How to Start a Catering Business

The growing popularity of niche and specialty foods, the post-pandemic resurgence of large-scale events like corporate gatherings, festivals, and weddings, and advances in food prep technology make catering a lucrative business opportunity. According to the market research organization IMARC Group, the global catering industry is poised to be worth $220 billion by 2032, exhibiting a growth rate (CAGR) of 4.5%.

Catering food—even from a home kitchen—can be a profitable and rewarding venture, but a successful catering business requires more than providing a solid menu. 

 

Learn how to start a sustainable and thriving catering business with LegalZoom’s recipe for success. We’ll cover everything a budding entrepreneur needs to know about the world of food and service. 

Is now the time to start a catering business?

Large gatherings have returned after the peak of the COVID-19 pandemic, and catering businesses have been enjoying a nice steady uptick in demand. Grandview Research expects just the U.S. catering industry to experience an impressive 7.7% growth between 2020 and 2030. 

What’s driving this growth? 

• An increase in large social events like corporate functions, product launches, weddings, and other personal celebrations
• Companies using catered food to lure people back to the offices
• Demand for specialty food providers, like gluten-free, vegan, or keto
• Growing interest in global cuisines that may require specialty ingredients or skills
• Technological advances like Uber Eats and DoorDash make it easier to order and deliver catered food 

It’s safe to say the catering business is ripe for growth and innovation. From an earnings standpoint, a small to medium-sized caterer can expect to rake in about $250,000 annually with profit margins of approximately 15%. 

In addition to alluring earnings, the catering industry offers plenty of benefits:

• Set your schedule. You can set your own hours and menu—but expect to work a lot of nights, weekends, and holidays.
• Location flexibility. You can conduct most of your business operations from home, and in some areas, you may be able to use your home kitchen for food prep. Many metropolitan areas also offer ghost kitchens or rental space in commercial kitchens.
• Low startup cost. If you’re dedicated to food service, catering requires a lower upfront investment than starting a brick and mortar restaurant.

How to start a catering business in 10 steps

These 10 steps will shed some light on what to expect as you start your catering business.

Step 1: Conduct market research 

Before diving into buying cooking equipment and creating menus, you need to understand your local market. If you live in a rural town with multiple catering services offering Italian cuisine, going a similar route might not be the wisest decision. 

To grasp the lay of the land, try one or several of the following methods: 

• Scope out the competition. Search for local caterers on sites like Yelp, Facebook, Instagram, and Google Maps. Study their menus and pricing, and read customer reviews to understand their likes and dislikes.
• Find your audience. Identify the demographics of your area (age, socioeconomic status, types of events) and determine your target audience.
• Get real-world advice. Speak to local businesses like event planners, office managers, human resource teams, event venues, and wedding planners to find out what they’re looking for and who their go-to catering company is.
• Ask your network. Just about everyone has been to some catered event at some point in their lives. Conduct surveys in your network via GoogleForms or SurveyMonkey and ask people about their past experiences with catering—what they liked, what they disliked, and what they look for in a catering company.

Step 2: Decide on your offerings 

“Catering” can mean a few different things, so it's necessary to give your business some direction. Based on your market research, culinary skills, and interests, decide what type of catering you will do and who your target audience will be. 

You can pick from a wide variety of different niches. For example:

• Corporate catering for events like product launches, employee orientations, and conferences
• Weddings and celebrations like anniversaries, birthdays, and other milestones
• Social event caterers for private parties 
• Specialized cuisine like gluten-free, vegetarian, or vegan food
• Home-based meal prep service
• On-site catering, where you cook and serve at the event location

Tailor your niche to your area and interests. If you live in an area with die-hard sports fans, consider special offerings featuring team logos, colors, or menu item names. If you’re a fan of fine dining, consider how you can elevate typical catering offerings.

Step 3: Choose a business model

Your chosen entity structure impacts your operations and finances. If you wish to operate as a sole proprietor, you won’t have protection from claims or cases against the business. For example, if a customer gets severe food poisoning and threatens to sue you, your personal assets could be on the line if you lose the case. 

A limited liability company (LLC) is the easiest-to-form legal business entity that offers personal liability protection, meaning your car or personal savings is more protected in the event of a lawsuit. A business attorney can guide you in making an informed decision by highlighting the differences in liability protection, tax implications, compliance requirements, and operational needs of each business structure. 

