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The Sales, Profit, and Cost Problems in Catering Company
Introduction
Catering services management is an integral part of any business. It is where the real money is made in this sector, and unfortunately, it is also where many companies make the biggest miscalculations. The catering company, owned by a celebrity group and with one of the most extensive catering services in its business, has struggled to find its way back to profitability. For example, although they are using some of the most advanced technology in the industry, their sales figures have fallen in the last six weeks by nearly 40% (Hansen et al., 2021). It would be significant enough to indicate potential problems if it were not for another issue that has also been happening; costs are out of control. Whereas these costs previously had been sustainable given the high-quality employees they used, they have now risen far past their original budget allowing them no choice but to raise prices as necessary. Unfortunately, these price increases will hurt their client base and profits further down the road.
Additionally, the current staff is not equipped with enough training or experience in managing catering services operations on a large scale as they currently offer. The staff members lack knowledge about how technology can be used effectively to streamline processes and improve efficiency. They also lack practical experience dealing with clients who may require special dietary restrictions allergies, or preferences when it comes time for them to order food from the companys menu. This essay will examine the factors leading to the costs, profits, and sales problems and further outline improvement strategies for the issues.
Factors Leading to the Sales Problems
The companys sales force is too small to meet the high demand for service at the current price points. It means they are spending more money on customer acquisition than they could if they had more time to spend on each customer. In addition, the company does not have a strong brand identity. This means that potential customers do not know what they can expect from them, which makes it hard for them to trust the company or make recommendations. Moreover, there are no clear goals or strategies for how Catering Companies should manage their sales process. All of their managers report directly to their owners, celebrities without any business management background. No one oversees or incentivizes those responsible for driving sales numbers up (Cengiz et al., 2018). Finally, there is no clear understanding of why costs rise faster than revenue. Even though it is unclear what they would do differently if they knew more about where the money was coming from.
Factors Leading to the Profit
The most common factors leading to profit problems are: first, there is a lack of vision among the owners and a lack of understanding about how vital catering services are for the success of a business. Second, there is a poor understanding of what makes a good investment, which means it is hard to find funding for new projects or expansion plans (Goodman, 2019). The owners want to do everything themselves, from hiring staff members to preparing food and drinks for their clients, but this does not work well for several reasons: firstly, it is costly; secondly, it is inefficient; thirdly, it does not scale with growth; fourthly, it does not offer enough variety or control over what happens at different events, for example, one possibility might require premium ingredients, but another event may be happy hour.
Another factor is the inability to create a culture within the company where everyone knows their job well enough, so they do not need constant supervision from managers trying to do too many things at once, thus causing delays and other problems. Staff issues also hurt profits: some employees are not taking their responsibilities seriously. They are not doing their jobs correctly or efficiently enough to meet production goals, which means more wasted food and dissatisfied customers.
Factors Leading to the Cost Problems
There is no central control of costs; each unit has its budget, which makes it difficult to manage overall costs across departments and make adjustments as needed. It makes it very difficult for management to make any changes that could improve profitability without causing collateral damage elsewhere in the organization that is losing customers. The company has been paying too much for supplies, as they cannot get the best deals since they are not as big as some other companies (Dhir et al., 2020). They have spent more money on advertising than they should have, causing them to lose money on each order because of the cost of running their ads and buying media placements. There is no process for tracking customer satisfaction or complaints so that managers can improve their product offerings accordingly or reduce prices if necessary.
Improvement Strategy for Sales Problems
The companys owners are unhappy; they have been struggling for a while now, and the owners want to know why. They want to ensure they are not overspending on servers or hiring too many cooks. They must predict sales numbers to budget appropriately and keep costs in check (Kotler, 2018). They do not realize there is much more in their business than these two things. For example, they have hired an outside firm to manage their brand management efforts and marketing campaigns, but they do not have a system for tracking those results. They do not even have the data needed to do this reporting.
It is essential to understand that catering services are not a one-size-fits-all solution for their business. Catering is a highly specialized industry, and just because one has a catering business does not mean one should use it as their primary source of revenue generation. The owners need to eliminate all of their old products and replace them with new ones that align with current trends. For example, instead of using an old-fashioned tablecloth for their buffet tables, they should use something like napkins made from recycled material.
