Why Events are a Huge Opportunity for your Restaurant
As Alex reviewed earlier this week, corporate event spend and wedding budgets are increasing nationwide. Alex & I are both planning weddings right now - we have, for better or worse, intimate knowledge of the growth in wedding budgets!
What does this mean for you and your restaurant?
If you don’t already have a private dining, events, or large group program in place, you are missing out on a growing revenue opportunity.
Why create a private dining, events or large group program?
We’ve already reviewed the revenue opportunity here. Importantly, large group and private events won’t cannibalize your existing business – you’ll be tapping into an entirely separate segment.
In addition to the obvious opportunity to bring in more revenue, there are three big reasons to start working to attract large group and private events:
- Higher Spend
- Predictable Revenue
- Higher Margins
Let’s review each of these below.
Higher Spend
The average party size for a full-service restaurant is 3.7 guests. Depending on your average ticket, that’s ~$100-500 per table, perhaps even higher for big spenders.
Our software is used to manage hundreds of thousands of events, which provides us a great opportunity to look at stats across a wide swath of restaurants managing events. While there is a lot of variance, the average large group or private event spends around ~$2,500.
That’s 5-20x the amount of revenue your average table will bring in.
Events also tend to have higher average tickets than your typical customers. That’s because private events are often celebratory – think corporate holiday parties, rehearsal dinners, and business celebrations – and as a result, tend to include higher spend on additive items like alcohol and dessert.
Bottom line: Events bring in parties that are larger, have higher tickets, and spend 5-20x more.
Predictable Revenue
I like to think of Large Groups & Private Events as the major Sales Opportunity in the Restaurant Industry. Events provide an opportunity to actively sell (vs. rely on customers making reservations, typically driven by marketing) and drive repeat business with one-on-one sales relationships.
With a sales process in place for these larger parties, and relationships with customers who return often, you can generate “Predictable” Revenue for your business. (more to come on this in a future post)
Events revenue is also predictable in another way: it’s booked ahead of time. One of the biggest values to creating a private events or large group business is guaranteed revenue weeks or months (even years!) in advance. The majority of large group and private events are booked 30-60 days out from their actual date.
Finally, it’s standard practice to collect a deposit of 10-50% of the estimated total cost when private events customers book with you. Over 90% of the restaurants we work with also collect signed contracts, to partially or fully guarantee the estimated cost of the event ahead of time.
Bottom line: Events are more predictable, parties are booked ahead of time, and revenue often comes in before event dates.
Higher Margins
This one is pretty simple.
Compare Typical Party vs. Group Margins in Full Service Restaurants:
- Typical Party: 3.5-8%
- Groups/Events: 15-25%
Why? Because everything is more predictable - including food ordering, service scheduling, etc. – and higher-margin items like liquor and dessert comprise a larger portion of the check.
Bottom line: Events are typically higher-margin business due to more predictable costs and higher liquor spend.
What’s stopping you from attracting large groups & events?
As an owner of a restaurant or restaurant group, especially smaller properties, you may doubt that you can serve large groups and events.
However, I honestly believe any restaurant can serve events customers.
Here are the four most common objections I hear:
Our space is “too small.”
The size of your space shouldn’t deter you from offering some variation of a private dining & events business. Even if you have a 50-seat, four-walled restaurant, you can offer your space for buyouts at a premium – like Atlanta-based restaurant The Lawrence does.
We don’t have a Private Dining Room or Bar.
Having private space is great – but it’s not a prerequisite to hosting group events. Many groups aren’t actively looking for private space. In those cases, placing groups in an “open” part of the restaurant or giving them prime space at the bar are great options.
There are also ways to create private spaces without putting up new walls. JCT Kitchen and The Spence, for example, create intimate spaces for groups using sound-proof curtains.
I wouldn’t know how to start attracting events.
It’s amazing what an inquiry form on your website can do. Giving visitors to your site an easy way to see that you host large groups & events and contact you specifically about hosting an event is a great place to start. I think you’ll be pleasantly surprised by the response you get.
I don’t have anyone who can manage events.
Right now, you don’t have anything to manage – so don’t sweat it! Consider giving the task of responding to any inquiries to an Assistant GM, Top-Performing Server, or another staff member.
If you do start attracting large groups and events, consider hiring an outside group or someone part-time to manage events customers. Feel free to reach out to me if you need a few tips or recommendations on how to go about doing so.
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The Bottom Line
The average event brings in ~$2,500. Our clients, on average, will host 10-15 events per month at each location.
That’s ~$25,000-$40,000 in predictable revenue per month for the average restaurant.
While results won’t be the same across the board – every restaurant is different – given the economics, developing an events program is worth strongly considering.
We’ll detail how to get started in future posts. But if you’re interested in learning more, get in touch!
Sources: Gather Data, SBDC Trend Report
