Why start a catering business?

For people who enjoy cooking, baking and developing recipes, running a catering business can be a satisfying and lucrative career. Some benefits of starting a catering business may include:

Opportunities to scale

You can start a catering business on a small scale, preparing meals out of your home. As you expand your business and catering skills, you can grow gradually, taking on larger clients and bigger events. Adding employees and moving to a commercial kitchen can increase production capacity.

Potentially low financial risk

Restaurants need physical locations, while catering businesses can rent commercial kitchens for events.

Flexibility

You have full control over the food you serve and events you cater. Some catering businesses expand to entertainment to offer a full-service experience. Others specialize in a specific style of food for certain occasions.

Starting a catering business can also give you more control over your schedule since you choose the events. This makes it a flexible option that can work around your responsibilities.

Costs of creating a catering business

Regardless of the size, catering businesses have basic start-up costs. Average start-up costs for a registered catering business range from $10,000 to $50,000, but this number depends on your business niche, location and scale. The main start-up costs of building a catering business typically include:

Business location

You need a location to prepare and package orders. If you cook out of your home kitchen, you may file part of your rent or mortgage payment as a business expense. As your business grows, you might buy or rent a separate location with more room for equipment to keep up with demand.

You can rent a commercial kitchen or co-rent with other culinary businesses to save money. This can cost anywhere from hundreds of dollars a month to several thousand dollars, depending on the kitchen size and hours required.

Licenses and permits

As a provider of food and beverages, your catering business must follow local health and safety standards. Specific requirements for licenses and permits may vary based on your location. The permits, licenses and registration fees can add up to a thousand dollars or more.

Related: How to Register a Business Name for Your Business

Insurance

Like any business, your catering company should have general liability and property insurance. If you have a catering vehicle to transport food to clients, you need commercial auto insurance. Your business may also need other types of commercial insurance, such as unemployment and workers’ compensation insurance.

Equipment

Equipment is one of the most significant startup costs of a catering business. Buying used equipment or renting expensive items can help you save money. Some kitchen equipment you may need to prepare food includes:

• Ovens
• Stoves
• Walk-in freezers
• Deep fryers
• Refrigerators
• Commercial mixers
• Dishwashers
• Pans, pots and cutting boards
• Kitchen utensils
• Containers for food
• Ice machine
• Shelving

You likely also need serving supplies, including:

• Heat lamps
• Serving dishes
• Flatware
• Beverage dispensers
• Glassware
• Tablecloths and napkins
• Cake stands and dessert trays

Labor

Your labor costs can include the price of onboarding employees, paying chefs, servers and other employees for hours worked and paying consultants for advice and developing the HR and payroll systems. They also include the cost of training your staff and obtaining certifications for particular skills. Additionally, budget to give yourself a fair salary once your business is cashflow positive.

Food costs

One benefit of running a catering business is that you can wait to order food until you have customers. As your business grows, having staple items on hand lets you take on last-minute customers and reliably fill orders.

Additionally, you may spend money on ingredients while testing and refining your menu. The amount you spend on food in the start-up phase depends on how many menu tests you perform and the dishes you serve.

Advertising

Some entrepreneurs market their catering businesses exclusively through word-of-mouth. Having a small advertising budget can help you reach potential customers. Basic advertising costs, such as brochures, business cards, branded items and radio or web ads, can range from under a hundred to a few thousand dollars.

Deciding on a niche

The specific services you offer and the local market can affect your specialties. Consider researching your competition and looking for gaps in the market where you could differentiate your catering business and attract a specific audience.

You might choose a niche that has the potential to grow but isn’t oversaturated. Examples of niches within the catering industry include:

• Weddings
• Bar and bat mitzvahs
• Luncheons
• Conferences
• Box lunches
• Cocktail parties
• Children’s entertainment
• Concessions

You can also specialize further by choosing a particular style of food, such as fine dining, vegan meals, brunch foods or traditional cuisine, and specialty services.

For example, a catering company that specializes in barbeque might serve food in banquet-style trays. Meanwhile, a full-service fine dining catering business might have servers pass out hors d’oeuvres and serve individual plates to guests.

Building a menu

Once you decide on a niche, you can brainstorm ideas for your menu. A simple menu with several popular items can lower costs and streamline processes in the beginning. You might add new dishes as your business becomes more efficient or create event-specific menus and tiered meal plans for specific occasions.

Consider common dietary restrictions when developing your menu. Avoiding certain ingredients or offering alternatives may help you appeal to a broader customer base while being consistent with your catering theme. A catering company that specializes in artisan pizzas could open up a larger market by adding gluten-free crust or vegan options.