Step 4: Write a business plan 

A detailed catering business plan is essential for securing funds, guiding growth, and ensuring smooth operations. Business plan templates can be obtained from SCORE, but you can also create one yourself. Ensure the business plan includes:

• Executive summary, company mission, and vision statement. What is your catering business about, why are you starting it, and what do you want to achieve with it? 
• Market analysis. Develop some insights on your competitors, how you’ll meet the needs of your market, and who your potential customers will be. 
• Financial projections. Estimate your startup costs and when you will start turning a profit. Identify possible risks and emergencies like equipment repairs and increased food prices. A catering business requires capital investment, and you might not have the personal funds for it. Identify various funding sources—like investors, small business loans, or business credit cards—to kickstart your business.  
• Marketing strategy. How will you tell potential customers about your business? How much will it cost to get the word out, and which methods will be the most effective? Marketing is an ongoing commitment that goes beyond creating a website and a social media page. Back up this plan with data, analysis, and realistic projections.

Step 5: Obtain necessary licenses, permits, and insurance

Local, state, and federal authorities heavily regulate the food and service industry. For instance, your local health department definitely has a strict (and lengthy) list of food safety requirements, including specifics on cleaning equipment and utensils, food storage, and handling guidelines.

Not only will you be subject to inspection by your local health department, but you’ll also need special licenses and permits to keep your business legitimate:

• General business license (from your city, county, and/or state)
• Home occupation permit if you work from your home kitchen
• Caterer’s permit
• Health department operation permit
• Food handler’s permit (such as ServSafe)
• Alcoholic beverage license(s)
• Seller’s permit 

Compliance is key to building a sustainable business that limits your liabilities, especially if you wish to operate a home catering business. Your local health department or Chamber of Commerce can help you identify local, state, and federal license and permit information. Or, save time by using an attorney-guided licensing service like LegalZoom to get all business license requirements squared away. 

A lot can go wrong in this business. Therefore, it’s essential that you also acquire the right business insurance coverage that’ll shield you from mishaps. It's beneficial to have general liability insurance, commercial auto insurance, and workers’ compensation—in fact, your state or local government may require some or all of these types of insurance. Some insurance providers even provide tailored catering and personal chef insurance, giving you the first line of defense against food spoilage, equipment breakdown, and personal injury claims. 

Step 6: Invest in catering equipment

Even a home-based catering business requires a lot of equipment—from pots and pans to insulated storage containers, ovens, serving utensils, chafers, and possibly even a specialized vehicle. But the beauty of this business is that you can start small and build your equipment inventory. For instance, if you have a one-time requirement for a chocolate fountain, you can probably rent one instead of buying one. You can also work with local party rental companies to get table linens, silverware, and serving dishes. 

Online restaurant suppliers like RestaurantDepot and USAEquipmentDirect are good places to find commercial equipment at wholesale prices. Getting second-hand kitchen equipment via online marketplaces like Bid-on-Equipment or Facebook Marketplace is also possible. Keep an eye out for restaurants going out of business in your area, as they are often looking to sell off equipment for cheap.

Remember to run a quality check on anything you wish to buy to understand potential maintenance expenditures. 

Step 7: Craft your menu

Now for the most exciting part—this step actually transforms your culinary dreams into a tangible product! But, it's important to stay grounded in the reality of your situation: your target demographic, skill level, and volume capacity. 

It’s easiest to give potential clients easy-to-visualize à la carte and buffet style menus that take the heavy planning out of their hands. For example, suppose you are specializing in pan-Asian cuisine. You may offer a few different pre-planned packages, such as a Japanese dinner that requires customers to choose one each from a list of soup options, noodle dishes, and a meat dish. Or, you can offer a Chinese dim sum lunch buffet and ask clients to choose up to seven options from your list of a dozen or so.

Use your menu planning as an opportunity to get friends and family together—run a few menu tastings with your own network and incorporate their honest feedback on portions, food quality, taste, and price point before finalizing your menu. 

Step 8: Build vendor relationships

As a catering company, you'll work with many vendors. These include event planners, decorators, food suppliers, and those providing transport and equipment. Strong vendor relationships can deliver cost savings, improve food and service quality, and minimize risk—all things that impact your ability to provide delicious food and exceptional service. 

Find suppliers and event partners through referrals or an online search. You can build long-term positive partnerships with them by following a few best practices:

• Negotiate fairly, honestly, and respectfully 
• Sign written vendor contracts to eliminate confusion 
• Communicate regularly 
• Pay on time and as per contract 
• Provide feedback and recognition for their work

Step 9: Market your business

Marketing can help you reach a wider audience. Some creative marketing strategies that can get people talking about your business include the following:

• Invest in digital marketing campaigns like pay-per-click ads
• Use location-based words and tags like “Cleveland gourmet catering”
• Add your business to online directories like Yelp and YellowPages
• Attend trade shows and local events 
• Host tasting events to showcase your food
• Leave business cards and flyers with relevant businesses such as florists, bridal boutiques, and event planners’ offices

Good word of mouth goes a long way in the food business—and it’s also the cheapest way to attract customers. Therefore, it’s imperative you encourage customers to leave a review on your Google Business profile and other social media platforms.

