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Cracker_Barrel_Prime_Rib_Heat_n_Serve_Family_Dinner.jpg Photo courtesy of Cracker Barrel
Cracker Barrel’s catering business increased over 35% compared to the prior year -- one of several restaurant companies reporting double-digit year-over-year growth in the channel.

Catering becomes a bigger part of the conversation in Q2

Several companies reported double-digit year-over-year growth in catering and expressed optimism about the channel’s continued potential.

Like the breakfast and late-night dayparts, catering took a huge hit from the pandemic. But as events swing back into full gear and businesses attempt to woo employees back to the office via food, catering seems to be experiencing quite a comeback.

To be sure, catering has been on a recovery path for several quarters now, but the channel was a much bigger part of the conversation during the most recent quarter, as indicated by several public restaurant companies.

Consider Red Robin, which reported late last week. The company is in the early innings of a five-point “North Star” turnaround strategy, focused on things like elevating the guest experience and removing costs and complexities. Catering is also a piece of that turnaround puzzle. CFO Todd Wilson called it a “bright spot” in the company’s off-premises business.

“Catering generated approximately $23 million of revenue in fiscal 2022 and has grown 44% in the first half of 2023 as compared to last year. The team has done fantastic work building and growing this business, and we believe plenty of opportunity remains,” he said during the company’s earnings call.

It’s not the only company that sees opportunity in this channel. Bloomin’ Brands’ CEO David Deno said catering continues to grow and identified Carrabba’s as a leader in the space. The company recently launched Carrabba’s Bistro, which focuses on lunch catering and includes Italian-inspired sandwiches. Catering was over 5% of Carrabba’s sales in Q2.

“We are very excited by the early results and believe this could represent growth opportunities beyond catering. We're also very pleased by the strong momentum we are seeing in catering at both Outback and Bonefish. As a result of all the above, we expect off-premises to remain a large part of our business,” Deno said.

El Pollo Loco thinks it can also get to 5% of catering sales within the next one to two years, from its current 1%. CEO Larry Roberts is bullish on the channel because his company’s food travels well, he said, and the team is currently revamping its catering program to include a new menu with more options. The new program is expected to roll out in Q3.

“We are also evaluating partnerships with third-party catering delivery services that will further drive the program,” Roberts said. “After the initial rollout of the program, we will be testing the use of area catering managers to determine the impact they can have on growing our catering business. We are very excited about the potential of catering and believe it can become a $50 million to $100 million sales layer for the El Pollo local system over time.”

Noodles & Company CEO Dave Boennighausen also believes his company’s products are well suited for catering.

The variety inherent in our menu, which eliminates the veto vote, combined with how well our food travels for the catering occasion, provides the opportunity to substantially grow this part of our business,” he said.

In addition to that optimism coming from the menu, he said catering is easy to incorporate into operations and staffing is now at appropriate levels to build the channel. That latter piece may be driving catering’s comeback throughout the industry, as employment levels continue to inch back toward pre-pandemic levels. For Noodles, the catering business represented 1.4% of sales in Q2, a 40% jump year-over-year. Boennighausen believes it can get much bigger over the long term.

“We have begun more aggressive promotion of our catering opportunity, both inside and outside our restaurants, to develop a business that we believe can be mid-single-digits as a percentage of sales over the long-term,” he said. “Notably, our top 10% of restaurants already drive nearly 4% of sales from catering.”

Noodles is working with a culinary consultant for growth opportunities on this channel, including “an appropriate catering menu.” Meanwhile, Chuy’s continued to build out its catering markets, with 17 markets currently online, and the channel represented 3.5% of Q2 sales – an increase of approximately 80 basis points year-over-year. CEO Steven Hislop said the company is targeting approximately 4-to-6% of catering sales mix.

“We’re very, very excited about (catering) and we’ll continue to add certain trucks and refill some of our markets as we continue forward,” Hislop said.

Then there’s Sweetgreen, which reported its business-to-business channel, which includes both outposts and catering, has more than doubled year-over-year. And, BJ’s CEO Greg Levin said catering was a “big surprise” in Q2, adding that it’s been driving a lot of traffic in off-premises business. Cracker Barrel’s catering business increased over 35% compared to the prior year and remains on track to exceed $100 million this fiscal year.

That is a lot of catering chatter for just one quarter, illustrating the rebound is in full swing and is likely driving companies, big and small, to sharpen their focus on the channel, or least test the waters a bit. In-N-Out just added fries for the first time since its catering program launched in 1974, for instance. Cava’s first public report revealed that the company is piloting catering. Subway relaunched its catering program last year, while Applebee’s rolled out its catering menu to all restaurants. Four-year-old Savvy Sliders is leaning into its catering program. So are concepts like Asian Box, Beef Shack, Ruby Slipper, Ike’s Love & Sandwiches, Fuzzy’s Taco Shop, Chi’Lantro BBQ, Tijuana Flats, Crisp & Green and so on and so forth. As mobility and labor continue to improve, and as operators continue to seek ways to diversify their revenue streams, catering will likely incite even more conversations in the near term.

“The world has changed in the last several years. We all know that. The shift towards more off-premise, catering is coming back,” Noodles’ Boenninghausen said. We want to ensure that we are not missing some potential big opportunities in terms of our menu … We know we have a tremendous upside. We think this is a really good time to step back now that there is more normal guest behavior and identify where there are some opportunities.”

Contact Alicia Kelso at [email protected]

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