After crafting your initial recipes, consider asking a test audience to try your menu and provide feedback. You may need to adjust your recipes by using different ingredients.

Another important part of the testing process is timing the cooking process from start to finish. This helps determine if you have the time and labor resources to offer each dish. Also, consider checking if the dishes last under heat lamps or in chafing dishes to maintain quality throughout the meal.

Related: The Basics of Designing a Restaurant Menu

Hiring employees for your catering business

It’s possible to run a catering business for small events. However, to grow your income, you likely need employees to assist with food preparation, serving and cleanup. Research employment laws in your area to understand your legal obligations and tax responsibilities as an employer before beginning the hiring process.

When hiring employees for your catering business, consider these key factors:

Types of employees to hire

People who own catering businesses typically fulfill multiple roles until they have the capital to outsource responsibilities to contractors and employees. Examples of roles to consider hiring for your catering business include:

• Chefs: Hiring a head chef can help refine your menu and create new, interesting specials. This lets you focus more on the business side of catering.
• Cooks: While chefs have the training to lead a team and craft recipes, line cooks efficiently work as a team to prepare meals on schedule.
• Administrators: Once you have a steady stream of customers, administrators and customer service specialists help handle customer inquiries, coordinate event schedules and manage paperwork.
• Accountants: Keeping track of your finances can get more complicated as your sales volume increases. Hire an accountant or a bookkeeper to record transactions and produce budget reports to support your financial choices.
• Servers: Offering meal service as part of your catering package can make your company more appealing to high-end clients. Having reliable, professional servers is essential for building a reputation as a full-service caterer. Even with buffet-style service, having servers refill food can ensure good customer service.
• Designers: Consider working with a freelance designer to create promotional materials, brochure designs, logos and other parts of your company branding.
• Delivery drivers: As you take on more clients, you may not be able to attend every event. Consider hiring delivery drivers to transport the food and set up food stations for your customers.

Creating a job posting

When creating a job posting for your catering business, be clear about the hours and the role. As a growing catering business, you might only need help part-time. The hours are often nights and weekends when special events are held. Making these details clear helps you attract candidates who prefer that schedule.

Make a list of skills you’re looking for and any requirements applicants must meet. If they need a food handlers certification, specify this under the qualifications section of the job description.

Finding candidates

Job boards and word-of-mouth may be great ways to find employees for a new business. Look through your professional and personal network to find dedicated partners who want to see your business succeed.

If you’re hiring for a critical role in your business’ development, such as a head chef, you may consider contacting a recruiter to help you find someone with the right experience. When vetting candidates, look for previous customer service or food service experience to build a strong staff that requires minimal training.

Related: We’re Hiring: 17 Ways to Say You’re Looking for Employees

Conducting interviews

Creating an effective interview process helps you identify candidates who align with your needs. The people you hire represent your business and influence customers’ impressions. Determine the most important skills and qualities for your open position. Then, create interview questions to evaluate those areas.

Assess interpersonal skills during the interview. Fulfilling catering orders is often fast-paced and requires consistency, attention to detail and the ability to work under pressure. Ask candidates questions about their experience using each of these skills. If you’re hiring a team of employees, consider how their personalities may work together.

Setting prices and building a business model

Before you assign prices to each menu option, research how much you need to make to break even. Record all your one-time and recurring costs. Use that information to set the minimum amount you need to charge to be profitable.

You can also decide how high of a profit margin makes sense for your services. Market research may help you find a balance between how much customers are willing to pay and how much you need to make a profit.

Many catering businesses use a tiered business model where customers can order pre-set packages for a certain amount. Others create custom plans for each client to settle on a fair price per person. In addition to the basic cost of bulk meals and standard service, catering companies typically charge fees such as:

• Delivery fees
• Clean-up fees
• Bartending fees

Frequently asked questions about starting a catering business

Is catering a profitable business?

Catering can be profitable if you monitor food and labor costs. When testing recipes, consider ingredient prices to ensure each dish is cost-effective. Researching the local market may help you customize your services to appeal to your target audience and optimize costs to reach a profitable position. Consistency typically helps your business grow and increase profits steadily.

How can you market your catering business?

Friends and family can share positive reviews to increase brand awareness. Using targeted advertising techniques can help you speed up growth and generate significant community interest. Here are several methods you might use to market your catering company:

• Running ads online
• Offering free catering to a community group
• Posting photos of your food and menu to social media pages
• Updating your online search listing
• Handing out flyers and brochures at event centers
• Providing discount promotions for return customers

What are the drawbacks of starting a catering business?

While catering businesses are somewhat flexible, you have to work when your clients host events. It may take more time and creativity to find enthusiastic employees who enjoy working hours outside a traditional work schedule.