How to start a catering business
The secret recipe for a successful catering service business: Fire up the hard work, mix in culinary skill, and add more than a dash of perseverance. Read on to avoid being part of the 50% of all small businesses that fail within 5 years—and, more importantly, to get your new catering venture off to the right start.
Create a business plan for your catering business
“Plans are worthless, but planning is everything.”
Did President Dwight Eisenhower speak that line from the White House kitchen? Well, it certainly applies to catering. Whether you prefer a formal business plan or the back of a napkin, consider the following questions before you start a business:
- Executive Summary: How would you describe the business and your potential success?
- Overview: What’s the business’s background, legal structure, and other key attributes?
- Industry Analysis: What does market research reveal about the catering industry in your area, including size, opportunity, and current trends?
- Competitive Analysis: Who are your competitors, and what are their strengths and weaknesses?
- Marketing: What is your marketing strategy to reach potential customers
- Management: What unique skills do you bring to the business?
- Operations Plan: How will you manage the day-to-day tasks of the business
- Financials: What are your estimated revenue, expenses, and profit for each of your first five years?
Find your catering niche
Finding a niche is simply choosing an area to focus on or specialize in from the larger catering market. A niche helps you stand out in a crowded marketplace and makes it easier for you to track your ideal client. Trying to do everything for every client is often a path to disaster. Common niches for catering companies include:
- Corporate events (Banquets, boxed lunches, cocktail parties, executive luncheons, golf outings)
- School events
- Parties for children
- Parties for adults (Anniversaries, bachelor/bachelorette, birthdays, dinner parties, holidays)
- Sports events
Once you pick the type of events you want to specialize in, the type of food you’d like to focus on will help you get even more targeted. Sometimes offering food for those with dietary restrictions, such as dairy-free, gluten-free, kosher, vegan, and vegetarian, can also differentiate you from the competition.
Uncover your catering unique selling proposition (USP)
Your unique selling proposition is a description of what makes you different from every other caterer.
In a world where customers have an overabundance of choice, 90% of a small pie is better than 10% of a big pie for business owners. For example, an enterprising caterer might have the USP, “Authentic Vegan and Vegetarian Barbecue for Health-Conscious Adults.”
The USP instantly separates the business from other caterers, therefore making it memorable. They’ll have an easier time dominating their piece of the pie. Of course, they can open up to meat-eaters to widen the market if the specialization doesn’t have enough potential customers to support it. You’ll have to strike a balance between your niche, USP, and the market.
Pick your catering business name
This part should be more than a bit of fun. So many caterers start with a name and dream. Select a name that immediately summarizes your USP and sets you apart from other caterers. Maybe it’s as simple as The Vegan and Vegetarian BBQ Catering Company or as fun as The Green Queen’s BBQ Catering Company.
You can start with a business name generator or simply research the competition. One way that has led to many winning business names is asking close friends and family to brainstorm with you. Maybe the best way is to do some name word associations and see what patterns emerge and ideas spark.
After you have a list of contenders, head over to Google to see if any of your top names are already taken. Can you come up with an alternative that still rings true to your USP and the soul of your catering business? The one essential thing is picking a name you love. Just like your signature dish, you and your customers will have to feast upon it for years.
Design your menu
Once you know your niche and your USP, you’re ready to build your menu. The major mistake new catering business owners make is building too big of a menu. You need to pare down your selection so that you and your staff can execute with excellence.
One adage that you can adapt for catering: KISS, or “Keep It Simple, Sous Chef.” If the advice is good enough for the sous chef, it’ll work for the head chef, too.
Choose your kitchen location and equipment
Many states and their health departments prohibit the use of a home kitchen for food preparation. If you plan on catering from home, you may need to upgrade your kitchen to meet commercial requirements in line with government regulations.
Before making such a hefty investment, many new caterers choose to rent commercial space. It’s a good idea to ask local restaurants if you could use their commercial kitchen after business hours. Renting kitchen space is wise, but so is renting kitchen equipment. As you grow your business, you’ll learn what you need. Your master list of catering equipment will likely include:
- Buffer Equipment
- Serving Equipment
You may need a van to transport it all, and catering software can help you manage inventory, such as booking, sales, and marketing.
Figure out your financial plan
Investing in financial research can pay big dividends. Chief amongst them is growing a profitable business. Margins in the catering business can end up thinner than anything a chef's knife can julienne. Catering start-up costs vary, but it’s common for new business owners to estimate anywhere from $10,000 to $50,000.
Here are a few questions to help you determine your potential expenses:
- How much will it cost to cook the food? How much will it cost to rent commercial space? How much will you spend on serving and cooking equipment?
- What will I pay to source the food? Will you partner with food service vendors and restaurant suppliers or work with farmer’s markets?
- How will you transport the food? Will your current vehicle work, or will you need a new one?
- What does setting up the business cost? How much will you pay for permits, licenses, and insurance? Will you need to hire a lawyer or accountant?
- What do you expect to make? What’s your per-person cost and profit?How much will you pay employees and independent contractors?
One benefit of a catering company is that it has a more negligible overhead than starting a restaurant. The answer to many of the above questions could be rent until it becomes profitable to own. This especially true if you’re starting the business part-time or as a side hustle focused on small events.
While you’re thinking about the costs, here are some simple and creative ways to finance your new business:
- Ask friends or family.
- Crowdfund with community help.
- Finance equipment and with vendors.
- Invest your savings.
- Open a line of credit.
- Secure a personal or business loan.
