How to Start a Frozen Food Business

As people stay home more, frozen foods are booming, with the market experiencing impressive double-digit growth. So if you have some real culinary skills, or just a few recipes you’ve always to share with the world, you could start your own frozen food business and grab a share of this thriving market. 

But succeeding will take more than just ideas. You’ll need to understand what you’re getting into from an entrepreneurial perspective. Luckily, this step-by-step guide details everything you need to know about launching a successful business.

Step 1: Decide if the Business Is Right for You

Pros and cons

Starting a frozen food business has pros and cons to consider before deciding if it’s right for you. 

Frozen food industry trends

Industry size and growth

• Industry size and past growth – The global frozen food industry was worth $256.46 billion in 2021 after growing nearly 11% the previous year.((https://www.fortunebusinessinsights.com/frozen-food-market-104138)) 
• Growth forecast – The global frozen food is expected to grow more than 50% by 2028. 
• Number of businesses – In 2022, 567 frozen food production businesses are operating in the U.S.((https://www.ibisworld.com/industry-statistics/number-of-businesses/frozen-food-production-united-states/)) 
• Number of people employed – In 2022, the US frozen food production industry employs 97,383 people.((https://www.ibisworld.com/industry-statistics/employment/frozen-food-production-united-states/))

Trends and challenges

Trends in the frozen food industry include:

• Millennials are driving much of the growth of the frozen food industry, demanding frozen meals made with premium ingredients.
• The American Frozen Food Institute predicts that growth will continue in the industry due to innovations in foods that meet specific dietary needs, such as plant-based foods and immunity-boosting foods. Frozen foods for the weight-conscious, such as Lean Cuisine, are also popular.
• The fastest growing frozen food categories are seafood, poultry, and appetizers.

Challenges in the frozen food industry include:

• Safety concerns with the manufacturing of frozen foods make it imperative for new frozen food businesses to thoroughly investigate their manufacturing partner. 
• Supply chain issues surrounding organic ingredients are causing delays in production for some frozen food manufacturers. 

Consumer spending

• Average consumer spend – The average person in the US spends $53.81 on frozen meals annually.((https://www.statista.com/statistics/253730/us-expenditure-on-frozen-meals/))
• Potential customer base – 72% of consumers in the U.S. consume frozen foods.((https://affi.org/frozen-foods-are-a-pandemic-powerhouse/))

How much does it cost to start a frozen food business?

Startup costs for a frozen food business range from $6,500 to $13,000. Costs include your initial inventory, a commercial-grade freezer, and shipping supplies.

When you start your business, you can take two different approaches. You could order a small number of your products (the smallest your manufacturer will allow) so that you have samples. Then you can go to local grocery stores and pitch your product to see if they will order the product to stock. This can be a challenge since the freezer aisle is the most competitive aisle in the grocery store. However, if you can achieve this, you can have your products shipped directly to the stores and you don’t have to hold inventory.

Your other option is to sell directly to customers online, in which case you will need to order a stock of inventory from your manufacturer and store it in a commercial freezer. Packaging frozen food for shipping is challenging and expensive, but this is probably the best way to start selling your products faster. Later, once you’ve proven that people will buy your products, you can pitch it to grocery stores citing your proven track record.

Start-up Costs	Ballpark Range	Average
Setting up a business name and corporation	$150 - $200	$175
Business licenses and permits	$100 - $300	$200
Insurance	$100-$300	$200
Business cards and brochures	$200 - $300	$250
Website setup	$1,000 - $3,000	$2,000
Inventory of frozen foods	$1,500 - $3,000	$2,250
Commercial grade freezer	$3,000 - $5,000	$4,000
Shipping supplies	$500 - $1,500	$1,000
Total	$6,550 - $13,600	$10,075

How much can you earn from a frozen food business?

Prices for your products will depend on what you’re making. These calculations will assume an average sales price of $5. Your profit margin after manufacturing and shipping supply costs will be about 30%.

In your first year or two, you could work from home and sell 500 items per week, bringing in $130,000 in annual revenue. This would mean $39,000 in profit, assuming that 30% margin. If you land contracts with grocery stores, sales could climb to 1,500 products a week. Without the cost of shipping supplies, your profit margin could rise to around 40%. With annual revenue of $390,000, you’d make a tidy profit of $156,000.

What barriers to entry are there?

There are a few barriers to entry for a frozen food business. Your biggest challenges will be:

• Finding a reliable manufacturer
• The competition from large frozen food companies

Step 2: Hone Your Idea

Now that you know what’s involved in starting a frozen food business, it’s a good idea to hone your concept in preparation to enter a competitive market. 

