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How To Start A Catering Business Step-By-Step Guide

How To Start A Catering Business Step-By-Step Guide

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Do you make a mean steak or come with creative buffet ideas? Do people around you constantly ask you to cook for their next event? If the answers are ‘Yes!’, then you’ve probably considered the idea of starting a catering business before.

Catering is an extremely lucrative industry and can be scaled and tailored to whatever best suits your skills and situation. Companies in the US alone have made $11 billion in total revenue in 2019. Plus, if you run a catering business, you can often earn $30,000 – $80,000 per year, depending on various factors and extenuating circumstances.

But just because you possess great cooking or baking skills doesn’t mean you can run a successful catering company! For catering, you need a few more skills too, including communication and entertainment.

By following a step-by-step, pre-launch research plan on how to start a catering business, you can plan in advance and confirm how likely it is that you will succeed. And if it’s not likely, then you can easily revise your plan to make sure it happens.

Use this easy guide to plan with us and make your catering business succeed!

Step 1: Pick your niche

How To Start A Catering Business Step-By-Step Guide 1

The first step to running a prosperous business is finding your place in the market. For caterers, that means defining the niche you will target. But the best part is, there are dozens of niches you can choose from, including weddings or special events!

However, it is important to start with marketplace and customer research of the area you’ll be doing business in. This helps you make an educated decision regarding the type of catering you should offer.

Once you know your target customers and what they want, you can develop a plan to attract clients to make the business profitable.

If you’ve defined your audience clearly, you can easily start basing your business around the catering experience they require.

Of course, when a client comes to you, you must work around their problem and find them a viable catering solution. If you end up being lazy about taking your niche and clientele seriously, this can end up being a big problem for you later. Not only will it cause you to stress, but it will end up draining your resources too. So instead of the business being lucrative, it will end up causing you trouble.

Wow, that’s a lot of information! Why don’t we break it down?

  1. Find the niche that fits your skills:
    • This niche can be different types of events, such as weddings.
    • Or different kinds of food, like focussing on diets such as vegan or low calorie, etc., or cuisines like Chinese or Mexican.
  2. Research your customer base.
  3. Markdown the details of your chosen clientele on your business strategy.
  4. Produce a marketing plan targeting those customers.
  5. Establish your business within your chosen niche.
  6. (And remember! Take your catering seriously even if you are at the top of your chosen niche, or you might end up losing the business and your reputation.)

Picking a niche might seem like a limiter for a caterer, but it proves successful if you do it right.

A great example of a catering business that has chosen its niche and turned it profitable is Soyfish. It provides luxury sushi and Japanese food catering for home parties and special events.

As there aren’t many catering companies that exclusively cater to Japanese food, Soyfish has filled that gap in the market and, in turn, built a successful business.

Step 2: Create your menu

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A well-crafted menu is extremely important to the core identity of your business.

The service and presentation are significant, but it’s the food that keeps customers coming back and recommending you to their friends and associates.

Even though catering menus are smaller and less complex than restaurant menus, they still require a significant amount of research and planning.

First, you need to take your competition into account. This will help you determine your area’s clientele, help you find out which ingredients are easily available, and determine the overall price people are willing to pay for catering.

Furthermore, catering services come in many different styles. Depending on your area or your field of expertise, you can choose the type of catering that best fits you. Wedding catering, social event catering, and corporate catering are among the many styles you can choose from.

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The type of event being hosted by your client also plays a huge part in drafting your menu. The type of event, its formality, and how much time attendees have to eat are the two core factors determining the menu.

So, for example, a takeaway style catering is perfect for short events where guests don’t have enough time to sit down, relax, and savor the meal, while a buffet might be better for events like birthdays and weddings.


Gain the confidence to start your food business

How To Start A Catering Business Step-By-Step Guide 4

A lot can go wrong when starting a food business in today’s age.

Learn how to use Instagram and core business fundamentals to start your catering company on the right foot in my free masterclass.

Step 3: Price your catering

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The price of your catering is primarily dependent on the food and services your client chooses and the number of guests they have.

Types of Expenses:

Some ingredients cost more than others, so the price will vary depending on the menu.

Mealtimes also play a significant part in determining the price as even though the cost of dishes may be the same, the number of servers, plates, and glassware add to the total fee.

Additionally, the fee mounts up based on the number of people attending an event, but be sure to include a policy to get your payment even if fewer than decided people end up coming!

The total number of guests and the type of dishes served will determine your total food costs, but your fee must also include service charges, supplies costs, and bar costs.

Service charges include labor costs, so this can vary depending on the number of servers and assistants. These assessments also include markup costs.

Markup costs are, in simple words, the fixed cost you charge for your time and effort beyond the cost of the ingredients and food. It’s important to decide the markup for your menu beforehand because it allows your business to make a profit!

However, there is a fine line between a markup fee being high enough for a profit or so high that the customers start choosing businesses with lower markup costs.

After the markup costs, you should also focus on supply costs, which are expenses for items like tablecloths, utensils, glassware, and chairs.

Pricing Strategies:

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Once you’ve dealt with all the costs, you need to focus on the actual pricing. You have to account for all the costs to end up with a healthy profit margin, which means defining your strategy.

●       You can choose the fixed prices route, where you have a range of options in your menu, but they all have non-negotiable prices, much like a restaurant.

●       Secondly, you have the option of custom pricing, which depends on your customer’s budget, but this can, of course, limit your creativity.

