Depending on the size of your business, you will need a location with excellent kitchen facilities. It must be easily accessible, should meet the needs of your staff and clients and shouldn’t eat into your profit margins too much.
When it comes to food-based businesses, you have a few choices — you could go into business as a restaurateur or start a catering business.
A catering business can be a great choice if you don’t want the expense of running a restaurant. You can still earn good margins on the meals you produce without having the overhead of running a restaurant.
Running a successful catering business can be a big challenge. Whatever your idea for doing business as a caterer, turning that vision into a company that creates amazing cuisine and delights your customers is doable, so long as you take the right approach. In this guide we’ll cover:
Understanding the world of catering
Paying taxes for your catering business
Deciding if you’re ready to start a catering business
Hiring employees, managing finances and administering your catering business
Planning out your catering business
Locating other resources for your catering business
Determining the best legal structure for your new organization
Following various rules and regulations
And much more
By the time you've read through our complete catering business guide, you will have all the information you need to set up and manage a catering. Let's get into it.
Caterers exist to provide food for major events, parties and functions. They exist to take the stress out of preparing, cooking and serving food. Good catering businesses can expect repeat bookings, and lucky business owners will get long-term agreements to provide food on a regular basis.
Caterers and other food establishments are big business in the U.S. Here are some surprising statistics about their popularity.
Sales of social caterers in 2017, up from $7.7 billion in 2015
Total revenue for catering businesses in 2017
Catering businesses in the U.S.
Caterers employ people, or just over two per catering business
This makes the catering industry very attractive to aspiring entrepreneurs, but there are big challenges in opening, running and growing a successful catering business. They demand a great deal of work, so expect long hours. Add to that the need for a constantly full pipeline, challenging profit margins and seasonal variation; you will need to work hard to ensure your business is successful.
But for those with the discipline, focus and commitment, running a catering business can be a hugely satisfying experience for you, your staff and your patrons.
When it comes to catering, your clients want several things:
Is Catering Entrepreneurship for You?
Running a catering business requires resilience and good planning. You will need to combine great marketing with an interesting and accessible menu and competitive pricing. You will need to attract clients in a competitive local marketplace. Then, you must create amazing dishes, hire staff, get chefs and ensure you always have work coming in.
You can’t forget about the administrative side of this business either. Sourcing ingredients, sorting out disputes, working out profits and more are all required. In fact, being a cater requires one of the most well-rounded skillsets of any business you might choose to go into. Along the way, you’ll learn amazing skills, develop great people management techniques and build huge amounts of experience in creating and running a successful business.
What Are the Main Skills, Expertise and Experience to Be a Successful Catering Entrepreneur?
As we mentioned above, running a catering business requires a huge and diverse range of skills. Among other areas, these skills include:
What Are the Main Challenges for a Catering Entrepreneur?
There are several major challenges for any catering business owner. These start with competition — your local area only has a certain number of clients, and you’re likely competing with a few other local businesses. Although you will build up a good reputation over time, strong marketing is essential in attracting clients to your business.
Another major issue for catering owners is financial management and making a profit. The vast majority of revenues you receive from patrons will go toward food ingredient costs (27-30 percent), staff salaries and wages (20-25 percent), occupancy costs (5-10 percent for utilities, rent, etc.) and other costs. After all expenses are taken into account, overall profit margins typically clock in at around 10 percent, compared to the average restaurant profit margin that runs between 2 and 6 percent.
Staff management also comes with is own list of challenges. From unexpected absenteeism to interpersonal conflicts, juggling staffing priorities will take up a lot of your time!
No two days are the same for a catering business owner, but all those days will be long. From working out menus, training staff, marketing and administration in the mornings through delivering food and providing services, you can expect to start work before 8 a.m. and not finish until late. If you open a catering business, you need understanding family and friends because they will not be seeing much of you.
There are several different ways to set up and run a catering business. These include:
All businesses need a business model, which is how you will generate sales, provide services and make money. Think about your business model now, because it’s better to have that in place so you can start acquiring customers and generating revenue from day one.
You will also need to look at financial projections for your catering business. What are your expected sales and revenues? What is your profitability? How much money will you keep in the business to grow it? How much will you pay yourself and others? If you can, try to plan your revenue for the next month, three months, year and two years.
Finally, you should put your business plan together. Business plans do vary slightly, but they should cover the following areas:
Now that you have all the background information for your catering business, it’s time to make it into a reality. That starts by choosing the right structure or “legal entity” for your business. In the U.S., there are four main business structures. They are:
For more information on the advantages and disadvantages of different types of businesses, please see our in-depth guide. If you’ve still got questions, we’ve answered them to help you choose the right business structure for your catering business.
In most cases our recommendation would be to create an LLC. We have a complete guide to everything you need to do, and we can set one up for your catering business. LLC formation does vary from state to state, but we’ve got you covered, wherever you are.