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How to Start a Catering Business
Your culinary talents make you and your family happy, so why not spread that joy to the rest of the world?
Take your cooking skills to the next level and embark on a new career in the wonderful world of catering. If you enjoy parties and specialized food preparation for events of all kinds, then let your entrepreneurial spirit guide you into starting your own catering business.
Starting a business takes planning and hard work, but if you follow this simple, step-by-step guide, you’ll be able to build your own catering business from scratch.
Time to build
Step 1: Decide if the Business Is Right for You
Pros and Cons
Every business has its advantages and disadvantages, including running a catering business. Weigh each pro and con to find out if catering can work for you.
- Invest in your passion – Share your culinary talents with your community.
- Flexible – Work on your own time and in your own niche.
- Simple – Uncomplicated business model with a consistent service offering.
- Opportunity – There are always reunions, weddings, corporate events, etc.
- Choose your clients – Choose your own clients and workload, with a high degree of client retention if you deliver good service and delicious food.
- Rich networking capabilities – You never know who you will meet at an event!
- Must satisfy – Even one dissatisfied or sick customer can hurt your business.
- Health and safety – Food preparation means you are legally bound to focus on.
- Weak profits – Catering industry offers relatively low profit margins.
- Repetitive – Catering can be repetitive work, leading to high employee turnover.
- Low scalability – Difficult to scale your business over time.
Market researcher IBISWorld valued the US catering industry at $15.4 billion in 2021, up from $14.3 billion the previous year, representing 8% annual growth. … Continue reading Since 2016, the industry has expanded at a steady compound annual growth rate (CAGR) of 2.5%.
In the last decade, the catering business has grown faster than the rest of the U.S. economy, benefitting from a larger urban population and more corporate events. British market research firm Technavio expects the global catering industry to grow 4.5% annually through 2025.https://www.prnewswire.com/news-releases/catering-services-market-2021-2025-industry-analysis-market-trends-growth-opportunities-and-forecasttechnavio-301349349.html
Tech design and education firm Harbinger Learninghttps://harbingerlearning.com/blog/catering-industry-growing-by-leaps-and-bounds-and-sustaining-beyond/ attributes the industry’s strong growth to four main factors:
- Technological reach – Apps and websites put catering at event planners’ fingertips
- Healthy consumer spending – The average catering order has increased in recent years due to larger corporate profits and a surge in consumer spending
- Rise in catering avenues – Boxed lunches, catering out of a vehicle, interior decorating, and other non-traditional services have expanded industry offerings
- Better packaging – New packaging that controls temperature and maintains food freshness has enabled caterers to be more mobile and flexible
How much does it cost to start a catering business?
Entrepreneur magazine estimates the startup cost for a catering business at $10,000 to $50,000, with an average of $30,000. The most significant costs include cooking equipment (~$15k) and potential furniture fixtures such as tables, chairs, and refrigerators (~$15k). And these costs are likely to increase as your business grows.
Here is an overview of some of the likely startup cost estimates for a catering business in 2021, as compiled by Step by Step Research:
|Startup Costs||Ballpark Range||Average|
|Kitchen/Location||$3,000 - $6,000||$4,500|
|Licenses and permits||$1,000 - $3,000||$2,000|
|Staff||$1,000 - $4,000||$2,500|
|Advertisements||$1,500 - $2,500||$2,000|
|Insurance||$500 - $1,500||$1,000|
|Equipment||$15,000 - $35,000||$25,000|
|Food and beverages||$1,000 - $1,500||$1,250|
|Training and courses||$500 - $1,500||$1,000|
|Networking/marketing||$250 - $750||$500|
|TOTAL||$23,750 - 55,750||$39,750|
How much can you earn from a catering business?
A catering business can expect to make $30,000 to $50,000 in annual profits, with leading jobs site ZipRecruiter putting the national average at just over $42,000. A typical catering firm maintains a 10-12% profit margin, which may be low but is a sizable improvement on restaurants’ 3-6% margin.
A catering solopreneur could thus expect to take in $350,000 to $420,000 in annual revenue, and $35,000 to $50,000 in net profit. A catering business’s main source of revenue is the per-event fee, which varies based on the number of people being served and the extent of service.
Event catering can cost clients anywhere from $500 to $3,000 and above, depending on the number of people and the market niche of the caterer. To make $40,000 in annual profit, a catering firm would have to host around 200 events and change an average of $1,800.
What barriers to entry are there?
The primary barriers to entry for starting a catering business include:
- Startup capital – A catering business requires a kitchen, cooking equipment and possibly furniture, each of which requires significant monetary investments. Licenses, permits, and insurance are other initial costs.
