How to Start a Food Catering Business

The food service industry has grown, with more consumers demanding better, high-quality food. Arguably, the increasing number of food operations businesses calls to attention the potential and lucrative market the food service industry offers. The number of food service businesses in the United States increased from 155,000 to over one million over fifty years. This report targets the catering business, which provides suitable food options for consumers, detailing how entrepreneurs can start a successful business.

What is a Catering Business?

A catering business is an entrepreneurial pursuit within the food service industry whereby consumers enter a prearranged contract with caterers to provide a diverse variety of drink and food options to a certain number of people at a particular location and time. This business is different from the conventional restaurant business structure, given that consumers select their preferred menus and locations. Notably, caterers and restaurants prepare their food before business; however, the former prepares food, ensuring that only the final steps of either reheating, cooking, or assembly takes little time during service. There are two types of catering businesses: institutional and social. Social caterers are involved in catering services to charities, civic groups, individuals on and off-premises, and corporations. On the other hand, institutional caterers serve hospitals, universities, large hotels, airlines, and retirement centers, whereby contracts are long-term, and consumers are in large volumes.

Why Start a Catering Business?

As one of the most fulfilling entrepreneurial pursuits in the food service industry, the catering business has provided flexibility in budget and time for entrepreneurs. One of the critical motivations for starting such a business is the flexibility to experiment with different food choices as customers have diverse interests and demand different cuisines for their events. Therefore, owning a catering business may indulge one in situations; whereby customers have more passion for their food choices. Catering also demands one to engage in social circles and networks. As the face of the company, the caterer engages in meetings with clients from diverse business and personal backgrounds. This enriches their experiences and provides them with authentic food service experiences that fulfill their interest in the profession. More importantly, catering businesses facilitate flexible work-life balance, with owners able to stipulate the times they choose to work.

Market Analysis

• Global market size: USD 160.98 billion in 2019
• Projected Annual Growth Rate: 4.9% ( 2022-2026)
• Average Catering Businesses in the USA: 144560 catering businesses in 2022 (4% annual growth)
• Key Players in Catering Market: Aramark Corporation, Goddard Catering Group Ltd., SodexoInc., Elior Group S.A., D.O. & C.O. Aktiengesellschaft, Delaware North Companies Inc., dnata Ltd., Compass Group PLC, Newrest Group International S.A.S, Thompson Hospitality Services LLC, TajSATS Air Catering Limited, Cosmopolitan Catering, Performance Food Group Company, and Ocean Catering Company.

Sources: https://www.ibisworld.com/industry-statistics/number-of-businesses/caterers-united-states/

Catering Business: Startup Analysis

Production equipment	$30,000 to $50,000
Supplies (food ingredients (vegetables, spices, additives)	$10,000 – $15,000
Insurance and Legal fees	$4,500 to $6,000
Permits and licenses for the business	$5,000 to $10,000
Business Software	$1,000 to $3,000
Small business insurance	$4,000 to $10,000

Disclaimer: These costs may vary, depending on location, competition, supplies, sources, market share & your personal decisions, but they offer a good idea of what you will spend to start. Our Data are purely informational and should not be taken as legal or financial advice.

Start a Catering in these 11 Steps:

1. Creating a Catering Business Plan
2. Legalize Your Catering Business
3. Setup Your Catering business for Taxes
4. Setting Up Your Catering business Bank Account & Exploring Funding for Your Business
5. Catering Business Accounting & Invoicing Setup
6. Acquire the necessary permits & licenses for your Catering business
7. Get Required Catering Business Insurance
8. Grow your Catering Business brand: Helpful Tips
9. Create An Online Catering Business Presence
10. Getting Leads & Calls For Your Catering Business
11. Get to know Your Catering Business, Research local competition

Step 1: Creating a Catering Business Plan

Business plans refer to prepared documents that entrepreneurs use as a guide for launching their businesses. Notably, the document usually includes information about the service or product one offers, marketing strategies, and financial information. Well-prepared business plans are essential for caterers because they provide clear strategies and goals they can use to achieve success in their new businesses. Additionally, business plans enable caterers to track their growth and progress, defining where mistakes have been made and providing solutions. Given that business plans include information such as competitive analysis, market analysis, marketing, consumer segmentation, cash-flow projections, and logistics and operations approach, they outline the business’s clear short and long-term goals. Caterers require business plans as they are necessary for decision-making, ensuring owners can follow their original plans as they tackle business challenges. Business plans are also relevant because they reduce risks owners might face as they create contexts for exploring the budget, resources, and capital dynamics necessary for success. In this case, caterers can outline better benchmarks and objectives that help keep accountability.