In addition, they need to find a way to increase overall sales volume. They can do this by creating special promotions for customers who purchase specific items simultaneously or within a short period; for example, buy one thing and get another item free. They could further start offering loyalty programs so that customers who frequent their establishment will receive discounts on future purchases; for example, they are given 2% off their bill every time they come back (Cengiz et al., 2018). Finally, they need better marketing strategies for their social media platforms like Facebook and Twitter so that people will see their products advertised more often throughout their day, for example, each hour instead of just once every two hours.
Improvement Strategy for Profit Problems
Based on the companys financial analysis, the researcher has developed a plan to improve its profits and profitability. The first thing they need to do is cut their costs by reducing spending on both advertising and inventory management. Second, they should introduce new products into the market; it will allow them to increase sales while also decreasing their costs overall. They will require less advertising since they will cost less than their old products when they gain traction with customers with higher purchasing power.
In addition, the researcher believes that the underlying cause of these problems is that the catering service is not being marketed properly. It can be accomplished using social media, todays most common means of advertising. Moreover, the owners can improve profit by increasing staff numbers. It will allow the owners to offer more services at lower prices and better quality control. Another aspect that could help enhance yield would be implementing more efficient processes within the company. It would allow the business owners to save money and time so that they can spend it on increasing their profits.
Improvement Strategy for Cost Problems
First, the owners should look at the problem holistically; they need to identify the root causes of their cost problems and work on addressing those issues to solve them. It means looking at the big picture rather than just one piece at a time. Second, they must focus on improving the companys financial metrics by reducing costs and increasing revenues through effective marketing (Walker, 2021). It will help them improve their financial health by reducing debt and increasing liquidity, improving their credit rating, and making it easier for them to obtain financing if needed. Thirdly, they should consider developing more efficient systems for managing inventory and scheduling deliveries to cut labor costs while increasing productivity through better workflow practices and automation of processes within the company, such as payment collection.
Additionally, the owners need to ensure they are not over-committing themselves financially. By keeping track of their cash flow and expenses, they can identify areas where they need to cut back on costs. It will enable them to continue operating without issues later down the line when they have already spent all their available funds on expenses but still have not achieved profitability. They can further cut costs by reducing the number of employees on the payroll, reducing food waste, restructuring menus based on customer demand, and improving efficiency by implementing new technologies into their operations. Finally, they must look at their customer satisfaction rate to determine any issues with the product quality or delivery timeframes. If either of these metrics shows improvement, it may be worth investing more resources into improving them further before investing more money into marketing initiatives.
Conclusion
The Catering Companys overarching problem is that they operate from a place of limited information. They are working in the dark, not even realizing that the issues they are experiencing in each of these areas can quickly be addressed and fixed. Since it is a small company, one would suggest that the owners agree to keep all catering services in-house for the foreseeable future. Moving forward, they should focus on providing high-quality food rather than expanding their line of services. As mentioned earlier, this restaurant tends to rely on its celebrity clientele far too much when marketing the business and drawing in customers. They have been relying heavily on word of mouth and paid advertisements to drive business to the restaurant, but they need more natural methods of getting the word out. People often will not choose a venue based on internet reviews or advertising because they do not think these sources are credible.
References
Cengiz, E., Cengiz, F., Demirciftci, T., & Cobanoglu, C. (2018). Do food and beverage cost-control measures increase hotel performance? A case study in Istanbul, Turkey. Journal of Foodservice Business Research, 21(6), 610-627. Web.
Dhir, A., Talwar, S., Kaur, P., & Malibari, A. (2020). Food waste in hospitality and food services: A systematic literature review and framework development approach. Journal of Cleaner Production, 270, 122861. Web.
Goodman, J. (2019). Strategic customer service: Managing the customer experience to increase positive word of mouth, build loyalty, and maximize profits. Amacom.
Hansen, D. R., Mowen, M. M., & Heitger, D. L. (2021). Cost management. Cengage Learning.
Kotler, P. (2018). Marketing for Hospitality and Tourism, 5/e. Pearson Education India.
Walker, J. R. (2021). The restaurant: from concept to operation. John Wiley & Sons.
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