Not all catering jobs are created equal. In fact, some venues have a seedy underbelly when it comes to hiring caterers—hidden charges, kickbacks, commissions. Maybe it’s time you read the fine print in your contract. By Sharon Aris
Venues, venues everywhere, but nothing you can use. It’s hard enough for small-to-medium-sized caterers to get a toehold into venues with so many working off a small list of ‘preferred suppliers’. But even when they do get in they can find nasty costs, surplus charges and other hidden surprises.
According to Jean-Paul Vandervaere, director of Roo Brothers Catering in Sydney, the big problem isn’t venues having preferred caterers. “That’s their perspective, and I get that,” he says. “What I struggle with and find offensive is the commissions added to the bill.”
It is common for venues to charge an upfront hire fee, but some also charge extra percentages for things like brought-in alcohol, per-head fees, fees for seating and equipment—all of which are added to the caterer’s bill rather than the venue’s bill.
Worse, Vandervaere adds, sometimes these charges are entirely hidden: if the venue has brought the client to him, he may have no access to the client at all, and these charges will be hidden in the catering bill presented at the end to the client by the venue.
Vandervaere calls these additional charges “kickbacks.” He says that’s what they amount to, as these extra venue remunerations are mostly hidden from the client. Even though he itemises them on the bill, most people just look at the bottom line, and the charges come at the expense of the caterer’s business. “It just ends up making the caterer look more expensive than they really are,” he says. “That’s a problem if the caterer is wanting return business from the same client, because if we were catering another venue without those charges, we would come out cheaper.”
What sticks most in Vandervaere’s craw is the common justification for the extra charges—that outside operators cause extra trouble to venues. His gold licence accreditation, he points out, is a guarantee that he will leave a good impression that reflects well on the venue, and his prices, necessarily higher than home-kitchen outfits, already include this.
But Vandervaere isn’t the only one complaining. Off the record, other caterers from around the country have told Restaurant and Catering Australia magazine that some venues not only add extra commissions, they also have a clause in their contract that prohibits the caterer from revealing these extra venue charges to the client. One caterer we spoke to said the commissions might not be explicitly spelled out as hidden in the contract, but the decision as to who received the gig ultimately came down to which caterer would be prepared to pay back a 20 per cent commission to the venue for all business.
Are these hidden venue commissions legal? According to NSW commercial lawyer Matthew Crouch, the answer is mostly “no.”
Hidden venue commissions can be illegal and can give rise to Trade Practices Act issues, he says. But he cautions, not all things that people loosely refer to as “commissions” are illegal, even if they are hidden. For example, simply charging a margin on products supplied is not illegal. It’s what most wholesalers and retailers do.
The gist of secret commissions is usually that there are three parties and one is receiving a secret commission that is being passed on to a consumer/buyer without that person knowing that the price includes the commission. Add circumstances where the consumer/buyer would be entitled to anticipate that no commission was being paid and you are almost certainly over the line.
And while the crime laws in this area vary between states, the underlying principles are nearly the same. Crouch adds the remedy is mostly simple—transparency. If you have to pay fees or reverse a commission, you tell the client.
Nigel Clayton, director of Big Belly Bus in Western Australia, says hidden venue charges are particularly problematic for caterers who put all their fees on their website, like he does. This means if a venue demands extra commissions, and Big Belly Bus has to charge an additional fee to cover, they’re the ones who end up looking dishonest based on their website prices.
For Clayton this is particularly irritating, as he has a policy of being straight up about all his charges. “A lot of caterers sell menus,” he observes. “Then only later do chairs, staff, napkins, etc., get discussed. I put it all out upfront.” He knows it can make him look more expensive at first, even though his prices aren’t dearer than most competitors once those other expenses have been included. But, he says, “we really help this country, and it comes down to promoting honesty and values. It’s the responsibility of all businesses to do that as well as earn money.”
But Clayton also points out this can be a two-way street, and he now talks to venues about turning the charges around the other way. Which means, because he’s willing to train his staff to operate in specific venues—thus accrediting them to the venue’s precise requirements—it comes at a cost to him, but makes the venue look good. He also asks to be made a ‘preferred caterer’, and then gets the venue hire slightly cheaper.
But he adds price discounting alone is not the way to drive a business. “At the end customers are looking for a result. It comes down to confidence. I sold three functions today because of confidence, and that includes telling people I won’t do a certain price, but what I will do. You do get better deals out of trusting people.”
Andy Moulynox, co-owner of Fred and Ginger Catering in Melbourne, says these days, with so many of Melbourne’s venues locked out, he’s skipping a lot of the venue hassles entirely simply by doing more catering outside. “It’s so much easier if we put a marquee on a beach, park or a deck over a swimming pool.”
But he adds, when he’s working in venues one trap he’s coming across is around liquor licences. “Two weeks ago a venue insisted we pay a fee so the duty manager would be present as the RSA [Responsible Service of Alcohol] on site to ensure compliance with the liquor licence. They quoted us a fee of $450 for four hours for him to do so. And that was even though we were using our licence.”
A meeting where Moulynox brandished his licence, staff certifications (“all my staff are RSA-qualified”) and the Licensing Act put paid to that. “If you’re not savvy with the legislation you can get trapped.”
Moulynox also cautions caterers to watch the charges at charity events. Fred and Ginger recently catered an event, where, in addition to paying a usage fee, the marquees were also charged per square metre, and there was an additional $1,250 charge per corporate sign at the event—even the catering signs telling people where to go.