Essentials of What a Catering Business Plan Contains are:

• Executive summary of the overall business
• General description of the company
• Introduction
• Organizational structure
• Market research and competitor analysis
• Description of your products and services
• How you plan to market and sell your products
• Financial projections and funding plans
• Sales & Marketing Strategies
• Roadmap for your business
• Projected growth based on your business plan
• Appendix

What are the Costs Involved in Opening a Catering Business?

There are many costs involved in starting a catering business, with the most critical foundation being a commercial kitchen. Caterers must ensure they set up their facility well, reserving 75% of the kitchen area for food production, 15% for receiving and storage, and 10% for administrative roles. Kitchen equipment is quite costly, with business owners expected to prepare quality resources for use.

Common Supplies Required:

Apricots	Mushrooms	Watermelon	Pumpkins
Asparagus	Plums	Melon	Figs
Tomatoes	Cherries	Artichokes	Peaches
Currants	Beets	Strawberries	Heirloom
Herbs	Nectarines	Pomegranates	Rhubarb, Berries
Fiddlehead ferns	Kumquats	Mandarins	Brussels sprouts

Equipment Needed for Your Catering Business

• Two commercial ovens (range top (an oven with the ringed metal burners you see in consumer kitchens) and hot top (an oven with a solid metal top that heats evenly): $2,000 to $5,000 per oven.
• Two convection ovens: $5,500 to $7,500.
• Dishwasher: $2,500 to $7,000.
• Two hotboxes: $700 to $3,000 each.
• Commercial-grade mixer: $450 to $2,200
• Pizza oven. $2,500 to $7,500
• Two heat lamps: $100 to $250 each.
• Refrigerator: $3,000 to $4,000.
• Freezer: $3,000 to $3,800.
• Scale: $500 to $2,500
• Ice machine: $1,500 to $4,000.
• Carrying units: $100 to $500 each.
• Food processor. $400 to $1,500.
• Slicer: $300 to $3,000.
• Sink: $600 to $2,000.
• Stainless-steel worktables: $300 to $1,000 each.
• Baking equipment: proofing box ($5,000), baker’s rack ($100 to $350).
• Two to four coffeemakers: $300 to $1,200 each.
• Six stainless-steel chafing dishes: $60 to $200 each.
• Miscellaneous serving items (vegetable platters, measuring spoons (metal and plastic), sauce bowls, trays, meat platters, salad bowls, and punch bowls): $100 to $50.
• Utensils (ladles, tongs, kitchen spoons, measuring cups (metal and plastic), carving boards, cutting boards, a cheese grater, spatulas, an egg slicer, wire whisks, pastry brushes, a potato peeler, chafing dish setup(s), meat and candy thermometers, a flour sifter, a can opener, a knife sharpener, funnels, a melon ball maker, a garlic press, a pastry bags, a portion scale, heavy-duty plastic food warmers, an aluminum colander, a radish rose, a citrus knife, wicker bread baskets, wicker cracker baskets, and three-prong plug adapters.
• Knives (carving, cheese, bread, paring, boning, and chef’s cleaver): $250 to $350.
• Pots and pans (½-, 1-, 2-, 3-, 4-, 5-, 6-, and 10-quart capacities)

What are the Ongoing Expenses for a Catering Business?