Market research will give you the upper hand, even if you’re already positive that you have a perfect product or service. Conducting market research is important, because it can help you understand your customers better, who your competitors are, and your business landscape.

Why? Identify an opportunity

Research frozen food businesses online to examine their products, price points, and what sells best. You’re looking for a market gap to fill. For instance, maybe the local market is missing a gourmet frozen dessert business, a premium frozen fish company, frozen whole grain waffles, frozen concentrated soups or frozen vegan pizzas.  

This could jumpstart your word-of-mouth marketing and attract clients right away.

What? Determine your products or services

You can design your recipes and specialize in certain foods or create a variety of recipes. It’s probably best to start with just a few products to test the market.

How much should you charge for frozen food?

Prices vary based on the types of products you’re offering. Check the prices of similar foods to make sure that you’re competitive. You should aim for a profit margin after manufacturing and shipping supply costs of about 30%.

Once you know your costs, you can use this Step By Step profit margin calculator to determine your mark-up and final price points. Remember, the prices you use at launch should be subject to change if warranted by the market.

Who? Identify your target market

Your target market will depend on the types of products you offer, but generally it will be a very broad and diverse market. You should spread out your marketing efforts to include sites like TikTok, Instagram, and Facebook.

Where? Choose your business premises

In the early stages, you may want to run your business from home to keep costs low. But as your business grows, you’ll likely need to hire workers for various roles and may need to rent out a distribution facility. You can find commercial space to rent in your area on sites such as Craigslist, Crexi, and Instant Offices.

When choosing a commercial space, you may want to follow these rules of thumb:

• Central location accessible via public transport
• Ventilated and spacious, with good 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 Frozen Food Business Name

Your business name is your business identity, so choose one that encapsulates your objectives, services, and mission in just a few words. You probably want a name that’s 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 ideas 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 
• Name should be relevant to your product or service offerings
• Ask around — family, friends, colleagues, social media — for suggestions
• Including keywords, such as “frozen food” or “frozen meals”, boosts SEO
• Name should allow for expansion, for ex: “Frozen Delights” over “Frozen Desserts”
• Avoid location-based names that might hinder future expansion
• Use online tools like the Step by Step Business Name Generator. Just type in a few keywords and hit “generate” and you’ll have dozens of suggestions at your fingertips.

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 using our Domain Name Search tool. 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. Your business name is one of the key differentiators that sets your business apart. Once you pick your company name, and start with the branding, it is hard to change the business name. Therefore, it’s important to carefully consider your choice before you start a business entity.

Step 4: Create a Frozen Food Business Plan

Every business needs a plan. This will function as a guidebook to take your startup through the launch process and maintain focus on your key goals. A business plan also enables potential partners and investors to better understand your company and its vision:

• Executive Summary: A concise summary of the frozen food business plan, highlighting key points such as market opportunity, competitive advantage, and financial projections.
• Business Overview: An overview of the frozen food business, including its mission, vision, and the specific niche or target market it aims to serve.
• Product and Services: Detailed information about the range of frozen food products and services offered, emphasizing unique selling points and quality.
• Market Analysis: An examination of the frozen food market, including trends, customer needs, and potential growth, providing a foundation for the business strategy.
• Competitive Analysis: Evaluation of competitors in the frozen food industry, identifying strengths, weaknesses, opportunities, and threats to strategically position the business.
• Sales and Marketing: A plan outlining how the business will promote and sell its frozen food products, including pricing, distribution channels, and promotional strategies.
• Management Team: Introduction of key individuals involved in the business, highlighting their expertise and roles in ensuring the success of the frozen food venture.
• Operations Plan: Details on how the frozen food business will operate, covering aspects such as sourcing ingredients, production, packaging, and distribution.
• Financial Plan: A comprehensive financial overview, including startup costs, revenue projections, and profit margins, providing a clear picture of the business’s financial viability.
• Appendix: Additional supporting documents, such as market research data, resumes of key team members, and any other relevant information that enhances the frozen food business plan.

If you’ve never created a business plan, it can be an intimidating task. You might consider hiring a business plan specialist to create a top-notch business plan for you.

Step 5: Register Your Business

Plus, registration is exciting because it makes the entire process official. Once it’s complete, you’ll have your own business! 

Choose where to register your company

Your business location is important because it can affect taxes, legal requirements, and revenue. Most people will register their business in the state where they live, but if you’re planning to expand, you might consider looking elsewhere, as some states could offer real advantages when it comes to frozen food businesses. 

If you’re willing to move, you could really maximize your business! Keep in mind, it’s relatively easy to transfer your business to another state. 

