But what are the ingredients to a successful catering business? And how can you make sure yours succeeds? Here’s how to start your own catering company in 12 not-too-complicated steps.
1. Find your speciality
When your catering business fits in a specific niche, for face less competition from the big, one-size-fits-all caterers on the block. And it becomes easier to build up a solid base of repeat clients through word of mouth marketing.
- What type of food will you serve? Will you serve everyone? Or go deep on a niche market, like vegan or gluten-free cuisine.
- What types of functions will you serve? When you’re just starting out, smaller functions like cocktail parties, staff lunches, and wedding showers may be easiest. As your business grows, you can expand your catering services to include larger events.
- What’s your capacity? If you’re jumping into this full time, maybe you’re ready to serve multiple functions per week. But if catering is a side hustle, you may need to limit your business activities to the weekends.
- Who’s going to do the work? Sketch out a hiring plan, factoring in who’s going to do food preparation, sales, accounting work, etc.
Next, it’s time to see who you’ll be competing with, and who you’ll be working for.
Researching customers and the competition
It’s best to research the lay of the land before you put together your menu and start buying equipment. For instance, if you live in a small city and there are six other caterers specializing in Sikh weddings, you’ll face a lot of competition in that niche. You may want to focus on something no one else is trying, like vegan pub fare.
A search for local caterers should be your first step. See what menus are being offered, and what size functions your competitors serve. If they don’t have approximate prices on their websites, consider calling to get quotes.
After that, the best way to learn about local caterers is to talk to their customers. Not only do you get the scoop on what your competitors are doing, right or wrong, but you’ll be conducting customer research. That will help you plan how to market your business later.
A few ideas to get you started:
- Talk to friends and family. Baptisms, weddings, wakes—chances are, you know someone who has had to plan one. Ask who they chose as a caterer, why, and what the experience was like. It may give you an idea of what types of services your business should offer.
- Call up the people who use caterers the most. These are your potential customers, and they’re a gold mine. Wedding planners, office managers, event coordinators—they all have their own favorite caterers. Who’s the most popular caterer in town? Who has a bad reputation? What do they look for in a caterer?
- Read the reviews. This may seem like a no-brainer, but in the rush to get your business off the ground, you may forget to investigate what customers think. Google, Yelp, and Facebook reviews for local catering companies will give you some insight into what customers like and what they don’t.
- Look at the big picture. Reports and statistics on catering businesses nationwide can give you a bigger picture of how the industry operates, as well as recent trends. Get started by checking out Catersource’s state of the catering industry report.
2. Investigate local licensing and permits
Licensing and permits for catering companies vary state by state. Depending on your state, you may or may not be allowed to prepare meals in your own kitchen with equipment you also use for personal meal prep. And liquor licenses will have different requirements according to state.
Despite state-to-state variations, there are a few licenses and permits common across all states, some of which you’ll likely need to start your business:
- A general business license, issued by your state, municipality, city, or county.
- A zoning permit, depending on where you’ll locate your cooking facilities.
- Health permits, depending on where you’ll be preparing food and whether you’ll be transporting it.
Get in touch with your local health department, as well as your Secretary of State, to learn about licenses and permits that pertain to you.
3. Create your menu
If you love food and you’re already thinking about starting your own catering business, no doubt you’ve stayed up late at night dreaming of the magnificent meals you’ll serve.
Now that you’ve done some research, answered some important questions about your business, and investigated local licensing, it’s time to write a rough draft of your menu.
While you may customize later, it’s best to start of with a set list of options. That way, you can perfect well in advance the supply orders and preparation processes for each dish you serve. Once customers choose their items, it’s just a matter of mixing and matching factors you’ve already planned out.
Your menu will be shaped by your capacity and your cooking facilities. Less tangibly, it will also be affected by what types of food you’re comfortable serving, and the niche you’re marketing to. For instance, if you only serve food with local, seasonal ingredients, your winter menu won’t offer freshly squeezed orange juice.
4. Plan your location
The location of your business will depend on local laws pertaining to catering businesses, as well as zoning regulations.
Some states may not allow you to prepare meals in your home. In that case, you have one of two choices: Rent a commercial kitchen, or prepare food on-site.
Renting a commercial kitchen increases your operating costs, but it also gives you flexibility; you’re always able to prepare meals for your customers, regardless of their location. And you’ll be able to do it in a larger capacity than you would be able at home. However, you’ll also be responsible for delivering food, so you’ll need vehicles and equipment that are up to the job.
Preparing food on-site means you’ll be relying on customers’ facilities for meal prep. That limits you to serving customers who rent or own places with kitchens—churches, community centers, and homes. You’ll save on operating costs, but pay in other ways: It’s up to you to adapt to whatever kitchen you’re using. Also, you won’t be able to serve some events—like gallery openings, work lunches, or some outdoor events.
The best plan is to decide what you’re going to serve, and to whom, and then choose the location and plan the budget that fits.
5. Get ready to buy equipment
Your equipment needs could range from a new egg whisk to an industrial mixer, from a couple of Yeti coolers to half a dozen chest freezers. It depends on the scale of your business, and your customers.
Prepare a list of all items you’ll need to get up and running. Then get in touch with a restaurant supply company, and get a quote for your shopping list. You’ll use that to help you put together the budget in your business plan.
If you’re considering financing equipment, take a look at all your options first. A small business loan or line of credit may be cheaper, in terms of interest payments, than a finance plan. And paying cash upfront may give you the option to buy used equipment, which could cost you less in the long run.