- Competition – The catering industry is growing fast and that means competition. Many restaurants perform catering services as well.
- Logistics – Cooking a mass meal is one thing, but effectively packaging, transporting, and delivering it to an event is another. The logistics of catering can be a problem if you do not have the experience or equipment to effectively do it and maintain your food’s freshness and quality.
- Difficult to scale – Due to the time-intensive work required, scaling your business enough to serve multiple events simultaneously is difficult.
Step 2: Hone Your Idea
Why? Identify an opportunity
To begin as a prospective caterer, you should research your local market to identify what kinds of businesses are catering events, what kind of events those are, and what kind of equipment, fixtures, and logistics such events require. Consider the most common avenues of wedding catering and corporate catering. Other special events, such as graduations or birthdays, are also likely to use catering. Alternative niches in the realm of catering might include flowers, tables, or other non-culinary decorations and interior design.
What? Determine your products or services
Compare your local market’s needs to the food and beverage menus you’re capable of providing. Do you want to provide full-service, multiple-course meals, or just pastries, cookies, and desserts? Will you serve alcohol? These decisions could necessitate additional planning.
Determine your offerings by researching the most popular food and beverage products at the events you plan to serve. Examples of catering niches include:
- Corporate lunches
- Holiday parties
- Rehearsal dinners
- Award ceremonies
- Bar mitzvahs
- Box lunch events
- Baby showers
- Dessert delivery
Adding some personality to your menu could also be a boon to your brand. Maybe you provide the best brunch, vegan meals, or mobile dining. Traditional or cultural dishes could be popular in your market.
Consider how you’d like your dishes served — on plates, by servers, or in boxes. There are many options for your choice of food and its delivery. It is best to consider your market relative to your capabilities, both in terms of skill and equipment.
How much should you charge for your catering services?
Generally, catering services charge based on the size of the event. You should structure your pricing plan based on your expected expenses. Whether you are preparing mass meals or just delivering treats, you need to weigh labor and ingredient costs against your desired profit margin (avg. 10-12%).
Search site Thumbtack provides a handy guide on catering costs on a per-person basis. Their rates for weddings and other common events include the prices customers should expect to pay. On average, for the most common food station or buffet-style catering, they calculate that the customer will pay around $30 per head:
|# of People||Total Cost||Cost Per Person|
For high-end food and services, the prices will of course be higher. Formal plated meals with multiple courses, for instance, require more preparation time and more expensive ingredients. Here are some more example prices from Thumbtack:
|Catering service||Cost per person|
|Formal dinner||$145 per person|
|Informal food stations||$25 - $45 per person|
|Buffet||$23 per person|
|Corporate event||$70 per person|
Depending on your target market and specific catering offerings, this should get you started in brainstorming your own pricing plan.
Who? Identify your target market
Your target market – whether it’s corporations, weddings, or another niche – will have different demands. You should adjust your menu and your services accordingly.
For example, weddings and rehearsal dinners are more likely to make specific requests and ask for certain dishes. Corporate events may be more informal, with generic food requests or adherence to your menu offerings.
If you are ready to customize your menu and include a capacity for your cooks to accommodate unique wishlists for meals, then perhaps you should seek out weddings, bar mitzvahs, and other personalized celebrations. If you intend for your meals to be more standardized, boxed and templated, then corporate events and conferences may be a better fit. If you want to make extravagant meals fit for fine dining, then you should pursue the higher-end clientele looking for that type of service.
You should understand going in, no matter what type of cook you are, your menu will largely be determined by the desires of your target market.
Where? Choose your business premises
In the early stage of business development, you may want to operate your business from your home, assuming your kitchen is big enough. This will help you keep expenses in check.
However, as your business grows and operations intensify, you will end up hiring workers for various job roles. Then you may need to rent out a physical storefront where you can operate your kitchen and store your food. You can find commercial space to rent in your area on Loopnet, Instant Offices, and Square Foot.
When choosing a kitchen or office space, you may want to follow these four rules of thumb:
- Central location easily accessible via public transport
- Ventilated, with natural light
- Flexible lease that can be extended as your business grows
- Ready-to-use space with no major renovations or repairs needed
Step 3: Brainstorm a Business Name
Your business name is your business identity, so choose one that encapsulates your objectives, services, and mission in just a few words.
Settling on a business name is a key step. You probably want a name that is short and easy to remember, since much of your business, and your initial business in particular, will come from word-of-mouth referrals.