The ongoing expenses for catering businesses include kitchen equipment, supply, and vehicle or transportation costs. Ideally, when exploring the numerous possibilities and options in catering businesses, owners must consider the quantity and potential costs of all the required materials. Usually, this depends on the type of food and volume one has been contracted to provide. The price estimates provided above can be negotiated with caterers seeking cheaper options for equipment. In addition to the event accessories and significant appliances, one needs a variety of utensils for preparing and serving full meals and hors d’oeuvres. It is also vital to facilitate transporting equipment and food to catering locations. One must either lease or purchase a van with enough storage to meet their needs. In most cases, caterers modify their vans with every modern kitchen appliance and equipment apart from running water. Additionally, installing propane gases, refrigerators, and mobile warmers is necessary to meet consumer needs.

Regarding food supplies, the catering business allows owners to plan the amount of food to be prepared as they have precise data about meeting their needs. In this regard, stable foods such as sugar, flour, grains, canned goods, spices, and frozen goods can be bought in bulk to serve the long-term needs of the business. Owners can choose retail or wholesale approaches in acquiring supplies, depending on the events they are catering to and the budgets. Usually, achieving long-term relationships with wholesalers is essential in keeping the operating costs minimal. Catering businesses also require staffing cost considerations. Typically, caterers hire a central permanent staff and part-time workers depending on the events planned for the month or year. For instance, the staff includes one chef and two or three helpers to cater to an event for fifty people. Finally, there are legal compliance considerations with owners expected to keep up with the health and safety regulations and insurance fees that allow them to operate successfully. By registering the business and meeting all the local, state, and council policies, catering businesses must prepare for such costs to ensure they operate smoothly.

Catering businesses also require marketing cost considerations, particularly since they must form suitable promotions for their consumer targets. Fundamentally, marketing operations allow caterers to make inroads into suitable consumer segments as they align their business values to consumer needs. This process enhances brand value and image and engages consumers to purchase more. Marketing costs may vary depending on the approaches tailored to meet the business needs.

Who is the Target Market?

The target market for a catering business can be defined depending on the type of catering business one has set up. For social catering businesses, the target market is charities, civic groups, individuals on and off-premises, and corporations. On the other hand, for institutional caterers, the target market is hospitals, universities, large hotels, airlines, and retirement centers, whereby contracts are long-term, and consumers are in large volumes. Delving deeper into the target market for this business, owners need to know that the following consumer groups are known for hiring catering services: the entertainment industry (movie sets, musicians on tour, professional sports events, and plays in production), businesses (for openings, team building activities, meetings, special sales events, awards banquets, corporate retreats, employee meals, executive dining, and galas), universities, retirement centers, hospitals, convention centers, nursing homes, community groups (donor and fundraising events) and individuals (bridal and baby showers, weddings, special in-home dinners, funerals, and anniversaries).

How Does a Catering Business Make Money?

Making money from a catering business can be pretty challenging, with owners having to ensure their pricing strategies maximize their profits. To make money, caterers enter into contracts with customers about providing food and drinks at particular times and locations. Thus, as the customer waits to receive service on the scheduled day, the caterer can achieve profit by choosing a pricing formula that allows them significant profit for each event: Overhead + Materials + Labor + Profit = Price.

How much can you charge customers?

Table 1: Pricing per person

Option	Price
Olé sangria	$1.12
Grilled vegetable tapas	$0.75
Orange flan and fresh fruit	$1.25
Egg and potato torta	$0.25
House-cured olives and roasted peppers	$1.15
Sizzling shrimp tapas	$1.25
Tapas-style potato salad	$0.25
Grilled chicken tapas	$0.50
Total Food Cost per Serving	$6.52

The table above shows the average pricing for a party. As noted, prices may vary given the different menu options and pricing strategies for different business models. When contracted by client X to provide food and drinks for a party of 50 people, the formula shown above can enable profitability for catering businesses. By considering the overall costs and the expected profitability of a catering event, owners can determine the relevant pricing for each guest in an event.

Overhead costs include fixed and variable costs of the catering business. These costs may vary depending on the event and consumer needs. For instance, salaries for the staff, utility bills, rental equipment, vehicle expenses, and supply costs may vary. Typically, caterers have a rough idea about the overall costs per year, and to break even, they must estimate or stipulate the relevant budgets for events they cater. For instance, the overhead costs may reach $150,000, and a business may have at least 150 events annually. Therefore, for each event, the overhead costs would be $1,000.

