calihan, president of the 30-year-old firm. Caterers "didn't really think drop-off delivery food would affect their business, but it has," he says. Calihan hopes the fancy foodstuffs will rack up sales of $10,000 and wow a dozen new people into becoming catering customers.


Whether it's a nibble or a chomp, catering companies citywide are seeing delivery services bite into their businesses. These services enable restaurants to enter the catering market easily and with little overhead: No need to build an ordering app or hire drivers; all that's needed to deliver is there, for a fee, and in droves.


The restaurant industry has targeted what it calls off-premises dining—food purchased from a restaurant but not eaten there—as a growth vehicle. In 2016, 25 percent of quick-service restaurants and 21 percent of fast-casual restaurants said that diners eating away from their restaurants would account for a bigger share of business than in 2015, according to National Restaurant Association research. For 2017, 45 percent of quick-service and 51 percent of fast-casual restaurants expected to expand the off-premises side of their business.


Calihan Catering's holiday goodies.
Calihan Catering's holiday goodies.


The real threat is to caterers who do small drop-off corporate lunches, says Julie Novack, founder of PartySlate, an online marketing platform for event professionals and consumers in search of their services. In the face of this competition, "all these companies have to do a better job of marketing themselves," particularly their expertise in menu planning, delivery and setup, and order accuracy, she says.


Novack operated PartySlate out of 1871 in 2015 and 2016 and once used a delivery service to order lunch for a 20-person client meeting. The salads arrived with no dressing. "It sounds like a small thing but to be honest, it was embarrassing," she says. These days, when a deal is on the line or the gathering involves 20 people or more, Novack goes with a caterer. "The big differential is the size of the group and what's riding on it," she says.


Business overall is up around 8 percent to $10 million annually at Tasty Catering, a family-owned catering firm in Elk Grove Village, but it is losing market share "to restaurants who portray themselves as caterers through delivery services," says Tom Walter, chief culture officer. The corporate clients choosing to go with Grubhub or another service do so because they say their clients are requesting it. "Clients at meetings want to use their favorite restaurant," Walter says.


Walter says Tasty Catering has begun to market the fact that there's a difference with regard to a caterer, a restaurant and a delivery service. "We are not UPS," he says. "We are a catering service with drivers who are certified sanitarians, who understand food-safety issues."


Grubhub drivers, who are independent contractors, don't receive special training in food safety or sanitation. But Grubhub Chief Operating Officer Stan Chia says, "We make sure they know how to operate on their platform." Chia describes Grubhub as a "marketplace" that connects restaurants and consumers, or in Grubhub for Work's case, corporate clients. He says that Grubhub for Work clients include caterers that, once the order is placed, fulfill it with their own drivers and service personnel. "We connect with caterers to drive demand," Chia says.


Overall sales are up at Chicago firm Catering by Michaels, but delivery businesses are nibbling at its corporate-lunch drop-off service, says David Sandler, executive vice president. "There is opportunity for these (delivery) companies to take a chunk out of market segments for the catering industry," Sandler says.



Catering by Michaels, with annual sales of $15 million, tried offering its catering menu via a delivery service about 18 months ago. "Customers hated it," says Jeff Ware, director of operations, who declines to name the service. One client ordered some intricate dishes and inadvertently didn't allow enough setup time before the event. Catering by Michaels caught the error and fixed it before it turned into a disaster for the client, Ware says. The company abandoned the delivery-service experiment after three and a half weeks.


Other businesses are taking proactive measures. Jewell Events in Chicago operates Jewell To Go, which provides drop-off catering services for corporations at an average price of $16.50 per person. It accounts for about 15 percent of business and has been growing steadily, says Greg Jenkins, president of Jewell Events, which does about $20 million a year in sales.


Jenkins says the company trains salespeople to tout the benefits of using a dedicated catering firm and has also increased its use of technology to meet clients' needs. One addition is a customized online ordering portal, which enables regular customers to order online quickly and easily. That system launched two years ago and now has about 15 users, Jenkins says. Jewell To Go has also "pretty significantly" expanded its menu to accommodate the growing sophistication of the American palate, including the addition of bento boxes and a street-taco bar for breakfast.


He says the corporate world's move toward more casual meetings and entertaining has helped delivery services cut into the catering business. "They're now into this drop-off environment," Jenkins says. "The white tablecloths are going away." Presumably, paper plates and napkins are taking their place. - (Crain's Chicago Business)


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