- Use personal or business credit.
Get your paperwork in order
After planning the big decisions, it’s time to make your dream a reality.
1. Register your business name with the state
Before you find potential clients, you need to register your business with state and local authorities. Also, you’ll need to pick a type of business structure such as sole proprietorship, limited liability company (LLC), or corporation.
2. Apply for your EIN
Your employer identification number (EIN) identifies your business for taxes. Surprisingly, getting one is both free and easy. Get your EIN here.
3. Obtain permits and licenses
This step requires some hustle, but it’s well worth protecting your potential customers. You’ll also be prepared for inspections by the local health department. Your state will likely require several permits, licenses, and certifications to get going. Standard ones for caterers include:
- Health permit. You can get this from your county’s health department.
- Seller’s permit. You may need this as a caterer.
- Food safety certification. A single employee or all employees may need this to sell food.
- Food-handling license. This is for anyone who handles food, so you and all your employees will likely have to get these.
- Liquor license, if applicable. You’ll have to get this if you’re planning to serve alcoholic beverages, and you can check the Alcoholic Beverage Control board for your state’s specifics.
State and local laws surrounding permit and license requirements vary, so you can always contact your Secretary of State to determine how to get the business licenses you need as a caterer.
4. Insure your catering business
Some first-time caterers let insurance fall into the last-minute category, while savvy food entrepreneurs keep it on the radar.
Every caterer needs solid small business insurance—that’s why it’s essential to shop around to lock in the best deal. Check out this overview of important coverages you may need to insure a catering business:
- Workers’ compensation: This coverage protects your employees if they get sick or injured while working in your catering business. Every state requires worker’s comp, and the consequences of skipping this coverage could cause the state to close your business. (You can get a quick estimate on what you’d pay for workers’ comp with our 60-second workers’ compensation calculator.)
- General liability insurance: This policy protects your catering business if you’re sued for an injury or property damage claim. (Expensive lawsuits can quickly put a catering service out of business.)
- Property insurance: This policy could protect your commercial kitchen and the equipment you own.
- Liquor liability coverage: This coverage protects you if you accidentally over-serve alcohol to a customer who then causes bodily injury or property damage. Your state may require this coverage before you’ll be issued a liquor license.
- Commercial auto insurance: This policy covers vehicles that are used for business purposes.
Hire your first employees
Before you jump into the hiring process, you’ll need workers’ compensation insurance to operate legally.
Once you’re legal and have the proper paperwork, you can get an overview of what you’ll need from the Small Business Administration. Some potential employees to help you in your food preparation now or in the future:
- Bartenders. Serve alcoholic drinks.
- Bussers. Clear off tables and help maintain cleanliness.
- Chef. Your head chef will craft the cuisine that pleases guests. You may need a sous chef for larger events.
- Cook. Works under the chefs to prepare food.
- Event Planner. Meets with clients to coordinate events.
- Host/Hostess. Helps seat the customers.
- Servers. Brings food to the customers.
- Staff Supervisor. Ensures the whole team operates efficiently.
While you’re growing, it may be hard to afford full-time workers. You can start with the servers as you play jack or jill of all trades. Referrals from friends, family, colleagues, and associated businesses are still the best way to find dependable employees. After that, temp agencies and job advertisements can help.
Think about stretching your budget to find the most experienced help you can afford. Just think how quickly negative reviews can hurt your fledgling food business. Professional uniforms and ongoing training can go far to build a stellar reputation.
Spread the word about your new catering business
After all the planning, it’s time to let everyone in on your little secret. How will you get your first customers? A little creativity along with sweat equity can go a long way to creating buzz.
Here are some common ways to advertise your catering business:
- Build a website. Get the URL for your business name. A service with templates like Weebly or Squarespace can make this easy.
- List your business on Google and Yelp. Sign up for your Google My Business and Yelp profile.
- Launch your social media profiles. Get your unique Facebook, Twitter, LinkedIn, Instagram, Pinterest, and other handles relevant to your niche.
- Buy online advertising. If you can afford the pricing, focusing on longer keywords related to your niche and USP could mean winning new customers.
- Distribute brochures and flyers. Call it old-fashioned, but it still works, and you might get your foot in the door with new customers.
- Create word-of-mouth. Business owners know there’s nothing better than word-of-mouth advertising, and the best way to get it is to please customers with food that’s worth raving about. Ask happy clients and customers for referrals that you can post to your website and social profiles.
- Partner with related businesses. Businesses such as photographers, event planners, and wedding planners can be excellent referral sources.
Check out these tips for running a successful catering business
Learning how to run a successful business is not a one-time meal—it’s more of a buffet. You’ve got to keep going back to discover the best practices. Some places to start your sampling include:
- The Catering Institute: A superb online resource of essays, videos, and webinars dealing with every aspect of the catering business.
- NACE: The National Association of Catering and Events provides online learning through its NACE University and teaches from the broad categories Business Academy and Food Safety. You can earn the Certified Professional in Catering and Events (CPCE) Designation.
- Catering Magazine: An extensive collection of valuable articles and resources geared to help you no matter how long you’ve had your catering service business.
This article’s been a lot to digest. Perhaps you’re thinking about how to stay sane as a catering entrepreneur.
On second thought, it could be your particular brand of culinary crazy that has you ready to start your own catering business.
If you’re happy to take one bite off your plate of to-dos, you can get business insurance with Huckleberry in about the same amount of time it takes to whip up your favorite snack. (Getting a quote is free, easy, and 100% online.)