The materials include the cost of the food and drinks as well as their delivery expenses. For the event hypothesized above, each guest having one serving would cost $6.52. For 50 guests having two servings each, the total cost would be $652 for the materials cost. The third component is the labor costs which include social security taxes, compensation for employee sick-offs or personal days, health and life insurance benefits, and vacation time. Various businesses have different approaches in this segment. For instance, a catering business may choose to include costs for food preparation in the overhead costs, including the labor used by the employees. However, part-time employees may be included in labor costs depending on the complexity of the event catered. Estimates of labor costs could be $300 to $500.

The final entity for consideration is the profit margins desired by a catering business. For example, an owner may target a profit of $150,000 yearly. Given that 150 events are booked annually, for each event, the owner must achieve a profit of $1,000.

Therefore, referring back to the prescribed formula (Overhead + materials + labor + profit = PRICE.

(Overhead ($1000) + materials ($652) + labor ($300) + profit ($1000) = $2952

After making these considerations, caterers can charge a price per meal for the fifty people at the event by dividing by the number of people.
2952/50 = $59.04

Therefore, by achieving a round figure of $60 per person, one can adjust the prices of items per person, whereby if every client has two servings of each item, they will have consumed a meal worth $60, as shown in the revised table below.

Table 2: Price list for guests (50 guests with two servings of each portion).

Option	Price
Olé sangria	$10
Grilled vegetable tapas	$5
Orange flan and fresh fruit	$5
Egg and potato torta	$2.50
House-cured olives and roasted peppers	$5
Sizzling shrimp tapas	$10
Tapas-style potato salad	$2.50
Grilled chicken tapas	$5
Total Food Cost per Serving	$60

Therefore, for 50 people, the caterer would receive $3,000 while having a $1,000 profit.

How Can You Make Your Catering Business More Profitable?

Achieving profit in the catering business is relatively easy; ensure clients have an excellent first impression of your services and staff. To begin with, caterers must seek the best style for their menu, which determines how they can price their items, break-even, and keep their customers satisfied. On many occasions, customers provide their food options. However, recent trends have seen caterers design different menus tailored to meet the needs of different clients or predetermined consumer segments. To achieve better customer success, one can choose artistic or modern serviceware to increase the attractiveness of their food presentations. Attractive and effective food presentation is an important touchpoint in achieving profitability, given that different customers want unique aesthetics in food service. Successful brands listen to consumer needs and develop menu and food service layouts and resources that meet these needs. For instance, customers may prefer food arrangements with particular color arrangements and shapes. In this case, having intense and powerful colors can be appealing to specific consumer groups.

Marketing and promotions also offer critical touchpoints for caterers to upsell and increase profitability. The era of social media and digitalization has enhanced brands’ access to potential consumer segments. By employing social media marketing and public relations approaches, businesses can expand their reach and invite diverse consumer segments to their market. Notably, a catering business should develop a website and mobile application, allowing consumers to interact easily with the brand and achieve their objectives. Many customers have adopted digital approaches in their food service approaches, and having a dominant presence on digital platforms makes it easy for the catering business to launch new services and target new markets. Through marketing approaches, businesses can examine potential markets and pursue business entry strategies that allow them success and mitigate risks. For catering businesses to be successful, they must diversify their service offerings, providing many menu choices and options to clients. For instance, caterers can secure all relevant licenses, allowing them to provide alcoholic drinks, food, and other beverages. Alternatively, increasing service officers allows businesses to operate between institutional and social catering business processes. Now, a business can upscale its operations and achieve economies of scale with more significant production and transport facilities to serve both large companies and individual consumers.

What Will You Name Your Business?

The business will be XXXXXX. This name is unique to forming a website domain and registering it as a business name. Naming a business is vital because it provides legal entities that justify its operations within a country. When one has a relevant and suitable business name, one can easily register the business in state and federal offices while maintaining a unique identity on social media sites and websites. Arguably, businesses take or avoid liability in business operations involving taxation and other legal issues. Therefore, having a business name is necessary to ensure one can represent their business in legal battles affecting the company’s success.