Step 10: Launch and manage your business

Before the big launch day, there’s some administrative groundwork you shouldn’t overlook:

• Check business name availability and register your business so no one else can take your name.
• Get an employer identification number (EIN) for tax purposes.
• Open a business bank account to keep your personal and business accounts separate and make bookkeeping easier.
• Implement the right technology tools to streamline operations and track sales, such as invoicing software or inventory tracking.
• Invest in professional development by staying updated on trends, attending industry networking events, and enhancing your skill set.
• Find a trustworthy attorney to advise you on business structure, taxes, employment law, and permits/licensure.

Once you’ve got everything in order, it’s showtime! Consider launching your business by hosting a tasting event to show off your culinary prowess or becoming a vendor at a local farmers’ market or food showcase event. Attract new clients by offering grand opening discounts or referral incentives.

How much does a catering business cost? 

Startup costs for a catering business generally range from $10,000 to $50,000, but this number heavily depends on the initial scale: whether you hire staff, what demographic you’re targeting, and the budget you set aside for marketing.

Here’s a breakdown of initial costs you need to consider: 

Equipment and maintenance

Catering involves a lot of specialized equipment that needs regular, careful maintenance. For example, just the price of a commercial oven can be over $3000. Consider buying second-hand catering supplies from trustworthy resellers to keep costs down. 

If you have to work from a commercial space, there might be additional rental and utility expenditures. Search locally—you may find a commercial kitchen rental or a restaurant, church, or community center subletting its kitchen during off hours, saving you from investing in equipment. 

Transportation is another significant start-up cost if you don’t already have access to a vehicle that can move bulky prep supplies like chafers and tableware. Remember to factor in related gas, repair, and insurance costs.

Ingredient sourcing

Your ingredient costs will depend largely on the menu you're offering. Managing food costs isn’t as straightforward as buying something and selling it at a markup, and food prices are known to fluctuate. 

You will need to research and identify at least two to three local suppliers that can provide the necessary ingredients. Prioritizing local suppliers will help cut down transport costs. Consider building partnerships with local farms—a great place to start is by talking to vendors at your local farmers’ market. While this cuts down on transport costs, you may pay a premium for in-demand local ingredients (although some customers will pay more for this feature).

You can also explore preservation or ingredient storage techniques that will allow you to purchase in bulk and ensure year-round availability of fresh ingredients. 

Licensing, permits, and insurance

Depending on your business model, you’ll need licenses and permits for food handling and alcohol service. You also need business insurance to cover transport and equipment breakdown, and general liability protection. Catering insurance costs around $25 to $85 per month, but the exact price depends on your business model and needs. 

Employees

To keep costs low, it’s best to keep additional staff members at the minimum. But if you expect rapid growth or need to hire a helping hand right away, you’ll need to consider salaries, benefits, and workers’ compensation insurance costs for each employee. 

Marketing

Some startup marketing costs include designing and printing logos, business cards, flyers, packaging materials, and menus. The cost of designing business cards, menus, and logos can range widely, from free DIY options like Canva to $2500 or more for professionally designed brand packages. 

While you can create your website for free using a social media platform, you can also design a simple and fully functional website yourself using a builder like Wix or Squarespace for $100–$300 per year, which includes a custom domain name.

How to decide which business model is right for you

Forming a legal entity is the best and easiest way to protect your business. Each ownership structure offers its own pros and cons. As a small business owner, you can opt for one of the following structures: 

• Sole proprietorship. Although it’s the easiest to start, this model offers no liability protection in the event of legal action. Sole proprietorships are pass-through entities, meaning your business income is filed in your personal income tax return. 
• Limited liability company. LLCs require filing articles of organization with the state. This structure protects your personal assets from business debts and liabilities. It also offers flexibility on filing taxes.
• Partnership. An ideal choice if you plan to start your business with one or two partners. Creating a partnership agreement is highly advisable so everyone is clear about ownership and responsibilities. 
• Corporation. Corporations are separate legal entities where shareholders aren’t liable for business debts. Corporations have more complicated paperwork and compliance measures. 

Other factors to consider

Consider tax implications, liability coverage, costs, complexity, and compliance requirements before finalizing a business structure. For example, corporations and LLCs are required to submit annual reports to maintain their Certificate of Good Standing. 

LegalZoom’s network of business lawyers can help you evaluate which structure suits your business based on your goals, risk tolerance, and legal needs. 

Here are some other things to consider:

Upfront costs

Having cash on hand allows you to invest in food and other supplies before accepting your first job.

