The catering service industry serves both the corporate sector and the private sector. According to estimation, there are currently approximately 850 active catering services in Israel. Of them, only 150 are defined as corporate sector suppliers, and the rest are for the private sector. The industry is characterized by a significant amount of new businesses, but also a significant amount of closed businesses; therefore, this data is only estimation.
- The market is extremely competitive, and includes businesses of various sizes.
- The market is affected by seasonality.
- In the corporate market, there is a price war and low profitability.
Customers: Defining the Target Market and its Size, Market segmenting
- Large corporations, factories, and other institutions that provide their employees with warm meals.
- Kindergartens and other educational facilities providing lunch to children.
- IDF and Israel Police.
- Customers conducting banquets who choose not to use the reception facility’s catering services, as well as customers requiring catering for a private home function.
- Companies and businesses conducting a unique function and requiring high level catering.
Competition in the industry is high and is introduced mainly by similar companies, according to market segmentation.
In addition, the corporate sector also competes with restaurants located in industrial areas, as some employers have meal voucher arrangements with these restaurants (practiced mainly among high-tech companies.)
Vendors can be divided into two main groups:
- Suppliers of raw materials, base products, drinks, and pre-cooked products.
- Equipment vendors: kitchen equipment, utensils, and transportation and packaging equipment.
Corporate sector usually advertises in professional literature and yellow pages. Approaching potential clients by way of sales persons.
In the private sector marketing methods include print advertisement, yellow pages, wedding guides and internet sites, participation in conferences, publishing internet sites, and incorporation in the favorites section of reception facility websites.
Factors Affecting Success:
Corporate sector: price has the strongest impact. In addition, low profit margins require control over operational expenses in order to maintain profitability.
Private sector: Reputation is the fundamental success factor.
Main barrier when entering the corporate sector is the high investment required. Additional barriers are the licensing process and production process.
In order to operate a corporate sector catering service, a chef is required, in addition to cooks and apprentices, general workers, drivers, delivery persons, wait-staff, managers, and sales and marketing positions.
A business that also caters for functions, logistics personnel and an event manager is required. This position holder’s responsibilities include general operation and success of the event.
Kitchen equipment and furniture, transport containers, kitchen utensils, serving utensils, counters, vehicles.
The extent of the investment varies according to the business’ purpose, location, required equipment, planned extent of activity, etc. therefore it is important to prepare an investment plan regarding these aspects before establishing a business.
Due to the complexity of investment and the array of possibilities, expert consultation is required.
Industry revenue and profitability
- Meal price ranges between 11 NIS (for kindergartens) and up to 20 NIS, dependant upon menu and number of diners.
- Average raw profit rate is 40%.
- Meal price ranges between $35 and $60, dependant upon the menu and number of diners.
- Raw profit rate in the private sector is approximately 75% of revenue.
Typical Terms of Payment
Vendor credit ranges between EOM +30 to EOM +60.
Credit terms for customers are usually set by tender and mostly range between EOM +30 to EOM +60.
Customary payment terms for customers: an advance is usually paid when reservation is made, and the rest paid in cash on the event’s day.
The high investment and competition in the industry situates these businesses at higher than average risk. A business plan should be meticulously prepared in order to prevent failure.
Licenses and Certifications:
- Local authority licensing is required, in order to operate a business in the industry, in addition to a manufacturing license, a Ministry of Health license, and a sanitation inspection.
- Kashrus: All meals in the corporate sector are kosher. A private catering service may decide whether they wish to hold a Kashrus certificate.
Business insurance (for content and inventory), third party insurance, employer’s liability insurance, loss of income insurance, and food poisoning insurance. In addition to the above, an insurance agent should be consulted in regards to the need for additional insurance