How To Start A Catering Business: 9 Simple Steps in 2021
There is a broad range of entrepreneurs in the catering industry. Whether you are an excellent cook, love hosting parties, or are involved in event planning, catering can help get the ball rolling.
Maybe your reason is as sweet and simple as Dannella Burnett from Gainesville, Georgia who started her catering business, called Oakwood Occasions, twelve years ago:
“I figured if I could cook for other people and put food on their plates, I could put food on my family’s plate.”
However, Burnett knew even when she launched her catering business and expanded into event planning that the business was far more than serving food. It is all about managing stress, preparing for the unexpected, and above all, managing business as you would any other.
Our guide will take you step-by-step through the process of starting your own catering shop. It won’t be long before you are delighting guests at parties, events, and festivals.
We’re going to talk about how to start a catering business to see if it really is the best business model for you.
Towards the end of this article I’ll answer some of the most frequently asked questions on how to start a catering Business…
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Table of Contents
How To Start A Catering Business In 9 Steps
It is important that you determine what type of catering operation you plan to do when starting a catering business.
A Cocktail Catering Can Be A Great Side Hustle.
Before you learn how to start a catering business, you should decide what type of catering business you want to open.
While some caterers only serve cocktails and small finger foods at cocktail receptions, others set up a buffet a la carte, while others do sit-down catering that you would see at a wedding or banquet.
After you decide which kind of catering you want to offer, you can move on to the next step.
Step 1: Choose Your Business Name And Business Entity Type.
When starting a catering business, the first thing you want to do is choose your business name and business entity type.
Once you’ve decided what type of catering business you want to start, it’s time to choose a name for it and define its legal entity. Make sure the name you choose is available in the state where you will open your catering business. A business name can usually be checked with the Secretary of State online in most states.
Depending on your preferences, incorporation should be your top priority when starting a catering business.
Your business will also require you to select a legal structure or business entity. You have several options here depending on what you’re looking for, including whether you’d like to do it alone or not.
If you choose to operate as a sole proprietor, your business will not be incorporated and will simply be owned by you (or you and your spouse). To avoid taking on all personal liability for your company, or if you simply want to have a partner for your business, you can register your business for the following:
- General partnership
- Limited partnership
- Limited liability company
- Or another business entity
The protections offered by each differ between partners and businesses.
Step 2: Write A Business Plan.
Writing a business plan will go a long way.
A catering company can be a profitable source of income.
After settling on your business name and entity, the next step in the “how to start a catering business” checklist is to create a business plan.
In the long run, having this plan will pay off, as you’ll have a safety net if something goes wrong, and it will prepare you what to expect while you’re running the business.
If you do not have a template to use, you can make a business plan on your own. It’s important that when you plan this project you conduct lots of research beforehand.
You’ll need to include information about how your business will be run, a market analysis, the specific products and services it will provide, and your marketing and financial strategies. It may seem like a lot, but since you will learn more about the catering world as you progress, you may add to your plan.
However, it is equally important to identify potential customers and to research about your competitors.
Do you feel your area requires a particular type of catering that isn’t currently available? You might find, for instance, that golf courses in your area are always in need of catering services for weekend events. A market analysis of your area’s needs is one way in sustaining your business.
The vendor and supplier lists should be part of your business plan if you want to start your own catering business. Be sure to source all the supplies you require, including linens, utensils, china, and tables and chairs if necessary, along with the food of course. Rather than purchasing things outright, it is recommended to rent non-food items first.
Equipment financing can provide the funding you need to buy supplies when that time comes.
Step 3: Register Your Catering Business And Get An EIN.
Your business may be named after you by default depending on the type of business entity you choose. A DBA or “doing business as” name might be required if you want to change that. Your business and its name need to be registered with the state where you plan to operate.
A catering business might also need other registrations since you’re handling food. This will depend on your state’s regulations. For instance, the health department may want to inspect the place where you cook and prepare the food you would be serving.
As well as a social security number, you will need an employer identification number. It only takes minutes to apply online with the IRS. After that, you’ll be able to benefit from it for a long time. You can use it to apply for credit cards and pay your employees, as well as to keep track of your tax status.
Step 4: Get All Licenses And Clearances Needed To Start A Catering Business.
The food-preparation industry is more complex than you might think. The state requires a business license as well as a food handling license for this business. Often a home kitchen will not pass a county or state health inspection, so it is best to look for a commercial kitchen that’s been approved already.
You might also need workers’ compensation, insurance coverage, and permits or licenses to work at certain venues. These are costs that will cut into your profit margins on a monthly or annual basis.
If you need help determining what will be needed, contact your local Chamber of Commerce, Small Business Development Center, or the Small Business Administration.
It is a good idea to consult with a lawyer specializing in the food or service industry to give you proper guidance and make sure that all registrations are handled before you begin cooking.
Step 5: Determine Your Pricing.
Your pricing depends largely on the type of catering you do and where you are located. Most businesses have pricing tiers based on what level of service and amenities they offer for different rates. Burnett didn’t take that route.
