Getting To Grips With Catering Contracts

Anyone working in the catering trade knows that the devil is in the detail when it comes to contracts. They are legal agreements designed to protect both the caterer and the client, especially when it comes to budgets. There are advantages, disadvantages and specific differences between them all, and factors like payment and accountability will all depend on the kind of contract you sign, so it’s worth being aware of the most commonly used types.

In a Cost Plus contract, you are likely to prepare an estimated budget for the client, which they would agree to, so you’ll need to make sure that you have included all the expenses you think you’ll incur; you don’t want to have to re-negotiate at a later date or be stuck into a contract you lose money on. If the budget is exceeded, the client will pay the difference, and if you come in under budget, then you’ll need to pass the excess to the client.

A Cost-Plus Guarantee contract has the same elements as above, although you will be expected to guarantee some of the elements within your offer to the client. These might be things like staffing numbers or costs, transport charges and so on. This kind of contract also means that any increased sales will decrease the bottom-line subsidy, but it is always possible to split savings by agreement.

With a Nil Subsidy/Cost contract, you are more likely to have complete control over pricing, additional costs and services and things like menu choice. This kind of contract is more likely to be used in high-volume situations where you are able to sell a large number of dishes at lower prices. As a caterer you are more likely to take the financial risks but can make a good profit if sales are high.  The accounts you manage tend to stay with you rather than being shared with the client, giving you a bit more control over your profit margins.

Last of all, a Royalty Contract is a way of guaranteeing a partner or client a percentage of the profits each month, so is more advisable if you are considering a long-term relationship or business model. You’ll need to be aware that the percentage you pay remains the same, even if your profits are down, so as with everything, it’s important to project your figures accurately.  It’s a complicated world, so make sure you take expert advice and get it right when you sign on the line.

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