Starting from Scratch: How to Grow Your Catering Business
So, you want to start a catering business. The good news is that according to Inc.com, the catering business is a $7 billion per year industry nationwide with plenty of room for new businesses, and growth for existing ones. The bad news is that the number one attribute that can make or break a catering business is experience. Let’s put that aside for a second and dig into the business aspects – because if you’re reading this, you’ve probably got the drive, if nothing else.
Catering is a very unique type of industry. While many aspects on the “business” side reflect the traditions of the service industry, many aspects of the customer interaction portion lean toward the cutting edge. Regardless, you have to have your head screwed on right to get your catering business off the ground. Thankfully, we’re here to walk you through the process from scratch.
Licensing and Regulations
One of the most important aspects of running a catering business is making sure that your licensing is up to snuff. One of the first things you should do is check with local authorities and health outlets. There are strict food safety regulations that must be followed to the letter or your business could get shut down before it ever gets a chance to fly.
Many start-up catering businesses, for example, are launched from somebody’s home kitchen. Doing so without getting the premises inspected could lead to some hefty fines, cease and desist notifications, and even lawsuits. Chances are you’ll have to bring your kitchen up to commercial standards before you can start marketing the food you prepare in it.
Additionally, you’ll have to apply for certain licenses with state agencies depending on the services you intend to offer. A food service business that is take-out only must have one type of license while one that’s dine-in needs to have another, and so on (this is important to note if you’re offering banquet facilities in addition to the cooking). Wine and liquor services require additional licensing as well.
Long story short, check with your local town or city officials—they can point you in the right direction.
Best Business Practices
While licenses give you the authority to operate, they don’t protect you from liability. That comes down to insurance and incorporation.
Incorporation is simply the process through which an individual’s business is created as a separate legal entity—the most common being a limited liability corporation or LLC. Without going through the process of incorporation (which isn’t hard or expensive), you can be personally held responsible for any damages to properties, injuries to individuals, or sickness caused by your catering business. This means that former clients and their guests could effectively sue you and take pretty much everything, from the apron to the au jus recipe.
Incorporation protects you from that because it positions your business, not you, as the responsible party.
Insurance, on the other hand, protects you against just about everything else (though you should definitely read over the exclusion clauses in your policy to understand what it doesn’t cover). National Federation of Independent Businesses (NFIB) recommends the advice of Michelle Bomberger, an attorney in Bellevue, WA, when it comes to insurance: “a general, $1 million liability policy probably does the trick.” This is definitely an issue you’ll want to discuss with an insurance professional, though, because the amount of coverage you choose will have a huge impact on how much you have to pay.
To protect your profits, ensure that every client signs a binding contract before you begin any work. This will guard you from customers who change their requests or renege on their promises. If they do, you’ll have the proof you need within the contract to sue in small claims court for the money you’re owed.
It can cost hundreds of thousands of dollars to get a catering business off the ground—especially if you need to build or revamp a commercial kitchen. Another viable option that could save you some money is renting all of the equipment you need until you have a financial buffer on which you can rely. Most of the event accoutrements you’ll need can be rented on the cheap from equipment outlets. Everything from linens and things, to chafing dishes and more can be had for a fraction of the cost.
You can even rent kitchen space until you have your own. There are, of course, many more opportunities to rent commercial kitchens and equipment in urban areas, but smart business owners can find what they need in rural areas as well. Try partnering with a local diner, convenience store, or civic organization. Chances are you’ll be able to find businesses that will let you use their equipment in the off hours.
Another thing to be cautious about is aggressively pricing your products—especially in the beginning. Gina Pace of Inc.com often warns beginners specifically not to underprice the food. The cost should not only reflect the actual price of the raw materials you put into it, but the billable hours you spent making it, transporting it, and serving it. Underpricing can result in deadly fund shortages, crippling your new business before it ever gets off the ground.
Staffing is critical. Having a good group of employees that can handle themselves well under stressful situations is a key component of any catering company. Donna del Ray, a professional caterer and owner of Relish Culinary Adventures, a recreational cooking school in Sonoma, CA understands the demands of staffing a catering business. She uses servers, preparers, and even administrative assistants on an as-needed basis. Typically, these food staffers are hired as independent contractors rather than employees—which spares the business the necessity of paying taxes, insurance, and other non-wage compensation. As your business grows, however, you’ll likely need to hire at least a handful of permanent staff members.
It’s important to balance the number of permanent staff against your constant base workload and hire out contractors to pick up the slack during the busy times. That way, you’re never overstaffed or understaffed.
To stand out as a caterer, you need to find or create your niche. “You need to set yourself apart,” says Denise Vivaldo, author of How to Start a Home-Based Catering Business. With the food you serve, the personality you exude, and the professionalism you bring, you need to set yourself apart from everyone else in your immediate area. You don’t have to reinvent the wheel—but your rims should turn some heads.
This is when marketing is your best friend. In addition to traditional print and media adverts, you should consider online inbound marketing. People often use the Internet to find local businesses. If they can’t find you, you’re not getting their business.
Try to treat every catered event as a marketing opportunity. You effectively have a captive audience, so make sure your logo and branding are everywhere (within the limits of your current client’s requirements, of course). It may even be worth your while to set up a referral program so that satisfied clients can get a little something in return for recommending your services to their friends, family members, and co-workers.
Make It Yours
The bottom line is that your catering business is yours. That’s what is going to make it stand out and what is going to set it up for success (or failure). Unlike run-of-the-mill chains and franchises, your catering business is built with your own blood, sweat, and tears—and that’s what people will love about it.
Infuse everything with your personality, your style, and your uniqueness and you’ll likely find a niche that allows your business to grow. If – instead – you offer bland, forgettable fare served by unenthusiastic employees… you might as well hang up your apron right now.