How To Build A Profitable Banquet & Private Party Room
Whether your restaurant currently includes a private party room for fifty or you have plans for a larger banquet facility to accommodate five hundred, this source of add-on business can turn out to be a new vein of profits and a promotional windfall. Each day companies, individuals, civic groups and non-profits are booking and throwing meetings and events with restaurants that can accommodate their breakfasts, lunches, dinners and other receptions. The thought of extra cash hitting your till can be seductive, but make sure you have done your homework before committing your time, energy and financial resources.
Start with a S.W.O.T. analysis. Get together with your business partners, managers and key employees to work through this brainstorming exercise. Begin with a clean sheet of flip chart paper for each area and have everyone help create an exhaustive list of your restaurant's strengths, weaknesses, opportunities and threats as it would relate to operating a banquet facility or private party room.
If you have a more casual concept like a pizzeria, your strengths might be fun atmosphere, appeals to kids or reasonable prices. Obviously your weaknesses might be too casual for formal events like weddings, limited menu or not conducive to business entertainment. Each restaurant is unique in what it has to offer the marketplace. Never make the mistake of thinking that everybody is your potential customer. You will waste ad dollars using this shot gun approach. Better to visualize what your ideal customer looks like.
If you see a private room as a separate profit center that you will market and you are not confined by space, then you will need to determine what size space you can reasonably keep booked and profitable. As part of the S.W.O.T. analysis, the proactive restaurateur will conduct a needs analysis to determine the opportunities for private parties, events and banquets. You will want to estimate how many parties a week you will book on average, making sure to take into account the guest check average. Lunch bookings will be considerably less than dinner bookings. While you might be hard pressed to find a local competitor willing to share their revenue figures, you'll have better luck calling the restaurant owner of a concept similar to yours in another comparable market. Not only will you want to uncover as much financial information as possible, but make sure and inquire to what marketing has and has not worked. I believe on the rule of threes. If you will make three of these calls, you can rely on the average with comfort.
Here is a down and dirty formula for determining revenue: # of Bookings Per Week X Average Revenue Per Event X 52 Weeks. Your largest fixed cost will be the extra rent you will have to pay. Your variable costs will be labor brought in to handle the parties and food cost. Create a spreadsheet for a few sample parties and come up with an average variable cost, as a percentage of sales, you can use for your calculations. Many of your other fixed costs are already covered like insurance and management. You might budget an extra five percent for all other variables such as utilities and replacement of plates and silverware to name a few.
Your quick formula for banquet room profitability is: Total Revenue -- Fixed Costs -- (Total Revenues X Variable Cost %) -- Advertising Expense. This will give you a first blush look at whether it makes financial sense to incur the extra investment of space and build out for a private party room.
How big should you make your banquet facility? Most often, a private party room is an afterthought or inherited with a lease. When I built my first restaurant in 1992, we had some extra space we decided to close off to create a private party room. While creating a business plan for your restaurant, your pro forma should include how many guests and table turns you conservatively plan on accommodating. Make your main seating area too large and your restaurant will appear to be empty. An empty restaurant lacks ambience and chemistry that helps create a buzz. If your dining room is too small, you will end up with long waits that could scare potential repeat customers away. At a minimum, your private party room is perfect for handling overflow crowds when not booked.
Pete Williams, owner of Old Barn Out Back in Lima, Ohio, ended up in an old barn that had a second floor ready to be converted into a large banquet facility. He has divided the area into three separate rooms with walls that retract back to make one large room for up to five hundred guests seated with a dance floor.
What kind of furnishings and equipment will you need to pull off a private party room? Most restaurants just carry over the theme and décor of their main dining room. This includes floor and wall coverings, paint and wall décor. If your room is smaller, you'll want to use square or rectangle tables that can be placed together to form different configurations for parties. They will range from one long table to a u shaped table to accommodate events that require the head of the table to be a focal point. U shaped tables are perfect for rehearsal dinners, meetings and awards ceremonies. If your banquet facility can accommodate a hundred or more guests, you may opt for the standard eight foot rectangular or ten foot round tables. This will give you more options for events.
Audio visual equipment needs to be budgeted for in the planning process. Most rooms will have a wall mount television and DVD player at a bare minimum. If you will be accommodating business meetings or educational sessions, you might opt to install a retractable screen and lcd projector. Pete Williams has an entire sound system for background music and to handle wireless microphones. Pete also has risers for the head table, a dance floor and a stage for his bridal clientele. Any room that accommodates more than fifty guests should have a built in drink station just off the main room to prevent your servers from bottlenecking the flow in your dining room. Some restaurants that accommodate large banquets even have a separate kitchen area. Your target audience and their expectations should dictate your equipment investments.
It's a given that you'll be selling food and beverages to private parties, but how you handle the menu will determine success or failure in the back of the house. Smaller parties can easily order from your standard menu. You'll want to create set or suggested menus for larger groups. By limiting appetizers, entrees and desserts to your most popular, the host is not forced to fret over menu choices. Mere Bulles in Brentwood, Tennessee, offers five different set menus ranging from thirty to fifty-nine dollars a guest. There are plenty of choices for all guests that feature their most popular items.
