Advice from the Nationwide Caterers Association (NCASS) on charging a fair price for traders.
Catering concessions are an essential part of a successful event both in terms of feeding and watering your punters, but also for raising revenue. Often this can also mean a timely boost to cash flow.
But how do you charge a fair rate that will keep your concessions happy while also maximising revenue? There are many options to consider – a pitch fee, percentage rate or to ask for a tender. Each have benefits and drawbacks.
One of the biggest misconceptions about food businesses is that they make significant profit margins. This is an easy trap to fall into, for example, we assume that a burger patty can be bought for £1, a bun for 20p and some onions for 10p and 10p for packaging. If a caterer then sells that burger for £7 they’re making £5.60 for every burger sold.
However, most event catering businesses work to a 1:3 ratio of food cost to price with many street food traders working to a ratio closer to 1:2. When 20 per cent VAT is added to the cost of the food and a rent of around 20 per cent, you can see that the business’s costs are rising to 65 per cent, and for street food nearly 75 per cent, before they’ve paid any wages, transport costs etc.
Unlike a restaurant which can manage its stock on an ongoing daily basis by offering ‘specials’ to clear older items, event caterers often have to throw away uneaten or uncooked food. The less food they sell, the more needs to be thrown away and dealt with by the event’s waste contractors. Therefore, assisting caterers to get their stock levels and staffing numbers right by providing helpful and timely information on attendance and other variables will help your traders to stay profitable and happy.
Just as event organisers take calculated risks when putting on a show, traders do the same. They understand that things can and do go wrong and therefore have to factor this into their pricing. It’s rare for a caterer to have a summer of great shows. There are likely to be a couple of good ones, several average ones and a couple of poor ones. If they have too many bad shows in a row they can really suffer with cash flow and some good traders go out of business. That’s why caterers like to return to the ‘good’ events and even the average ones; they like to go back year on year to the same events as it reduces the risk, enables them to refine their offering to the show and develop repeat business.
Attendance and competition
The more accurate you can be with attendance figures and with the number of caterers on site, the more likely you are to get it right for yourselves and the traders. Traders need to know what the potential market is and what competition they’ll face. From that they can work out roughly what they will make and what to bring. Ten caterers at a 10,000 capacity event will likely do close to twice as well as 20 caterers for the same number of punters.
The more information you can give on attendance the better. Did you run the event last year or even for several years? What was the attendance then? What is the capacity of the event and how well are tickets selling? Traders tend to halve the projected figures provided by promoters as they are often considered optimistic. So, if you know you sold 8,000 tickets last year and hope to sell 9,000 next year, let the caterer know and they’ll be able to manage themselves accurately.
Try to avoid direct competition for types of food where possible. If you have two traders selling the same food (depending on event size) this can cause problems as it is likely to halve their potential sales and can even lead to businesses competing on price rather than product and service. If traders start to compete on price for business, they will all lose out.
A trader’s capacity
A great trader can lose money at a great event. This can be for a number of reasons but usually due to a lack of experience or mistakes in scaling up their business – or over tendering.
Successful street food businesses may sell 150 portions in a day while an experienced event caterer may be able to do the same numbers in a lunch service. Higher volume caterers can sell more food and potentially make more money, as such, they can pay more money to attend an event. So, if you want high end food at your event, you may have to accept lower tenders/pitch fees. You may also want more caterers than high volume burger units. Depending on the event, you may want a mix of both.
Experienced traders with an experienced team behind them will know what kind of capacity their business has, less experienced traders may not. One way for a trader to work out how much to tender/pay for a pitch is to work out the capacity of the kitchen to produce food.
If they can produce 50 meals an hour, the most food they could produce in a 12 hour day would be 600 meals, no matter how long the queue. If they charge £7 a meal that’s a maximum daily take of £4,200. So at 20 per cent, the most they could pay would be £840. However, they are unlikely to be busy all day.
Opportunities to sell
The number of times per day that customers are likely to buy food will be a factor in the amount tendered. At a multi-day camping event with limited access to the outside world, punters may buy food two or even three times a day, increasing their potential revenue and the amount they can tender. Equally, one day events with other potential competition such as high street restaurants, takeaways or even picnics, will eat into the caterers’ revenue and the amount they should tender.
Location can be the difference between a great and a bad event for a caterer. Prominent positions in front of stages and next to bars will create greater footfall and should mean more business. Out of sight is out of mind for event catering and being sited next to banks of porta-loos can be disastrous for a trader. Offering different prices based on location will help to avoid unhappy caterers.
Demographics and food types
Providing traders with details of the demographics of the crowd can ensure that your punters get the food they want and traders tender fair amounts. We recently had an organiser of a rave contact us to ask for a burger van. They were adamant that they didn’t want any street food as they knew that their customers wanted a cheap burger not a lobster roll and had dealt with lots of unhappy street food traders the year before who just hadn’t sold enough. The event wasn’t the problem, the mix of food was. Explaining to the traders what sort of customers to expect will help them to tailor their offering and their tender accordingly.
We believe that a tender should come to 15-20 per cent of the projected turnover. This is the amount that restaurants aim to pay on rent and is really the most catering businesses can afford to work at shows and events. Some may pay more but that significantly increases the risk of losing money.
If you are unsure of what to charge for a pitch fee and are wary of tendering, why not try charging a percentage? By offering a percentage and deposit deal you share the risk with the caterer, however, if it goes well you’ll earn more. Traditionally percentages have been based on a degree of trust, however newer technology such as radio-frequency identification (RFID) has enabled organisers to manage this process far more effectively and there is some evidence to suggest punters spend more in such conditions.
If you would like further information about running an event, promoting fairness to traders or sourcing caterers, please contact the NCASS Support Team on 0121 603 2524 or visit www.ncass.org.uk