Here are some suggestions for brainstorming your business name:
- Short, unique, and catchy names tend to stand out
- Names that are easy to say and spell tend to do better
- The name should be relevant to your product or service offerings
- Ask around — family, friends, colleagues, social media — for name suggestions
- Including keywords in the name, such as “catering” or “foods”, boosts SEO
- Choose a name that allows for expansion; “Jim’s Bakery” rather than “Jim’s Cookies”
- Avoid location-based names, as they may hinder future expansion
- Use online tools like the Step by Step business name generator
Once you’ve got a list of potential names, visit the website of the US Patent and Trademark Office to make sure they are available for registration and check the availability of related domain names at a web cataloging site such as NameChk. Using “.com” or “.org” sharply increases credibility, so it’s best to focus on these.
Finally, make your choice among the names that pass this screening and go ahead with domain registration and social media account creation. And if you’ve exhausted all your creative juices but still don’t have a business name, don’t stress! Instead, check out our business name generator. Just type in a few keywords and hit “generate” and you’ll have dozens of suggestions at your fingertips.
Step 4: Create a Business Plan
Every business needs a plan, a rough outline that helps guide a startup through the launch process while maintaining focus on key goals. A business plan is also crucial for helping potential partners and investors understand your company and vision:
- Executive Summary: Brief overview of the entire business plan; should be written after the plan is complete.
- Business Overview: Overview of the company, vision, mission, ownership, and corporate goals.
- Product and Services: Describe your catering company’s services in detail.
- Market Analysis: Assess market trends such as variations in demand and prospects for growth, and do a SWOT analysis.
- Competitive Analysis: Analyze main competitors, assessing their strengths and weaknesses, and create a list of the advantages of your services.
- Sales and Marketing: Examine your companies’ unique selling propositions (USPs) and develop sales, marketing, and promotional strategies.
- Management Team: Overview of management team, detailing their roles and professional background, along with a corporate hierarchy.
- Operations Plan: Your company’s operational plan includes procurement, office location, key assets and equipment, and other logistical details.
- Financial Plan: Three years of financial planning, including startup costs, break-even analysis, profit and loss estimates, cash flow, and balance sheet.
Step 5: Register Your Business
Registering your business is an absolutely crucial step — a prerequisite to paying taxes, raising capital, opening a business bank account, and other guideposts on the road to getting a business up and running.
Registration is exciting because it makes the entire process official! Once it’s done, you have your own business.
Choose where to register your company
Your business location is an important decision because it can affect your taxes, legal requirements, and revenue. Most people will register a business in the state where they live, but if you are planning to expand, you might consider looking elsewhere, as several states offer real advantages when it comes to catering.
If you’re willing to move, you could really maximize your business!
Choose your business structure
Businesses come in several varieties, each with its pros and cons. The legal structure you choose for your business shapes your taxes, personal liability, and business registration requirements, so it’s important to choose wisely.
Here are the four main options:
- Sole proprietorship – The most common structure for small businesses makes no legal distinction between company and owner: you get to keep all the profits, but you’re personally liable for all debts.
- Partnership – Similar to a sole proprietorship, but for two or more people. Again, owners keep the profits and are liable for losses.
- Corporation – Under this structure, the business is a distinct legal entity and the owner or owners are not personally liable for its debts. Owners take profits through shareholder dividends, rather than directly.
- Limited Liability Company (LLC) – Combines the characteristics of corporations with those of sole proprietorships or partnerships. Again, the owners are not personally liable for debts.
We recommend that most new business owners form an LLC as it offers liability protection and pass-through taxation while being simpler to form than a corporation. You can quickly and cheaply form an LLC using ZenBusiness’s online LLC formation service (it can take as little as 5 minutes). They will check that your business name is available before filing, submit your Articles of Organization and be on hand to answer any questions you have about the company formation process.
Step 6: Register for Taxes
Once you have your EIN, you’ll need to choose your tax year. Financially speaking, your business will operate on a calendar year (January–December), or a fiscal year, a 12-month period that can start in any month. This will determine your tax cycle, while your business structure will determine which taxes you’ll pay.
The IRS website also offers a tax-payers checklist, and taxes can be filed online. It is important to consult an accountant or other professional to help you with your taxes to ensure you are completing them correctly.
Step 7: Fund your Business
Securing financing is your next step and there are plenty of ways to raise capital:
- Bank loans: This is the most common method, but getting approved requires a rock-solid business plan and strong credit history.
- SBA-guaranteed loans: The Small Business Administration can act as guarantor, helping gain that elusive bank approval via an SBA-guaranteed loan.
