How to Start a Catering Business in 10 Steps

Starting a catering company goes well beyond creating a delectable menu. You’ll also need to choose a location, hire a staff and obtain the proper licenses and permits. Here are the steps you’ll need to take to get started.

1. Find your niche

To build a solid foundation for your new business, start by researching the market in your area to determine how your speciality will help you stand out from the competition.

To find your niche in the catering industry, consider the types of food you plan to serve, the level of service you hope to provide and the team you will need to build to deliver those services.

Will you be primarily focused on catering corporate events or are you looking to cater weddings and other social gatherings? Do you plan to focus solely on food prep and delivery or will you be providing a full service complete with setup and cleanup?

This research will also come in handy when it comes time to market your business.

2. Choose a business name and legal business structure

With the vision for your catering company in mind, it’s time to choose a business name and legal structure, which will need to be registered in the county and/or state where you plan to operate.

Registration requirements will depend on your company’s structure — also referred to as your business entity.

The business entity you select will have a lasting impact, influencing everything from how your company operates to how much it costs you in taxes. But how do you know which business entity is right for you?

• Sole proprietorships are the simplest and most common business structure, but operating your catering business as a sole proprietor will make you personally liable for any damages or injuries that may occur.
• Limited liability companies (LLCs) are a popular choice for new business owners, offering personal liability protection and more flexibility at tax time. But unlike with a sole proprietorship, you’ll need to be prepared to spend valuable time and money to establish your LLC.
• Corporations are another option, though this business entity is most commonly used by large companies that plan to go public.

Many caterers begin as a sole proprietorship in the early stages, then assume a new entity when it’s time to start hiring employees. For advice on how to navigate this process, consult your local chamber of commerce or Office of Small Business Development Center.

3. Write your catering business plan

A business plan is a detailed document that outlines a company’s key objectives, strategies and procedures. It’s essential for attracting potential investors, demonstrating your understanding of the market, your potential for profit and your ability to manage risk.

Your catering business plan will also serve as a guidebook for your small business. It should include:

• Business model: Explain the scope of your business, including the types of events you plan to cater.
• Target market: Analyze your main competitors and target audience. This research will help you get to know your potential customers and build a plan to stand out in your market.
• Organizational structure: Based on your chosen business entity, clearly define the roles and responsibilities of key stakeholders and staff.
• Catering menu: Describe the types of food and level of service you plan to provide.
• Marketing and sales strategy: Outline your plans for marketing and selling your services, including how you will build a client base.
• Financial projections: Detail the amount of revenue you expect to see in the coming years, including when you expect to turn a profit.
• Funding request: If you’re seeking financing for your catering business, include a call to action, explaining the amount of money you need and what you need it for.

4. Obtain permits, licenses and insurance

Small businesses require licenses and permits from federal, state and, sometimes, local agencies to legally operate. These permits and licenses may come with a cost, and may need to be renewed each year.

In addition to acquiring standard business licenses, food-related businesses will also need to take steps to comply with standards set by the Food & Drug Administration (FDA) and other regulatory agencies. Catering business requirements vary by location, but the FDA provides a comprehensive list of every state agency that regulates food-based businesses.

In some states, caterers are also regulated by county health departments. You may need to pay a permit fee and may be subject to inspections, even if you run your catering business from home. We’ll talk more about how to start a catering business from home in a minute.

If you plan on serving alcohol, your catering business will also need a liquor license from the federal Alcohol, Tobacco Tax & Trade Bureau, as well as your state’s alcohol beverage control board or other commission.

At this stage, you will also want to acquire general liability insurance in case of property damage or bodily injury (such as foodborne illness) claims. If you plan to hire employees, workers’ compensation insurance is mandatory for most business owners in most states. And finally, the proper type of auto insurance is a must if you or your employees will be driving for work purposes.

5. Choose a location for your business

With permits, licenses and insurance in place, you’re ready to choose a location for your catering business. If you’re interested in starting an at-home catering business, you may be happy to learn that cottage food laws may allow you to prepare and sell certain foods from your home kitchen with little regulatory oversight.

These laws recognize that some foods, such as baked goods, jams and candies, pose a lower risk of contamination. However, cottage food laws vary significantly by state, and some states may require inspections or testing. This means you will need to take the time to understand your local laws and regulations.

If your state doesn’t allow cottage food production, or if you plan to offer a wider variety of menu items, a commercial kitchen space might be necessary. This could be a shared space that you rent for a few hours at a time or a more permanent location. Renting a commercial kitchen may be the simplest option when you’re first starting out, allowing you to test the waters without committing to a long-term lease. In addition to local laws, consider factors including cost and accessibility when choosing a location for your catering business.

6. Prepare to purchase equipment

The equipment you need to run your catering business will depend on several factors, including the types of food you plan to serve and the location you’ve chosen for your operations. Assess your needs based on these factors. Are you keeping it small and working at home, or are you building a full scale commercial business?

Renting a commercial kitchen space is one way small business owners can minimize equipment costs, as these kitchens are typically outfitted with the tools and supplies caterers need. If renting a commercial kitchen won’t work, equipment financing may be another option. Because the equipment itself secures the loan, rates may be relatively low for equipment such as:

• Convection ovens
• Knives
• Pots and pans
• Dishes
• Prep tables
• Cutting boards
• Sheet pans for oven
• Bowls
• Mixers
• Immersion blenders

Keep in mind that you may be able to buy pre-owned kitchen equipment for a more affordable price, though you’ll need to make sure the equipment is in good working condition before making a purchase.