Choose your business structure

Business entities come in several varieties, each with its pros and cons. The legal structure you choose for your frozen food business will shape your taxes, personal liability, and business registration requirements, so choose wisely. 

Here are the main options:

• Sole Proprietorship – The most common structure for small businesses makes no legal distinction between company and owner. All income goes to the owner, who’s also liable for any debts, losses, or liabilities incurred by the business. The owner pays taxes on business income on his or her personal tax return.
• General Partnership – Similar to a sole proprietorship, but for two or more people. Again, owners keep the profits and are liable for losses. The partners pay taxes on their share of business income on their personal tax returns.
• 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.
• C Corp – 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. The corporation pays taxes, and owners pay taxes on their dividends, which is sometimes referred to as double taxation.
• S Corp – An S-Corporation refers to the tax classification of the business but is not a business entity. An S-Corp can be either a corporation or an LLC, which just need to elect to be an S-Corp for tax status. In an S-Corp, income is passed through directly to shareholders, who pay taxes on their share of business income on their personal tax returns.

We recommend that new business owners choose LLC as it offers liability protection and pass-through taxation while being simpler to form than a corporation. You can form an LLC in as little as five minutes using an online LLC formation service. They will check that your business name is available before filing, submit your articles of organization, and answer any questions you might have.

Step 6: Register for Taxes

The final step before you’re able to pay taxes is getting an Employer Identification Number, or EIN. You can file for your EIN online or by mail or fax: visit the IRS website to learn more. Keep in mind, if you’ve chosen to be a sole proprietorship you can simply use your social security number as your EIN.

Once you have your EIN, you’ll need to choose your tax year. Financially speaking, your business will operate in 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.

It is important to consult an accountant or other professional to help you with your taxes to ensure you’re 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.
• Friends and Family: Reach out to friends and family to provide a business loan or investment in your concept. It’s a good idea to have legal advice when doing so because SEC regulations apply.
• Crowdfunding: Websites like Kickstarter and Indiegogo offer an increasingly popular low-risk option, in which donors fund your vision. Entrepreneurial crowdfunding sites like Fundable and WeFunder enable multiple investors to fund your business.
• Personal: Self-fund your business via your savings or the sale of property or other assets.

Bank and SBA loans are probably the best option, other than friends and family, for funding a frozen food business. You might also try crowdfunding if you have an innovative concept.

Step 8: Apply for Frozen Food Business Licenses and Permits

Starting a frozen food business requires obtaining a number of licenses and permits from local, state, and federal governments.

Federal regulations, licenses, and permits associated with starting your business include doing business as (DBA), health licenses and permits from the Occupational Safety and Health Administration (OSHA), trademarks, copyrights, patents, and other intellectual properties, as well as industry-specific licenses and permits.

You may also need state-level and local county or city-based licenses and permits. The license requirements and how to obtain them vary, so check the websites of your state, city, and county governments or contact the appropriate person to learn more.

You could also check this SBA guide for your state’s requirements, but 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 ensure you’re fully compliant.

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.

Step 9: Open a Business Bank Account

Before you start making money, you’ll need a place to keep it, 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 frozen food business as a sole proprietorship. Opening a business bank account is quite simple, and similar to opening a personal one. Most major banks offer accounts tailored for businesses — just inquire at your preferred bank to learn about their rates and features.

Banks vary in terms of offerings, so it’s a good idea to examine your options and select the best plan for you. Once you choose your bank, bring in your EIN (or Social Security Number if you decide on a sole proprietorship), articles of incorporation, and other legal documents and open your new account.

Step 10: Get Business Insurance

Business insurance is an area that often gets overlooked yet it can be vital to your success as an entrepreneur. Insurance protects you from unexpected events that can have a devastating impact on your business.

Here are some 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 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. 

Essential software and tools

Being an entrepreneur often means wearing many hats, from marketing to sales to accounting, which can be overwhelming. Fortunately, many websites and digital tools are available to help simplify many business tasks.

You may want to use industry-specific software, such as marginedge, Prime, or acctivate, to manage your costs, inventory, invoicing, and payments.

Accounting

• Popular web-based accounting programs for smaller businesses include Quickbooks, Freshbooks, and Xero. 
• If you’re 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. 

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 website builders. 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 designer or developer to create a custom website for your business.

They are unlikely to find your website, however, unless you follow Search Engine Optimization (SEO) practices. These are steps that help pages rank higher in the results of top search engines like Google. 