While you should request a deposit from customers, you'll probably have to pay some costs upfront, says Jim Pendergast, senior vice president of AltLINE Sobanco, a small-business financing firm.

"Some people pay the caterer after everything is prepared and delivered," he says, adding that there are options if you don't have the necessary funds. "Either set up invoice factoring, which is selling your invoice to a third party to get money instantly, or have a backer to get the money you need."

What kind of kitchen do you need?

You should know that, as a professional caterer, you may need a professional kitchen.

"Laws regarding catering services will vary state by state," says Andrew Winters, attorney, and co-founder of the law firm Cohen & Winters, in Concord, N.H. "Some states will allow a caterer to prepare food in their home kitchen, but they will have to meet a set of rules and regulations. In cases such as these, a health inspector will visit the home to ensure that all requirements are met."

If your state prohibits residential kitchens from being used for commercial food production, you'll need to rent a commercial kitchen. Some community colleges and local bars and restaurants will rent their kitchens during their off-hours.

What licenses and permits will be required

Food safety is an important issue, and you'll need to comply with local regulations by obtaining permits and licenses from both your county and city. While requirements vary, you may need health permits, food-handling licenses, and a liquor license. Call your area's business licensing department to find out what's required.

You'll also want to have insurance to cover your risks, such as an employee slipping and falling while serving food to guests, transportation accidents, and people getting ill from eating the food you or your employees have prepared.

And use a written catering contract with every client to cover potential issues, such as the closure of a venue or an unexpected occurrence. "Be sure to cover all your legal bases," says Winters. "You want to ensure that you and your customers are in full agreement on expectations and services."

Define your specialty

Another issue to address is defining your specialty. Instead of trying to be everything to everyone, it's best to create signature dishes that you can become known for. Use your expertise and the ingredients that are readily available to you to shape your menu.

You could become known for a certain regional cuisine, such as Italian or Vietnamese. Or you could focus on a type of meal, like brunch or picnic fare.

You could also specialize in a type of customer. "It helps to choose a niche," says Liz Maxwell, co-owner of Mike Maxwell & Company LLC, a catering business based in Los Angeles and Nashville. "When you first start out, you may take every job that comes your way. Eventually, [though,] you may decide to focus on a particular style of catering, like weddings or corporate luncheons. We cater to the entertainment industry."

Marketing your business

Having an online presence is important for long-term success because customers will undoubtedly search for businesses online. Start by creating a simple website and social media accounts with sample menus. You'll also want great photos of your food.

"People eat with their eyes," says Maxwell. "Make sure you take and share great photographs."

And while being on social media is important, when it comes to food, word of mouth is your best form of marketing. Ask for feedback and testimonials from happy customers and share them on your website. You can also offer a discount to anyone who refers a new customer.

"We market in a variety of ways," says Ian Duke, a Southampton, N.Y., restaurant owner who also offers catering. "When we opened The Coop, the catering menu for that was stapled on the delivery bags for people who ordered dinner from Union Burger Bar and Union Sushi and Steak."

Duke also donates food directly to charities and charity events. This way, he contributes to his community while boosting name recognition. "At charity events, guests can sample food," he says. "This method, in particular, has been a great method for us; as much as 80% of our catering comes from referrals."

FAQs

How profitable is the catering business? 

Running a catering company can be quite a profitable and successful business. Most caterers see profits between 5%–15%, depending on overall business expenses and how many events they can manage in a year. 

What are the risks of starting a catering business? 

The catering business has certain financial, safety, and operational risks. The top public liability a caterer faces is an illness caused by ill-prepared, spoiled, or contaminated food. Sometimes, requirements for specialized equipment can raise startup costs. Malfunctioning equipment can lead to operational hazards and workplace accidents. High turnover also plagues the industry. 

Can I run a home-based catering business? 

Yes, you can if your state permits. Contact your state’s Department of Agriculture or Department of Health for information about “cottage food laws” that govern the production and sale of food from home. 

How do I find clients for my catering business?

A well-crafted marketing strategy can help you build a loyal customer base. Partner with local businesses and event planning companies, attend local events, and host food pop-ups to spread visibility.

How should I price my catering services?

There are a variety of factors that affect price, such as guest count, cost of ingredients, supply cost, and service charges. You can choose from a variety of pricing strategies, although most catering businesses use the following formula as a guideline:

Selling price = food cost + labor cost + overhead cost + profit markup. The industry standard for markups is three times the cost of food.

It’s common to offer tiered pricing, where the cost per plate changes based on the number of guests. Many catering businesses use tiered pricing to attract larger social and corporate events that support bulk food purchasing.

Regardless of the pricing technique, remember to keep prices competitive. 

 

Stephanie Vozza contributed to this article.