●       Lastly, there are tiered pricing plans, which many businesses utilize to promote exclusivity and uniqueness. These tiers can include bronze, silver, gold, and platinum. Here, clients can choose the package that best suits their needs, which can broaden your prospects.

Still, it’s up to you to choose which option is best suited to your business and how you can deal with all the costs.

But remember to leave a margin for profit and pay attention to your finances because working for seventy hours a week and ending up with zero dollars in your banks is nothing short of a nightmare.

Step 4: Market Your Catering

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These days, people find out about different services either by word of mouth or by searching online.

Personal references undoubtedly get the most loyal clients, but you have to start somewhere, which means going online. You have to build a strong online presence that sets you apart from your competitors and convinces potential clients to pick you.

And if you’re focussing on your online presence, your website will need the most work. Let’s talk about the things you need to consider:

  1. The website should be easy to find and easy to use.
  2. You’ll want to make it aesthetically pleasing, especially the home page.
  3. It should list the foods and services you offer.
  4. You should also include pictures of the events you have catered to.
  5. Remember to add in reviews from previous clients as well so visitors can see what you have to offer. 

Nowadays, Instagram is the primary medium where people discover new businesses. So, make sure that your Instagram page has pictures that showcase your services and build positive touchpoints.

Besides marketing online, you can network at the events you cater to, as every guest is a potential customer. After all, everyone has special events and work functions and knows other people who require catering services.

Thus, you must network and build a positive rapport with the attendees while also serving great food!

Step 5: Get Permits & Licenses

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Licenses are a necessity wherever you go. Not only do they confirm your validity, but they also help you establish your credentials.

Still, state and local permits and licenses vary, so you’ll probably need to apply for multiple different permits rather than just one. In addition to state-level licenses, which include business licenses, you will also need to apply for local county or city permits.

There are also specific permits for working in the food industry, such as health permits, food-handling licenses, and liquor licenses. Additional licenses may be required for an individual event if the event is taking place in a city other than the one your business is based in.

Plus, a zoning permit for your cooking facilities is a necessity as well. And being in the food business means having to go through health inspections at a medical facility.

All in all, it’s quite hectic – but then again, it assures your reliability in the eyes of possible customers.

Step 6: Calculate the Startup Costs

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Even if you have a production and marketing plan at hand, the most important thing for making your business a reality is the initial investment required to set the plan into motion.

For a catering business, we’ve listed a few startup costs below:

1.     Location

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It’s better to work in an already constructed commercial kitchen rather than buying or building your own. To calculate the expenses for this, you will need to find the cost of renting kitchen space from a restaurant during the time it’s closed or a commercial kitchen space constructed by business owners.

Apart from the rent, you will have to pay for related expenses like utility bills, maintenance, repairs, and security. Sometimes it is factored in with the rent, but other times you have to pay for them separately.

2.     Business licenses and permits

After listing all the licenses and permits required, contact your local health department and licensing division to find out what they will cost.

3.     Insurance

Another expense of a startup is insurance. Many people believe they will not need insurance, but it’s better to be prepared, as you might need it someday.

You can also obtain liability insurance and personal insurance to be on the safe side.

4.     Employees and hired help

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The startup expenses will also vary based on whether you’re going to hire additional employees. 

When starting, it’s generally better to keep employees to a minimum. If you decide to hire extra help, though, you’ll need to factor in their salaries, benefits, payroll taxes, overtime pay, and workers’ comp insurance to the total cost of your business.

5.     Marketing

You’ll need more than business cards and fliers to market efficiently in this highly competitive market. You’ll have to pay for the domain and the design of the website you create.

Additionally, you might hire someone to handle the online aspect of the business specifically, which also adds to the overall cost.

6.     Equipment

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Tools are the most important part of starting a business. They are also the most investment-heavy, as you need a lot of equipment to run a catering business.

Some of these tools include industrial-grade stoves, ovens, pots, pans, kitchen utensils, coolers, fryers, and refrigeration equipment, but there are always more items you might need.

You will also need a vehicle to transport cooked food as it is unfeasible to transport it through public transport. This means that you would need to invest in a food truck or a big van.

Step 7: Put it all down on a Business Plan.

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The chance of succeeding in any business increases if you make a plan from the get-go. Before starting, just list down all the possible issues you will face and try to fix them.

This plan will then act as a blueprint outlining how your business will become prosperous and lucrative.

Composing a business plan is not difficult if you work on it one piece at a time. Writing all your ideas down will not only provide clarity to your vision but will also urge you to plan anything you might have missed.

From an investment standpoint, a written plan can be critical in finding business partners or funding.

Skipping this step can turn out to be a big mistake later on, as you might end up feeling lost and overwhelmed, and you won’t have anything to go back and refer to. 

Your plan does not need to be definitive; you can come back to it and make changes as you go.

Conclusion

Researching and planning to start a catering business doesn’t necessarily mean you have to launch it. Coming up with a business plan neither costs you anything nor forces you to launch a company.

However, if you’re serious about starting a catering business, work on your plan when you’re excited and inspired, and you’ll be surprised at how quickly you can determine the things you need to start your business.

Running a flourishing company is immensely satisfying. Even though catering businesses are very competitive, they are perfect for a first-timer because they have relatively low expenses and immense potential for the future. Of course, if you’re interested in food catering, you’re probably worried about the mistakes these businesses make.


Gain the confidence to start your food business

How To Start A Catering Business Step-By-Step Guide 4

A lot can go wrong when starting a food business in today’s age.

Learn how to use Instagram and core business fundamentals to start your catering company on the right foot in my free masterclass.

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