The catering business has relatively low margins. The trend in the catering business over the last several years is to charge clients a service charge on top of the negotiated price per person for the meal. Assessing a service charge as a percentage of the total bill is the method many caterers choose to make their real money. Service charges range from about 15 to 22 percent. Charge your client based on the pre-tax amount of his bill.
Caterer Bill Hansen explains that if he didn't charge a surcharge, he wouldn't make a profit. The costs in the catering business are so high that if he had to depend on menu prices and the generosity of client tipping to pay his staff and his bills, he wouldn't be able to make a living. Most upscale caterers agree with him, and the trend has spread all over the country. The service charge covers staff tips, overages, and other soft costs.
Explain to your clients when you first meet with them that instead of tipping, a service charge will be added to the bill. Most people like the fact that they don't have to worry about tipping when they're caught up in their event.
You will need to provide staff to serve and clean up for parties. Most caterers bill clients separately for this and don't include the cost of staffers in their menu prices. If you decide to bill customers separately, you can bill them a flat rate, an hourly rate, or a percentage-based fee for servers. According to Catersource, the average national hourly rate is around $20 per hour per server, and the average percentage fee is 17 percent of the bill.
Labor costs will vary across the country depending on the local labor market. In a very competitive labor market like Manhattan, a waiter/bartender/butler will make $19–$25 an hour, with a four- to five-hour minimum. This means that if the event is shorter than four to five hours, the caterer is required to pay the staff for the entire shift. Highly experienced staffers working as shift captains will make $30–$50 per hour.
Surcharges Charging your client a surcharge for a special service or a large unexpected cost out of your control is perfectly reasonable. If a client wants a dinner party in twenty-four hours for 100 people, for example, you should charge an “expedite fee,” since you have to drop everything else to do her event.
Credit Card Fees
If a customer wants to pay by credit card, make sure you charge him a credit card processing fee. Check with your credit card processing company to find out what the fee will be, and charge that fee to your customer. If you don't, you'll be losing 1–4 percent of the invoice right off the bat.
Credit card fees vary depending on the type of card used, the amount of the charge, and the processing company used to transfer the monies.
Pricing Outsourced Items
There are times that you may want to offer an outsourced item at cost to a solid repeat client. In general, though, since you're hiring the outsourcing vendor and arranging for the special cake, flower arrangements, or chocolate fountain, you should be compensated for your time. Charging 10–15 percent over the price the vendor charges you is reasonable. Charging 30 percent or more is greedy. Remember, you want to provide this service as a convenience to your guests.
You can charge a corkage fee per bottle for wines the client buys. Corkage fees vary from $5 to $15 per bottle, depending on the cost of the bottle. Corkage fees cover the cost of training your staff to serve alcohol in a professional and responsible manner.
In catering, every little fee adds up — both the fees you pay to run your business and the fees you charge your clients for your services. It is up to you to scrupulously record your exact costs and adjust your prices if you need to.