The catering business is a promising business opportunity for hotel management graduates. You can also set up your own catering company if you enjoy entertaining guests with your extravagant cooking and are looking for a profitable business opportunity.
Survey reports say that in 2019, the US-based catering companies raised total revenue of $11 billion. A successfully running catering business can deliver annual revenue of $30,000-$80,000.
Even with the global pandemic harming every event and activity, catering businesses are thriving remarkably in the world. Their demands still remain with a promise of good times. If you want to start your catering business under these circumstances, we know the key ingredients to your success.
10 Steps to Starting a Catering Business
If you are not sure how to start your catering business, follow the below 10 steps.
1. What is your Specialty?
Before starting a catering business, it is essential to identify your specialties. If you know your niche of specialization in the catering field, you will likely face fewer challenges and competition from other caterers in your area. Also, catering in your area of specialization helps you deliver the best food and services. When you deliver a good service, you secure a strong customer base for repeat business.
How will you understand your specialties? These questions ease the process-
- Which food type are you ready to serve, or do you prepare the best?
- What type of clientele or functions do you wish to cater to?
- What is your catering capacity?
- How will you operate the catering work?
Understanding where you specialize is not enough to determine your specialties. You need to decide on a specialty depending on the customer demands and market competition. Knowing the customers and competition requires market researching.
Market researching happens before you decide your menu, purchase equipment, and hire professionals in a niche. Visit events and competition websites to understand what local caterers offer. Contact your competitors to avail of catering quotations. Talking to customers often helps understand their demands, feedback about competitors, and the scope of service improvement.
How to conduct the survey?
- Get feedback from family members, friends and colleagues
- Talk to people who avail of catering services
- Read your competitors’ reviews
- Focus on the bigger picture of the industry
Once you know the market demand, competition, and specialisation genre, prepare your budget for executing the business plan.
2. Permits and licenses:
Operating a catering business requires licenses and permits, which varies with the state where you operate. Your liquor license, permission to use certain equipment, etc., varies with the state where you own the business.
Despite the state-wise variations, here are some permits and licenses that are common for all states-
- A business or trade license
- Permit for zoning
- Health and hygiene license
If you are not sure of the permits, visit the State Government’s Health Department and get a briefing.
3. Create a Menu:
When you think of starting a catering business, the first thought that comes to your mind is the menu you will offer. Since you have already researched market demand and competition, laying a menu will be easier for you.
Create a few sets of menu options. Having a menu aids in arranging for supplies and preparing dishes once your customer chooses one from your options set. Your list of menus depends on your cooking and serving capacity.
4. Pick a location:
Like any other business, choosing the perfect location for your catering business is essential. The choice of location depends on your zoning permit.
The freedom of operating your business at any location comes when you have a commercial kitchen. However, it has a high cost of operation. But a commercial kitchen allows you to take larger catering orders that you could have operated at your home.
The choice of location depends on the types of food you wish to serve and the demand of those menus in an area.
5. Purchasing Equipment:
The equipment you need at your kitchen varies with the business scale, menus, and the size of events you cater. Consider how many guests you wish to serve in an event, what kind of menus you will deliver, and list down the equipment needed for running the business. The equipment list will help in budgeting and planning the finances.
6. Business Planning:
The primary step of a business plan is to conduct market research. As you have a better understanding of the business opportunities, you will be able to prepare a budget and business projection.
The first point to note while starting a catering company is the cost behind setting it up. Starting a catering company can take anything between $10,000 to $50,000. This cost involves your transportation needs, equipment, and business promotion. The startup budget should also help you sustain the first 12 months too while your business takes a slow run.
7. Determining a Marketing Strategy:
Appreciation of your food is all it takes to spread the word about your catering business. Affordable ways to market your company are-
- Create your online presence with a website
- Display your menus with prices
- Focus on social media promotion and online reviews
- Post images of food you serve at events on your social media pages
- Try the “word of mouth” marketing technique with your friends’ help
8. Decide a Business Structure:
Before you get your catering business registered, you need to determine its structure for tax regulations. Consider whether it will be a sole proprietorship, partnership or LLC business.
9. Naming your Business:
Naming your business is crucial. It involves little market research to ensure you have a unique name and getting the name registered along with a trademark. Always choose a name pertaining to your business for easy remembrance.
10. Get Insurance:
Irrespective of your business, you need to get company insurance and insurance for your workers. Some of the insurances you might focus on are-
- Safety insurance
- Commercial insurance on properties and automobiles
- Insurance for unemployment
- Proprietor’s insurance
Once you have completed the above steps, your business is ready to run.
Catering is a promising business opportunity. However, you need to hire your employees wisely to deliver proper food and service during an event. It is a business that gains success mostly on word of mouth. Hence, ensure you deliver top-quality food and service.