Everyone raves about your cooking, and when you hold parties, your guests are glued to the buffet table, waiting for first dibs on the next dish you bring out. Then there are the requests, from friends and acquaintances alike, to have you help out with the food at some small event or another. And gradually it crosses your mind: maybe you should start a catering business, and make a living doing the thing you love.
Running a catering business can be a very fulfilling affair, leveraging your talent with food to grow a business of which you can be proud. But while it may seem simple at first—you have a kitchen, you can cook, and you already have a small handful of people ready and willing to spread the word about your new catering business via word of mouth—the reality of starting a catering business is a little more complex.
In addition to other important business considerations such as marketing, logistics and accounting, there are a number of legal considerations that are of fundamental importance to starting a catering business. You will need to comply with a variety of legal requirements before you can even get your new catering business off the ground.
Should You Incorporate?
While many small businesses get by in the form of sole proprietorships or partnerships, it’s more prudent for a catering business to be incorporated. The reason? Unlike sole proprietorships and partnerships, the corporate structure provides limited liability. A catering business is subject to more potential risks of injury—from employees slipping while working an event to people getting ill from the food you’ve prepared—and a corporation can help protect your personal assets from liability.
Can You Use Your Home Kitchen?
The idea of running your own catering business seems simple enough. You cook things in your kitchen and then bring them to the event you’re catering. The reality, though, is often far more complex.
First, many states prohibit residential kitchens from being used for commercial food production.
If this is the case, you’ll have to find a commercial kitchen to work in. If you can’t afford to upgrade your home kitchen to professional, commercial standards, check with local bars and restaurants to see if you can rent their kitchens during the business’s off hours; you’ll find that many food businesses are open to subleasing the use of their commercial kitchens during their down time.
Even if your state permits you to use your home kitchen, you will likely still be subject to health inspections from either your state or your local health department. You need to ensure that the kitchen you use is on par with regulatory standards. This will encompass not only your food preparation area, but also other food-related areas, such as any of the equipment you use for cooking, your refrigeration system and even how you dispose of food waste.
Do You Need a Catering Permit or a Catering License?
The reality is, you’ll probably need to apply for a number of different permits and licenses, rather than just one. In addition to state-level licenses—including a business license—you may also need to apply for local county or city-based licenses and permits. In addition to licenses and permits specifically related to serving food, such as health permits and food-handling licenses, you may also have to obtain a liquor license.
As well, additional licenses and permits may be required for an individual event, if the event takes place in a city other than the one in which you normally cater.
Do I Have to Comply with Food Production and Food Safety Regulations?
Food health and safety is an important issue for any professional food handler, such as a caterer, and you’ll find you need to comply with a variety of regulations, which govern food production and food safety. In addition to any state regulations, your local health department will likely have a number of regulations dealing with commercial food production, and you should understand these regulations so you can ensure your catering business is in compliance with them.
If you will be shipping or transporting food products to another state, you’ll also need to be aware of food-related regulations from the Food and Drug Administration (FDA) and the U.S. Department of Agriculture (USDA), both of which provide resources on their websites. And of course, if you cater an event across state lines, you’ll need to ensure compliance with the regulations applicable to the state in which the event is being held.
Do I Need a Catering Contract?
Even though a written contract isn’t required if you’ll be providing your catering services to the client within a year from the date of your agreement with the client, it’s always safest to use a written catering contract with every client.
A properly drafted catering contract will cover all manner of potential issues, so you won’t find yourself in legal limbo in the event of an unexpected occurrence. If you start with a standard catering contract template, you can modify it to suit the situation relevant to each individual client.
What Kind of Insurance Do I Need?
There are additional potential risks of a catering business that go beyond the standard, general business risks. Your insurance coverage needs to provide for all of these risks, which can include things such as employees slipping and falling while serving food to guests, transportation accidents, and people getting ill from eating the food you or your employees have prepared.
Ideally, your insurance should cover every possible eventuality. If you can, find an insurance agent or broker who has experience dealing with clients in the commercial food production industry; he or she should have a good idea of the coverage you will need. Another good source of insurance information? Check with experienced catering companies in your area to see what types of coverage they have.
What If I Need to Hire Staff?
You will probably need to hire staff, whether it’s full-time or on a per-event basis; catering businesses usually need additional servers and people to help with the food preparation, and the number of staff needed can vary depending on the size of the event. Because in many cases you’ll be hiring people as independent contractors rather than employees, you should understand the differences between an independent contractor and an employee. It’s also important to know and understand both federal and state employment laws, to ensure you are complying with any of the laws that may apply to your situation.
Starting a catering business can be the perfect opportunity for you to leverage your stellar cooking talents into a fulfilling business, but the first step in the business start-up process is to make sure you have all the legal issues covered. Doing so will give your catering business a solid foundation from which to grow.