Step 2: Legalize Your Catering Business

• Sole Proprietorship
• Partnership
• Corporation
• S Corporation
• Limited Liability Company

Step 3: Setup Your Catering Business for Taxes

To operate in the United States, a caterer must set up their business within the local, state, and federal guidelines. Catering business owners must seek an Employer Identification Number (EIN), also known as the Federal Employer Identification Number (FEIN), which serves as the official identifier of one’s business when performing transactions. The number operates similarly to a Social Security number (SSN). As one’s business I.D., the IEN is issued by the government and allows one to perform tax and other business operations. To maintain a business in the United States, one must apply for this number as it gives them access to a business bank account, enables tax reporting, and hires employees. Citizens of the United States or territories can apply for this number using their SSNs. Citizens are only allowed one EIN per responsible party per day.

Step 4: Setting Up Your Catering Business Bank Account & Exploring Funding for Your Business

Catering businesses must set up bank accounts as this allows suitable and effective business transactions in budgeting and tracking the business’s profitability. Banks are critical sources of capital and funding. With the catering business having a bank account, the owner finds it easy to make purchases, take loans, and even facilitate credit options for their customers. Catering businesses must also acquire business credit cards. Given the massive responsibilities of owning a catering business, having a business credit card is necessary to align the daily expenses with the budget, as the owner benefits from the bank. Notably, business credit cards, when used effectively, are vital sources of capital for supplies and equipment. In some instances, banks may provide interest-free financing. Accordingly, managing employee finances can be tricky, and catering businesses using business credit cards can navigate such obstacles. The card can be used to track employee spending and ensure they streamline a company’s budget.

Most Common Types of Funding to Start Your Catering Business

Step 5: Catering Business Accounting & Invoicing Setup

While most of the retail sales in the catering business may be paid through credit cards, cash, or checks, caterers must create permanent records of their business transactions. Business accounting is necessary, as the catering business owner must independently record sale slips, invoices, and credit sales. This information should include the invoice number, date, amount, running balances, collection letters, and notices. Keeping timely, accurate, and concise invoices is necessary to ensure the business can track its financials and discover opportunities to achieve profitability or reduce loss. Software such as Quickbook is recommended for use.

Step 6: Acquire the Necessary Permits & Licenses for Your Catering Business

State and Local Business Licensing Requirements

Step 7: Get Required Catering Business Insurance

The importance of attaining the relevant business licensing requirements is enshrined in the fact that many insurance companies are unlikely to provide their services without compliance. Insurance cover is necessary for a business as it mitigates the risks a business may face. Typically, business insurance is a way of protecting the investments one has made in their catering business as they cover the costs of the equipment, inventory, and fixed expenses. Ideally, this prevents liabilities for the business or owner in case of fire or other natural accidents.

There are many types of business insurance policies available, so it is important to speak with an insurance agent to determine which type of coverage is right for your business.

some common types of business insurance include:

• general liability insurance
• product liability insurance
• property damage insurance
• business interruption insurance
• worker’s compensation insurance

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Step 8: Grow your Catering Business brand: Helpful Tips

Helpful tips for growing one’s catering business incorporate marketing approaches that increase consumer engagement and brand awareness:

First, catering business owners must purchase signage that creates a primary source of communication about the brand values and image; Magnetic signs have been valuable and practical, with their mobility and advantage over the years. Second, catering business owners should invest in business cards, brochures, and stationery as these allow them to enhance the quality of their business. Presenting professional contracts, proposals, and communication channels with customers is necessary to achieve higher satisfaction and engagement. Arguably, the menus should have an aesthetic appeal with choices that inspire and motivate clients to contract services. Third, a dedicated phone or real-time communication with clients is recommended, given that most clients are likely to inquire about the services they will receive. Fourth, catering businesses should advertise on lifestyle and trade platforms as they can tap into these lucrative consumer groups. Ideally, developing professional relationships with businesses is essential to increase penetration.