Marketing

For your frozen food business, the marketing strategy should focus on highlighting the quality, convenience, and variety of your frozen products. Emphasize the freshness retained through freezing, the health benefits of your products, and the ease they bring to meal preparation. If applicable, showcase any unique or specialty items, such as organic, gourmet, or ethnic foods. Here are some powerful marketing strategies for your future business:

Kickstart Marketing

• Professional Branding: Your branding should convey quality, freshness, and convenience. This includes everything from your product packaging and logo to your online presence and marketing materials.
• Direct Outreach: Network with grocery stores, supermarkets, and specialty food stores to introduce your products. Attending food expos and trade shows can also be beneficial for building industry contacts and gaining visibility.

Digital Presence and Online Marketing

• Professional Website and SEO: Develop a website that showcases your product range, nutritional information, and any unique selling points. Use SEO best practices to optimize your site for search terms related to frozen foods, healthy eating, and quick meal solutions.
• Social Media Engagement: Utilize platforms like Instagram and Pinterest for visually appealing product showcases, and Facebook and Twitter for sharing customer testimonials, recipes, and food preparation tips.

Content Marketing and Engagement

• Food Blog: Share blog posts featuring recipes using your products, tips for healthy eating, and the benefits of frozen foods.
• Email Newsletters: Keep your customers informed about new product launches, special offers, and recipe ideas through regular newsletters.
• Video Content: Create engaging cooking shows or recipe videos that demonstrate how to use your products to make delicious meals.

Experiential and In-Person Engagements

• Product Sampling: Offer product tastings at grocery stores or food festivals to let potential customers experience the quality and taste of your products firsthand.
• Participation in Food Expos: Showcase your products at food expos and trade shows to reach a broader audience and network with industry professionals.

Collaborations and Community

• Partnerships with Food Bloggers and Influencers: Collaborate with food bloggers and influencers to review and promote your products, reaching a wider and more diverse audience.
• Community Involvement: Sponsor local events or engage in community projects, aligning your brand with health and wellness initiatives.

Customer Relationship and Loyalty Programs

• Loyalty Rewards Program: Implement a loyalty program that offers discounts or special deals to repeat customers.
• Referral Incentives: Encourage word-of-mouth marketing by offering incentives for customers who refer friends and family.

Promotions and Advertising

• Targeted Online Advertising: Use digital advertising platforms to target audiences interested in quick, healthy meal solutions and specialty frozen foods.
• Retailer Promotions: Work with retailers to offer in-store promotions, discounts, or featured product placements.

Focus on USPs

Unique selling propositions, or USPs, are the characteristics of a product or service that sets it apart from the competition. Customers today are inundated with buying options, so you’ll have a real advantage if they are able to quickly grasp how your frozen food business meets their needs or 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.

Global pizza chain Domino’s is renowned for its USP: “Hot pizza in 30 minutes or less, guaranteed.” Signature USPs for your frozen food business could be:

• Gourmet frozen vegan pizza you have to taste to believe!
• Where’s breakfast? It’s ready in five minutes! 
• Freshly frozen vegetarian delicacies 

Networking

You may not like to network or use personal connections for business gain. But your personal and professional networks likely offer considerable untapped business potential. Maybe that Facebook friend you met in college is now running a frozen food business, or a LinkedIn contact of yours is connected to dozens of potential clients. Maybe your cousin or neighbor has been working in frozen foods for years and can offer invaluable insight and industry connections.

The possibilities are endless, so it’s a good idea to review your personal and professional networks and reach out to those with possible links to or interest in frozen foods. You’ll probably generate new customers or find companies with which you could establish a partnership. 

Step 12: Build Your Team

If you’re starting out small from a home office, you may not need any employees. But as your business grows, you will likely need workers to fill various roles. Potential positions for a frozen food business include:

• Distribution Center Workers – package foods for shipping
• General Manager – ordering, inventory management, accounting
• Marketing Lead – SEO strategies, social media

At some point, you may need to hire all of these positions or simply a few, depending on the size and needs of your business. You might also hire multiple workers for a single role or a single worker for multiple roles, again depending on need. 

Free-of-charge methods to recruit employees include posting ads on popular platforms such as LinkedIn, Facebook, or Jobs.com. You might also consider a premium recruitment option, such as advertising on Indeed, Glassdoor, or ZipRecruiter. Further, if you have the resources, you could consider hiring a recruitment agency to help you find talent. 

Step 13: Run a Frozen Food Business – Start Making Money!

Ready to join the frozen food renaissance? Frozen foods are a booming industry, so now’s the perfect time to get in on the action. You just need a unique concept and great recipes, and you can find a manufacturer to do your production and packaging. Frozen food is a business that has the potential to grow fast, so your frozen food brand could become a household word!

You’ve got the entrepreneurial know-how, now it’s time to start putting those recipes together and putting your frozen food business on the road to success.