How to Add Catering and Prepared Foods to Your Grocery Business
September 16th, 2021
Prepared foods are typically the most profitable items in a grocery store, so many grocers are eager to expand that area of their business. But what does it take to add catering and prepared foods to your grocery business? In this article we will cover a basic process for grocers to follow to understand how to add this lucrative revenue stream to their existing grocery business.
Step 1: Understand your target market and business viability
Deep dive into your customer base
Develop no more than 3 customer profiles covering the types of individuals that frequently patronize your store(s). This is important because it allows you to understand their wants, needs, preferences and interest in catering and prepared foods. Detail your customer profiles, inclusive of the following information appropriate to your customer base:
- Buyer demographics (age, ethnicity, gender, marital status, income, education, and employment)
- Holidays commonly celebrated
- Local interests and/or seasonal peaks
Additionally, you could create a simple poll for your customers to be asked at check-out or another avenue asking anecdotal questions such as, would you purchase catering and/or prepared foods for this business?
After your customer profiles are complete, research competitors or similar brands with similar target markets to understand if they offer catering and/or prepared foods. You could start by answering the following questions:
- What is the extent to their offerings?
- Do they cater to local tastes?
- Is everything done in-house?
- What are their prices?
Ensure you also note what the other brands are doing that differentiates their offerings from others so you can begin to develop your own unique, standout selling points. After your research is complete, if you find your target market(s) would be receptive to a catering and/or prepared foods offering at your grocery business and like brands/competitors currently offer these services, then you’re on a good track!
Forecast your financial needs and project plans
Next, create Project and Financial Forecasting Plans to understand what it would take to develop and launch your offering. Templates and examples of Project and Financial Planning documents can be found via resources such as ProjectManager.com, Smartsheet.com, or through a simple online search.
In your Project and Financial Forecasting Plans, ensure you cover the following:
Outline the space, equipment, technology and manpower you would need to:
- Create the catering/prepared foods area in your store or the use of a central commissary kitchen; whatever makes sense for your business
- Consistently have supplies available to create your food
- Sustainably provide skilled employees to manage and run this part of your business
- Acquire and stock the items needed for catering (packaging, large quantity food preparation equipment, serving trays, delivery vehicles, etc.)
- Properly document, market and sell your products
Develop a budget forecast for:
- Equipment and supplies needing to be purchased
- Employees needing to be hired
- Current employees needing to be paid for their help
- Food needs to be sourced
- Any other overhead items specific to your business
Put together a project plan detailing:
- How you will take and manage catering/prepared food order
- How long it would take to prepare your in-store space for catering/prepared foods operations
- How long it would take you to receive any specific licences or approvals from your local health authority/governing body
- How long hiring or training additional staff would take
- How long it take to develop your menus and offering
- Your promotion and marketing plan to officially launch
Collaborate with your stakeholders
Meet with your important stakeholders to decide if undertaking this new business operation is truly viable. If you have an internal management team, take the information gathered in the previous steps (i.e. your business case) and discuss the final decision on adding catering/prepared foods to your business. If you and your team decide this is a viable business case, you may also need to meet with other external stakeholders, such as your accountant or lawyer, to provide additional support in expanding your business.
Step 2: Create your unique catering and prepared foods offering
How can your offering stand apart?
Understand what your unique food products could be either from your grocery business’s brand and/or from your target markets’ preferred tastes. For example:
- Are you an Italian, family-owned market?
- Do you serve a primary community, such as Jewish people, Hispanics or even a certain age group like Millennials?
- Is your brand known for offering only local, seasonal produce?
After you know what your unique offering could be, start to brainstorm menu options within that theme and feasibility of creating them with the equipment, staff and space you will have.
Begin dish development and test
Start small and test, test, test. As you are beginning your catering and prepared foods business, it would be wise not to start with a massive holiday, such as Christmas, which could overwhelm your operations and lead to unsatisfied customers.
Instead, you could start by offering a limited holiday catering menu to your customers, such as bakery boxes for Easter or steak dinners for 2 over Valentine’s day. You could even start with specific items, such as custom cakes, prepared family meals or trays of sandwiches. Test your newly developed menus/items by offering free samples in your stores or getting feedback from your employees.
Don’t ignore dietary restrictions
After you have your first menu, consider creating dietary restriction alternatives so you can capture a bigger audience from the beginning. These options could include:
- Gluten free
- Lactose free
Set prices for your items and services
Use your budget from Step 1 to create your costs for making each menu item, inclusive of raw ingredients, equipment, staff hours and space usage. Mark up your prices per industry standard in your area and be sure to include service charges for delivery, late cancellation, or other local ordinances.
Step 3: Sell your catering and prepared foods
Decide on your marketing and selling plan
Confirm what channels you will promote and sell your new catering/prepared food offering and the management process needed for them. Start by answering the following questions:
- Will you start only in stores with physical promotional material educating shoppers on your new offerings, hours and capabilities?
- Do you have a solid social media presence where you can promote your new offering and peak follower interest?
- Does your grocery brand have a newsletter or coupon/rewards mailing list you could promote on?
- Do you have a website or eCommerce website set up that you can add these products to?
Once you figure out your promotional and selling channels, write out your processes and procedures for taking and fulfilling orders via your various channels so you and staff can successfully manage them.
Set up payment capabilities
Ensure you have your payment or point-of-sale system set up so purchases are smooth. Linking up your financial accounts to a website or eCommerce system is quick and easy on most modern platforms. Point-of-sale integrations may take longer, so give yourself time to have these properly set up before launching and taking orders.
Streamline your technical processes
Consider purchasing software to manage everything in one location. There are dozens of systems on the market to fit your business’s needs, so take time to research and understand if a specific software suits your operations. If the software you want to implement comes with a cost, ensure it is no more than 10% of your projected catering sales.
Invest in branding and professional design services
Develop and create the needed marketing assets to sell your new catering on your chosen channels. These assets could include:
- High-resolution photos of your food, as well as staged and curated table and food settings to evoke your brand and the customers’ imagination
- Promotional videos of your food, services and/or operations
- Menus for print and digital with pricing
- Contact information for placing orders
Set your launch date
After you’ve set up your kitchen, production, staffing, ordering, payment and fulfilment processes, you are ready to launch! Publish your menu, announce your new service line and launch your catering/prepared foods offering! Congratulations, you’ve added catering and prepared foods to your grocery business!
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