“I started off doing custom proposals for people, and I’ve stayed with them throughout these nine years. It takes a lot more time, but a lot of my proposals get accepted, rather than a package deal where it may or may not fit what someone is looking for. If they don’t need something, if it doesn’t pertain to their event, it’s not going into their pricing. If they need more, they pay for more; if they need less, they pay for less.”
As an example of what she charges, Burnett states that she charges anything from $7-$8, for appetizers for cocktail hour, to $80 for filet mignon and lobster.
“It varies because we do buffets, plated dinners, simple appetizers, or [events] where we’ve just dropped off food and they’ve served it themselves—to very high-end menus with unique ingredients,” she explains.
Step 6: Hire, Train, And Outfit Your Staff.
Providing staff is essential for an event since it’s unlikely you can handle everything on your own. In Burnett’s case, hiring and training employees came naturally, but it might not be that way in your business, so do what you think works best for you.
It is likely that you can likewise find staff either through recommendation or from your own network. It might also be a good idea to look into job search sites devoted to foodservice or find out how one of your competitors recruits.
You should keep in mind that what works for you when you first start a catering business might not work as well when it starts to grow.
Another example of where capital at the start is useful: you’ll need the money for training before staff are put on the job. In addition, uniforms, including vectorized logos, can either be very cheap or very expensive.
Step 7: Market During Your Own Events.
The single most effective way that Burnett has to market and advertise a business beats all the others.
“When you’re putting food in somebody’s mouth, that’s the best time to find your next client. It’s through the guests that are attending the events you’re catering for.”
In any case, it depends on the kind of catering you offer. Corporate catering, for example, might emphasize LinkedIn advertising, which allows you to buy leads, or paying people by the hour to knock on doors and distribute fliers. Meanwhile, those looking into weddings would need to participate in bridal shows.
“Really, it’s about networking. A lot of word of mouth, a lot of referrals. When you’re just starting a catering business, that’s where the putting food in someone’s mouth tactic comes in.”
Step 8: Get Funding.
During the economic collapse of 2008, Burnette’s husband lost his job, which caused her to start her own business. As a former food and retail manager, she leaned on those skills when she looked for a new job.
“A woman at my church said, ‘Why don’t you reopen your catering business here at the church?’ I didn’t think you could do that, but we called the health department and had them do a site visit at the church kitchen. It was deemed sufficient for commercial use, so I had my church kitchen licensed as a catering commissary, and I launched the business with zero capital, zero plan. Nothing but me, myself, and I.”
Bennett found herself in business much earlier than she expected. Even though she was able to make things happen, she says luck filled the spot of capital, and would not recommend it to other aspiring caterers.
“There are some things that I could look back on that I would say either by sheer doggedness or dumb luck, the next right thing did happen. Was it more stressful because there wasn’t a plan at the beginning or there wasn’t capital? I think definitely.”
Bennett emphasizes the importance of capital for catering businesses:
“Most small businesses fail because they don’t have the capital to get them through the ebbs and flows. And in something like the catering business, there should naturally be some ebb and flow, whether it’s the seasonality of the type of catering that you do, or the calendar—seasons and holidays.”
Unless you’re as lucky as Burnett, you may have to secure funding to get your catering business started and keep it going during slow months. Finding out how to start a catering business can be accomplished by knowing how to acquire capital. You can acquire small business funding in many ways to get your business started.
Getting your catering business off the ground
You can also apply for a business line of credit or apply for a business credit card, if you want to go the traditional route. After you’ve established your business, you can apply for an SBA loan.
Step 9: Plan For Emergencies — Both Financial And Others.
When you start out, it’s wise to have extra capital and continue budgeting wisely as you go, since the catering business is never without its challenges.
“Things break, so you have to replace them. Maybe you started off with china for 200 and now you only have china for 150 because they break.”
“Repairs to vehicles: Catering can be hard on your vehicles, so you’ll need replacements to tires. The price of gas, when it went sky-high, it had an impact. Food was costing more. And people understood that food cost more to a certain extent, but people still had in their head that they need to do a lunch for $10 or $15 a person, and when the price of gas and food has gone up, it’s easy for that not to be profitable.”
Having a plan for the unexpected is more than just budgeting. A lot of events require catering from a venue that is 30 minutes, an hour, or a few hours away where the kitchen is. You might find yourself stuck in such a situation.
“The ability to be a MacGyver is a requirement. Every venue is different, and if you forget something, you’ve gotta figure out how to make it work.”
Can You Really Make Money By Starting A Catering Business?
Yes, You can!
There’s a lot that comes along with starting a catering business that many people struggle with.
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Starting A Catering Business: The Bottom Line
It isn’t easy to run a catering business. In light of the physical and demanding nature of the work, Bennett points out that it is important to be aware of what you are getting into.
“You can be a great cook, and that doesn’t necessarily make you a great caterer,” Burnett continues.
Yet Burnett managed to build an extremely profitable and successful business, so much so that, in 2019, she switched from catering to event planning, all off the back of what started in a church kitchen.
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