- Government grants: A handful of financial assistance programs help fund entrepreneurs. Visit Grants.gov to learn which might work for you.
- Venture capital: Offer potential investors an ownership stake in exchange for funds, keeping in mind that you would be sacrificing some control over your business.
- Crowdfunding: Websites like Kickstarter and Indiegogo offer an increasingly popular low-risk option, in which donors fund an entrepreneur’s vision.
- Personal: Self-fund your business via your savings, the sale of property or other assets, and support from family and friends.
Step 8: Apply for Licenses/Permits
Starting a catering business requires obtaining a number of licenses and permits from local, state, and federal governments.
Federal regulations, licenses and permits associated with starting a catering business include doing business as (DBA), health license and permit from the Occupational Safety and Health Administration (OSHA), trademarks, copyrights, patents and other intellectual properties, as well as industry-specific licenses and permits.
For a catering business, you will potentially need state-level licenses, a business license, and local county or city-based health and food-handling licenses and permits. If you plan to serve alcohol, you will need to obtain a liquor license as well.
Additional permits may be required by your state, such as a general business permit or license. The license requirements and how to obtain them vary from state to state, so check your state government’s website or contact the appropriate person to inquire about licenses and permits needed to run a catering business. You could also use the SBA’s guide to identify the required licenses and permits for your industry and your state.
Your city, town, or county may also have additional requirements for a real estate business, such as signage and zoning permits. Speak to representatives of your local governments about licensing requirements.
This is not a step to be taken lightly, as failing to comply with legal requirements can result in hefty penalties. If you feel overwhelmed by this step or don’t know how to begin, it might be a good idea to hire a professional to help you check all the legal boxes.
For peace of mind and to save time, we recommend using MyCorporation’s Business License Compliance Package. They will research the exact forms you need for your business and state, and provide them to you to make sure you’re fully compliant.
Step 9: Open a Business Bank Account
In order to begin catering you will need to have somewhere to keep the money you make, and that requires opening a bank account.
Keeping your business finances separate from your personal account makes it easy to file taxes and track your company’s income, so it’s worth doing even if you’re running your catering business as a sole proprietorship. Opening a business bank account is quite simple, and similar to opening a personal one. Most major banks offer business account options, just inquire at your preferred bank to learn about rates and features.
But it is a good idea to look at a few options, as banks vary in terms of offerings, and you want to find the plan that works best for you. Once you choose your bank, you just need to bring your EIN (or Social Security Number if you decide on a sole proprietorship) and your articles of incorporation or other legal documentation that proves your business is registered.
Step 10: Get Business Insurance
Business insurance is an area that often gets overlooked but is vital to your success as an entrepreneur. Insurance protects you from unexpected events that can have a devastating impact on your life and business.
Here are some of the different types of insurance to consider:
- General liability: The most comprehensive type of insurance, acting as a catch-all for many business elements that require coverage. If you get just one kind of insurance, this is it. It even protects against bodily injury and property damage.
- Business Property: Provides coverage for your equipment and supplies.
- Equipment Breakdown Insurance: Covers the cost of replacing or repairing equipment that has broken due to mechanical issues.
- Worker’s compensation: Provides compensation to employees injured on the job.
- Property: Covers your physical space, whether it is a cart, storefront, or office.
- Commercial auto: Protection for your company-owned vehicle.
- Professional liability: Protects against claims from a client who says they suffered a loss due to an error or omission in your work.
- Business owner’s policy (BOP): This is an insurance plan that acts as an all-in-one insurance policy, a combination of any of the above insurance types.
Step 11: Prepare to Launch
As opening day nears, prepare for launch by reviewing and improving some key elements of your business.
Develop your website
Website development is crucial because your site is your online presence and needs to convince prospective clients of your expertise and professionalism.
You can create your own website using services like WordPress or Squarespace. This route is very affordable, but figuring out how to build a website can be time-consuming. If you lack tech-savvy, you can hire a web developer to create a custom website for your business.
Essential software and tools
Being an entrepreneur often means wearing many hats, from marketing to sales to accounting, which can be overwhelming. Fortunately, a number of excellent software programs and digital tools can help you with many business tasks. We have broken them down into different categories below.
Several catering-specific websites and online tools can strengthen your business and boost efficiency. Here’s a list of top catering software offerings:
Some of your business will come from walk-by customers and web surfers, but you should still spend time on marketing. Especially as a new business, getting the word out and increasing customer awareness is crucial.