Customer retention in the catering business is a mix of meeting consumer demand and driving creativity in the production processes. These businesses must ensure they regularly engage with customers, answering their questions and ensuring awareness of all the background information relevant to their needs to achieve customer loyalty. Creating online communities that tap into different cuisines and options for clients may be suitable for retaining customers. Additionally, ensuring high-quality food, preparation, and serving standards is imperative as this enables the business to exceed customer expectations.

Step 9: Create An Online Catering Business Presence

Given the digital trends in most businesses, having an online presence is crucial as it gives a catering business credibility and brand awareness. A professional and attractive website gives catering businesses a competitive advantage as customers can quickly contact the staff, seek information about products and services, and make online purchases. Usually, websites are linked to a brand’s social media platforms, creating a seamless link between their social and professional environments. Web hosting services are necessary for brands to determine how best they can optimize their marketing approaches. An example of a good Webhosting service is Bluehost. An online presence essentially entails having YouTube and social media accounts (Facebook, Twitter, Instagram, Tik Tok, and Snapchat). These platforms will ensure that customers can review the brand’s catering services online. Additionally, creating business profiles on sites such as Google and Yelp will create digital channels to attract consumers to the catering business. The list below shows the marketing tools used to enhance a brand’s online presence:

• FAQ’s Awards and accolades
• Testimonies of clients
• Contact information with location links
• Client resumes and lists
• Buttons to react to social media posts.

Step 10: Getting Leads & Calls For Your Catering Business

Generating leads is an important strategy to drive business towards a catering brand. Various approaches can be used to achieve this objective. Referrals and social media are necessary for spreading word of mouth about one’s levels of customer satisfaction attainment. Referrals and promoted advertisements create the necessary traffic toward one’s website and phone contacts. Caterers should also invest in email marketing, allowing them access to numerous email lists containing potential customers. The use of search engine optimization is also recommended for generating leads and calls, with online users finding the business faster. Most importantly, catering businesses should separate their personal and phone numbers to ensure accountability in business transactions. In modern trends, caterers invest in virtual business phones to maximize cost savings, a professional appeal, and more productivity as one can work remotely.

Step 11: Get to Know Your Catering Business and Research Local Competition

The marketing analysis of a catering business will show the market dynamics, including the number of competitors, their marketing approaches, and business trends that inform forecasting and budgeting plans. Catering business owners must understand what is right for their business as they alter their marketing and production processes to fit the needs of their customers. It is necessary to understand one’s target market, including how best to meet their needs.

Frequently Asked Questions

How can you set up your catering kitchen on a budget?

While this might be tricky, one can always shop for second-hand items, seek discount stores or buy at wholesale prices. It depends on their business structure and size.

What strategies can you use for pricing to break even?

Use either tiered or fixed pricing methods depending on the number of guests. Markups are also important to ensure you save on costs.

How can caterers plan for events successfully?

Caterers must document their approaches and steps in event planning. From the acquisition of the catering contract to activities after events, catering business owners must showcase all their on-premise and off-premise engagements with clients. Here, they can actualize menu plans, pricing, payment details, after-sale service, and budgeting, among others.

What marketing strategies appeal to Gen Z customers?

Gen Z customers are digital-savvy and love sustainable brands. They are also interested in new and unique dining experiences that fit their busy schedules.

What are the dining room and beverage management strategies suitable?

Caterers should be strategic with their approaches to meet the client’s needs. With a master list of serving ware, dinnerware, party rentals, off-premises event packing list, and floor plans, caterers can design attractive, relevant, and satisfactory set-ups.

What recipes are every day in catering events?

Depending on one’s clientele, caterers should select recipes that embody their brand values. The goal is to impress the client, and different menu choices reflect different ideologies about business engagement.

How can catering businesses develop more efficient and effective food preparation and service budgets and strategies?

Create a recipe manual that showcases relevant information about guests’ needs and food choices. Alternatively, using standardized recipes is recommended, even though some guests may prefer different selections.