7. Prepare a business plan
“Cook it and they’ll come” is a recipe for a failed catering company. You’ll need clear plans for every part of your business in order to succeed.
On top of including research you do into customers and competitors, a startup budget, and financial projections, your business plan should cover:
- The problems you solve for clients and customers
- What sets you apart from the competition
- The resources your business depends on
- Your mission statement and vision for the future
- What inspired you to go into business
A word on catering company startup costs
According to the pros, you should be prepared to budget $10,000 to $50,000 in startup costs for your catering company. Naturally, startup costs vary business to business. You’ll need to take into account your equipment, transportation, and marketing needs. Whatever your startup costs, your initial budget should be able to cover the operating costs of your business for 12 months, without taking into account revenue.
8. Create an affordable marketing strategy for your catering company
Luckily, you don’t need to buy a Super Bowl ad to get the word out about your catering business. A few inexpensive techniques can do the trick.
Keep menus and prices fresh
If customers are looking up your business, chances are they’re already thinking about having an event catered. That means they want to know what kind of menu you offer, what kind of events you cater, and how much it will cost.
Keeping menus and price lists up to date on your website helps your customers start planning before they even contact you. A couple planning their wedding would rather know if your services are in their budget before they contact you; offering price ranges up front could mean they choose you over the competitor whose website still says “under construction.”
Curate your reviews on social media
A social media profile with recent reviews proves the lights are on—you’re an active, popular business. Encourage customers to leave reviews, and be sure to address any negative ones; it’s often better to offer a refund to a customer with unrealistic expectations than to suffer the damage to your reputation caused by a one-star review.
Post sexy food pics
Pictures of the dishes you’re most proud of can get social media followers’ mouths watering, and show them you know what you’re doing when it comes to presentation. Occasional food photos are a great, low-investment way to keep your social media up to date.
Be warned, though: An unattractive photo of your cooking is worse than no photo at all. If every photo you take looks like a public warning poster about food poisoning, you may want to enlist the help of a professional.
Word of mouth marketing is your best friend
Good, bad, forgettable—whatever kind of experience a customer has with catering, they’re only too happy to share it by word of mouth. The best thing you can do is make sure your customers have good things to say about you.
One way to do that is by providing exceptional service, every time. The other way is to offer referral deals. Maybe if a customer refers someone, they get 15% off their next order—or fresh-baked breakfast muffins and coffee for their office, as a way of saying thank you. Building and maintaining good relationships, as well as incentivizing referrals, will grow your clientele faster than any print ad or flyer.
9. Choose a business structure
Your business structure determines how your catering company will be taxed, and also your level of personal liability when it comes to debts and legal proceedings.
As soon as you go into business for yourself, the IRS automatically considers you a sole proprietorship. That’s great in terms of ease—no forms to fill out, no business structure to elect. But it’s not so great if you can’t pay your debts, or someone decides to sue you.
The next step up from a sole proprietorship is a single member limited liability company (LLC). An LLC functions a lot like a sole prop, except it sets up your business as a separate legal entity from your individual person. Meaning, you get more liability protection than you would with a sole prop.
To see all the business entity types you have to choose from, and how to elect each one, check out our guide to business structures.
10. Name your business
If you’re a sole proprietorship and you’re operating under your own name—say, Monica Geller—there’s no need to register a business name. But the minute you choose to operate under a different name—Monica’s Catering with a Smile—you’ll need to register it.
And if your business elects and structure other than a sole proprietorship, you’ll need to register your business name, regardless of whether it’s the same as your personal given name.
In either of these instances, you register your business name by filing a doing business as (DBA) form with your state and county. Our guide to DBAs gives you the full step-by-step.
11. Get insured
Business insurance protects your catering company in case the untoward happens. Even if your particular state doesn’t require you to get insurance, you should buy as many types of insurance as you need to protect your assets and shield you from being sued.
The most essential type of insurance for a catering business is general liability insurance. Chocolate fountain overflowed and permanently damage your client’s rare Persian rug? Bad batch of oysters from your supplier got some wedding guests sick? Over enthusiastic flambé took out someone’s eyebrows? General insurance has you covered.
After that, you might want to consider the following:
- Commercial automotive insurance, for your catering van.
- Commercial property insurance, protecting you in case your equipment or kitchen are damaged.
- Unemployment insurance, often legally required if you have employees. It also protects you from being sued for damages if an employee loses their job.
- Wrongful termination insurance, protecting you from being sued if an employee believes you mistreated them.
- Key person insurance, in case your star chef is put out of commission and it costs you business.
Take a deeper dive with our complete guide to small business insurance.
12. Start bookkeeping ASAP
Doing your books may seem a far cry from sights, smells, and tastes of the kitchen. But it’s a key ingredient when you start your own business. When your bookkeeping is disorganized, so is everything else.
Good bookkeeping helps you make sure you’re getting paid by customers, make certain you’ve paid suppliers, and keep track of how much cash you have to work with. It can help you plan how to expand your business, or make it more profitable if you’re having trouble paying the bills. And when you have a complete record of expenses on the books, you can take advantage of every possible tax deduction at the end of the year.
Before you cater your first event, make sure you’ve got bookkeeping set up. There are a few ways to do that, but naturally, we recommend Bench (that’s us). You’ll get a complete team of bookkeepers who do your bookkeeping for you, plus an intuitive app to track finances—all for a flat monthly fee.
Not sure Bench is right for you? Try an appetizer first. When you sign up for a trial, we do one month of your bookkeeping free.