Social media is a particularly good way of promoting your business because you can create engaging posts that advertise your products:
- Facebook: Great platform for paid advertising, allows you to target specific demographics, like men over age 50 in the Cleveland area.
- Instagram: Same benefits as Facebook but with different target audiences.
- Website: Search engine optimization (SEO) will help your website appear closer to the top in relevant search results, a crucial element for increasing sales.
- Popular web-based accounting programs for smaller businesses include Quickbooks, Freshbooks, and Xero.
- If you are unfamiliar with basic accounting, you may want to hire a professional, especially as you begin. The consequences for filing incorrect tax documents can be harsh, so accuracy is crucial.
The right equipment is crucial for the successful launch of a catering business. You might consider specialty equipment for your particular menu needs. Here’s a list of some of the major items you may need to get started:
- Kitchen equipment: ovens, stoves, grills, fryers, plates, bowls, trays, utensils
- Holding cabinets (for easily transporting trays of food)
- Chafing dishes (steel, lidded containers to keep food warm)
- Food pan carriers
- Hot food tables
- Catering carts
- Catering service trays
- Ice beverage bins
- Insulated beverage carriers
- Punch bowls
- Tabletop and buffet displays
- Food and drink fountains
- Ice sculpture molds
- Buffet serving utensils
- Concession equipment
Step 12: Build Your Team
You may not need to hire any employees if you are starting with a small catering firm run out of your kitchen. But as your business grows, you will likely need full-time employees to fill various job roles, such as:
- Event planner
- Busboys and dishwashers
- Admin & HR
Your business may at some point need to hire all of these positions, or just one or two of them, depending upon its size and needs. You might also hire multiple workers for a single role, or a single worker for multiple roles, again depending on your needs.
Free-of-charge methods to recruit employees include publishing a job post on platforms such as LinkedIn or Facebook, or using free classified sites like Jobs and AngelList. You might also use a premium recruitment option, such as advertising on Indeed, Glassdoor, or ZipRecruiter. Finally, you could hire a recruitment agency to help you find talent.
Step 13: Start Making Money!
Focus on USPs
Unique selling propositions, or USPs, are the unique characteristics of a product or service that sets it apart from the competition. Customers are inundated with buying options and need to be able to quickly grasp what’s novel about your catering business and how it fulfills their wishes. It’s wise to do all you can to ensure your USPs stand out on your website and in your marketing and promotional materials, stimulating buyer desire.
Here are some examples of USPs that may differentiate your catering business:
- Gourmet food on-the-go
- Niche food expert
- Organic and vegan meals
- Traditional or cultural dishes
- Well-planned; consistent and timely delivery
- Cater to customized requests
- Food presentation specialist
- Day-of prep and delivery
- Decorations, interior design
- Cooking instruction; a micro-culinary school
- Offer photography/videography
- Airline / cruise ship catering
- Cocktail catering
- Website and SEO – Create a website and optimize it for search engines.
- Social media marketing – Create a strong social media presence, especially on Facebook, Twitter and Instagram, by posting regularly.
- Competitions and giveaways – Via email or social media, generate interest by offering prizes to people who complete a certain action.
- Signage – Put up eye-catching signage outside your office, on your trucks and catering equipment.
- Promotional Materials – Distribute brochures or flyers in the area of your business, as well as at industry events and tradeshows.
Catering Business FAQs
Some licenses and permits are common to all businesses, such as zoning and sales tax. Other licenses/permits are specific to the food business and will need to be obtained through your state. You may need to register your business with the Food & Drug Administration and obtain your specific licenses and permits from there, depending on the type of food and beverages you plan to provide. Ultimately, it’s best to perform your own research to determine your specific business needs. State and local health departments can help you obtain the appropriate licenses and permits.
Startup food businesses do not need to build their own facilities and kitchens. Outside using your home kitchen, most areas offer many options for renting, or even co-renting, a professional kitchen. You could use an incubator kitchen, which are meant to nurture new food businesses, or a co-packer kitchen that will make your products for a contracted price. You could co-rent a kitchen facility alongside other caterers, or even rent out a restaurant’s kitchen on off-days or off-hours. Websites like The Kitchen Door provide search services for these and other options.
Food business owners should first and foremost understand the various food safety protocols, such as Hazard Analysis and Critical Control Points (HACCP), Good Manufacturing Practices (GMP), and the Global Food Safety Initiative (GFSI). Many food safety procedures can be learned online and health inspectors can provide further educational recommendations and training materials. In general, preparing, packaging, and labeling your food appropriately is necessary to comply with food safety protocols.