Your private party menu does not have to be priced the same as your dining room menu. You will be offering a package that includes amenities and service. Shop your competitors to see how they sell their banquets and what they are charging. Your costs should be determined by what the market will bear, not an arbitrary food cost percent seen in a text book.
Having a set menu in advance ensures proper ordering and a smooth running kitchen that gets the food out in a timely manner. Imagine the nightmare of serving a party of fifty and not knowing whether four or twenty-four guests will order the filet and lobster. Restaurants with themed menus such as Italian, barbecue and Mexican are better prepared to accommodate off the menu ordering. Space and service go hand in hand. If you have a large banquet room, you might consider menus served buffet style. It will allow your guests to get served quicker, with less staff and save you the investment of warming cabinets required for pre-plated service. Smaller rooms like the one in my restaurant dictated table side service. Either way, make sure you allow some flexibility in your menus. You do not want to miss an opportunity to sell more expensive packages.
If you have a beer, wine or liquor license, you'll want to discuss with the host how they want it handled. Some groups will not order alcoholic beverages for their party, making each guest pay for their own libations. You will find some parties that will want to host a happy hour before the main meal or with appetizers and cover bar charges for up to an hour or two. They might be sold wine service with dinner. The most profitable events have an open bar tab from start to finish. Keep in mind the need for portable bars when handling banquets for larger functions.
If you wish to assume the role of event planner, you can increase the profit on each event with add-on sales. Pete Williams offers ice carvings, flowers, upgraded linen and rental of a chocolate fountain.
If your facility can accommodate multiple parties, both large and small, at the same time, you should consider investing in software to handle your scheduling and agreements. Start with your point of sale vendor to see if there is a solution to fit your current system. Some of the more popular catering software packages can be used to handle the same functions. Most restaurants begin with a simple calendar book from their office super store. Make one person in charge of the calendar to avoid scheduling conflicts. Get with your team to set policies. How large a party will you take and how many events can you handle on a Friday night? Will you require a signed agreement to finalize a booking? Besides food, you are selling access to a room.
Like an airline, if someone cancels at the last minute, there is no market to resell that slot. Consider a non-refundable deposit as part of your booking/cancellation policy. You should have the cancellation fee escalate as the party gets closer. Some restaurants like Old Barn Out Back charge a fee for rental of the room. Pete charges five hundred dollars a night for his large room on weekends and two hundred and fifty dollars on week nights. If you are going to charge a room rental fee, you might want to be flexible. Better to have a party of fifty on a Monday night and comp the fee than forgo that revenue. From the beginning, create a pricing strategy you and your managers feel good about and can all honor. If the owner "wheels and deals" with parties and the managers stick to pricing sheets, you could upset some prospects and lose out bookings.
As important as space design, menu creation and kitchen operations are to the success of your private party room and banquet sales, nothing happens until you make the sale. Unfortunately, most operators focus the majority of their investment of resources on the operation. There are many advertising, marketing and selling strategies available. You will need to choose those that best align with your talents and resources.
Great marketing and advertising starts from the inside and works itself out. How many customers are you serving a day. Whether it is a hundred or five hundred, your customers know you, trust you and hopefully love what you have to offer in terms of menu, atmosphere and overall value. This mini army of supporters has influence in areas that would cost you hundreds or thousands of dollars to reach.
"I didn't know they did that?" is what most of your customers would say if asked about your private party room. Your primary mission is to educate your customers to your banquet room offerings and use or refer you when the need arises. Start with four walls marketing. If zoning allows, you should put up a banner on the outside of the building letting your customers and passers by know you have a private party room available. With the drop in cost of full color banners, an action photograph of a group using your room will connect the dots with the words. Keep your wording large, easy to read and to seven words, as that is the maximum number a passer by can comprehend. If you are rotating banners throughout the year for other promotions, bring out this banner during prime booking times like the fall for holiday parties or late spring for wedding receptions, graduation parties or rehearsal dinners.
Once inside your building break down your facility into marketing zones. All tables should have table tents promoting your private room. Your entrance or lobby area is a perfect area to hang a framed sign with the same information. Try including a call to action: "Holiday Parties Are Getting Booked Fast! Ask A Manager To Reserve Your Date". The more aggressive operator will use flyers at the hostess stand or stapled to to-go orders. The most effective, and non-traditional, four walls marketing zone is the restroom. The space above the urinals and the stall doors are perfect for hanging a small sign. As opposed to all the other zones, there is virtually no competition for your customers' attention. Do not forget your phone system. A message on hold recording should make mention of your room. You get no benefit from customers and prospects listening to elevator music, or even worse, a radio station that could be playing your competition's commercial.
The yellow pages were the number one place a prospect with no preference went to research buying decisions. Banquet facilities, catering, event planning, restaurants, party services and weddings are the more popular yellow page headings to use. Today the internet is equally or more valuable marketing real estate as we all point and click our way to hundreds of options. Though it is very expensive and time consuming to get top search engine ranking for your facility, you can buy your way to the top with pay-per-click advertising. Search engines like Google will allow you to bid on key words.