7. Find business funding

Many small business owners rely on personal savings, friends and family and crowdfunding sites like GoFundMe to pay for their start-up costs. But finding formal financing for your catering company isn’t impossible. Here are a few small business loans to consider.

Small business loans

Traditional lenders offer business loans to established businesses, but these loans typically come with strict standards for approval, including requirements for time in business, business credit scores and cash flow that new businesses may not be able to meet.

These same hurdles may apply to U.S. Small Business Administration (SBA) loans, but SBA microloans only provide up to $50,000.

Alternative lenders are another option, providing loans with fewer restrictions, though it’s worth noting that interest rates with alternative lenders are generally higher.

Business line of credit

Much like a credit card, a business line of credit allows you to borrow funds as needed up to a set limit. And unlike with a traditional business loan, you only pay interest on what you actually use.

Equipment financing

As we mentioned earlier, equipment financing can provide funds for specific items you need for your commercial kitchen or a vehicle to be used for the delivery of food. While some companies require one to two years in business to approve equipment financing, there are lenders who work with startups.

8. Create your menu and set your pricing

Setting competitive pricing is essential for the success of any catering business. The food you plan to serve will impact the price you need to set. While menu customization is common in the catering industry, new caterers may want to focus on creating a set menu. This will make it easier for you to deliver consistent, high quality service while you’re building a customer base.

To set prices for your services, consider the following factors:

• Location: This can influence pricing due to variations in the cost of living, labor and ingredients.
• Event type: The types of events you cater can also impact menu pricing, as certain events have different scales and come with different expectations. For example, a wedding will likely have higher-end food than a kid’s birthday party.
• Level of service: Full-service catering costs more, while drop-off catering costs less.
• Ingredients: The cost of ingredients can fluctuate, so it’s important to set a menu, track prices and adjust your pricing accordingly. Organizations like the National Restaurant Association can provide insight into wholesale food costs.
• Preparation time: The time, labor and resources involved in preparing and serving food should also play a role in determining your menu prices.
• Profit: After figuring out how much everything costs, you’ll want to add in a profit margin to arrive at your price.

9. Hire and train employees

It’s unlikely that you will be able to run your catering business on your own. You’ll probably need a handful of full-time employees to oversee the essential functions of your business, as well as a network of part-time employees or contractors to provide support on an event-by-event basis.

To find employees for your catering business, consider hiring directly or using a staffing service like Qwick or GigPro. And once you hire your staff, it’s also important to invest in training to set them up for success. Focus on providing training in food safety, sanitation and proper handling techniques.

10. Advertise your catering business

Now that you understand how to start your catering company, you need to consider how you’re going to market it. Start with the following steps:

• Define your brand: Before you invest in advertising, take the time to define your company’s unique value proposition. This will make it easier to create effective marketing messaging.
• Create a website: Your company’s website should establish your credibility, showcase your services and provide clear contact information for prospective customers.
• Leverage social media: Platforms like Instagram, Facebook, TikTok and Pinterest may make it easier to reach your target audience. To make the best use of social media, post regularly and use relevant hashtags.
• Build relationships: Be sure to connect with event planners and venue owners, join your local chamber of commerce and encourage satisfied customers to leave online reviews and pass on your information to other people in their network.

How much does it cost to start a catering business?

Catering business start up costs generally fall between $10,000 and $50,000, though it varies significantly. The amount you spend will depend on several factors, including the size and scope of your operations.

To build a budget for your catering business, consider large expenses, like your kitchen space and equipment, alongside other costs, including:

• Packaging, especially if your catering business specializes in drop-off service
• Transportation if your business is in need of work vans or other vehicles
• Staff, including full or part-time employees and/or contractors
• Uniforms for your workers
• Permits, licenses and insurance like the types we mentioned earlier
• Marketing materials such as a website, paid social media ads, email newsletters or newspaper, magazine or radio advertisements

Tips for catering business owners

From serving tasty food to providing next-level service, there are several ways caterers can build a good reputation. We’ve covered the basics, but here are a few additional tips to keep in mind:

Budget for emergencies and unexpected expenses

Emergency preparedness is important for any new business. You may think you have it all planned out, but you never know what problems might arise in the future. Budgeting for emergencies and other unexpected expenses is one way to safeguard your business.

Plan for potential problems

In addition to planning for financial emergencies, it’s also important to prepare for any other potential problems that might pop up. Staffing shortages, inclement weather and broken down vehicles can all interrupt your catering operations. How will you overcome these hurdles? It’s better to plan now than to be left scrambling when disaster strikes.

Be prepared to make sacrifices

Catering often requires working long hours on nights and weekends, sacrificing time you might otherwise be spending with friends and family. This is especially true when you’re first starting a catering business. But if you’re up for the challenge, it can be a highly rewarding career. Just be sure to set your expectations accordingly.

Join professional catering organizations

Having a strong network is important regardless of your industry. Caterers can find support by joining the International Caterers Association (ICA), which provides education, mentoring and resources. Another good resource is the Catersource website and online forums like Reddit and ChefTalk.