Localized key words are far less expensive and more effective than bidding on broad or national searches. If you are located in Milwaukee, you will want to bid on key phrases that include your city like "Milwaukee banquet facilities". My Google search only popped up six paid listings. A search term like that could be as little as ten cents for a single click. You can also limit the people that see your ad based on geographic variables. You could bid on the phrase "banquet facilities" and have it only appear on searches originated in the Milwaukee area. Make yourself a list of all the phrases and key words one might use to search for a private party room and start searching. If your competition is buying traffic, it's a safe bet to follow.
The more prudent marketer will fly under the mass marketing radar screen and use niche marketing to pick up bookings. Just like doctors that specialize make more money, the restaurant that uses a specialized marketing message to fill his calendar will get a higher return on investment while building a reputation in a particular niche.
Success leaves clues, and your calendar is fertile with niches to attack. Go through your calendar, or that of a non-competitor, and review each type of booking. You will want to list every type of event like birthday, corporate training luncheon, rehearsal dinner or office holiday party. Next to each type of event list the types of companies or groups that booked those events. This list is the beginning of your six minute marketing plan. You should start to see a trend among your bookings. You might find you handle a lot of wedding receptions and educational meetings for pharmaceutical reps. This could be because of your menu, theme, amenities or physical location. Do not attempt to swim upstream. Target those organizations and groups that most resemble the profile of your current book of business.
A good mailing list broker or website like zapdata.com or goleads.com should be able to provide you with a list of targeted prospects. If you get a bumper crop of holiday parties from companies within five miles of your restaurant, than target the other companies in that area with a targeted direct mail promotion. A letter stating that you specialize in handling holiday parties for companies in the Brentwood part of town will get a better response than a generic; one size fits all, brochure with an overview of your banquet facilities.
Another niche worth pursuing is the non-profit market. This market includes true non-profits, service clubs and membership based organizations. From monthly luncheon meetings to annual fundraising events, this group abounds with opportunity. Check your local yellow pages for a quick overview of the size of this market. If you want to check the viability of this niche quickly, pick ten organizations that you feel would be a fit and call the president. Inquire about their ongoing needs and invite them and their executive committee in for a sample luncheon. The good will and good food should pay for itself in future bookings.
Some niches are less accessible through rental of a mailing list. You will have to put yourself in the shoes of these prospects and target them where they shop. Weddings represent an evergreen opportunity to book receptions and rehearsal dinners. Taking out a booth at a bridal show is a very cost effective way to market yourself to hundreds of prospects. Make sure your booth banner is more than one large logo. You will want to incorporate a unique selling proposition that promises a big benefit to the bride. I used "Hassle-Free Rehearsal Dinners" as the hook to get them into my booth. Make sure and capture the names of those that express an interest. Ongoing marketing to this list maximizes your bookings.
Jamie Petrolias with Jamie's Restaurant has created a nice piece of ongoing business cultivating referrals from funeral directors. He invites them into his restaurant for lunch and a tour of his private party rooms. His goal is to get them sold on his food and location in order to refer bereavement luncheons. He keeps the funeral directors stocked with his menus so they have something to show a family that inquires about a restaurant to take the family after the funeral.
Another often overlooked niche is the convention and meeting business. After a long day of meetings and speakers, attendees are looking for a place with local flavor to let their hair down for an evening of fun. Get with your local convention center for a list of upcoming conventions. Many groups book directly with hotels. Create a referral program for hotels that do not have an in house banquet facility. A small finder's fee is a bargain compared to the time and money it would take to track down the leads.
The list of niches you could target is endless. From pizza parties for little league teams to seminars for doctors sponsored by pharmaceutical companies, using targeted marketing could keep you busy and your party room packed all year long. You have up to three meal times to sell; breakfast, lunch and dinner. For the operator looking to do at least a quarter million dollars a year in private party bookings, you should look into hiring a sales director to actively sell your facility.
An experienced catering or hotel salesperson will have the basic knowledge and contacts to jumpstart your sales. Most will expect a base salary and a bonus or commission plan to stay motivated. A good rule of thumb is to allocate ten percent of your private party sales to your salesperson. That includes base salary and bonus. Expect a ramping up time as it is not realistic for a salesperson to pay for themselves immediately. Your second year return should be much better as you get rebooked from satisfied customers.
Do not make the mistake of leaving a salesperson alone. You will want them to create a sales and marketing plan and review progress weekly. Not only will they feel part of your team, but accountability will improve their results. Make sure you encourage and facilitate an open line of communications between your salesperson and kitchen manager. They will need to work together to exceed your client's expectations.
Whether you inherited a private party room in your lease or are making plans to create one, you will find many opportunities to increase your profits. Each host brings with them guests that you can wow into becoming regulars. With any endeavor or expansion, proper planning on the front end, ensures success in the long run. As much as restaurant owners are into the food and operations, do not underestimate the importance of sales and marketing. Nothing happens until someone sells something.