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How to Start Catering Business: A Restaurant Owner's Essential Steps

Ever wondered how to start a catering business? Overwhelmed by the steps? Dive into this guide for restaurant owners and unlock the essential roadmap to success.

September 27, 2023

Author’s Bio:

David Morneau is the co-founder and CEO of inBeat Agency that helps brands scale their marketing efforts. He has helped over 200 DTC brands to date.

If you’re a restaurant owner looking to diversify your business streams by launching a catering service, you’re on the right page.

Although your restaurant has given you plenty of practical know-how in launching and managing your business, catering companies require specific strategies, paperwork, and marketing services.

This guide will help you deal with all that through six actionable steps to launch and scale your catering company, plus plenty of pro tips.

Let’s dive in.

1. Research Your Market

Like any business venture, a catering company requires on-point market knowledge. Data-driven strategies are the best because you can easily identify what works well and what doesn’t.

This data helps you hone your strengths and build upon your weaknesses to ensure your business stays profitable.

Here are actionable steps to guide your market research:


1.1. Identify Social Trends


A successful business offers products and services aligned to their prospect’s needs. But often, those needs aren’t purely objective; they’re also heavily influenced by trends and cultural values. To understand those social trends:

A. Engage on social media platforms: Think Instagram, Facebook and TikTok. Jot down trends in food presentation, popular cuisines, or any dietary needs that seem to be catching attention. You can simply explore the #foodtrends hashtag on Instagram to gain a slew of ideas. Sambookco offers a neat example of both food presentation and interacting with its followers:

Food trends

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B. Use Google Trends: Use this tool to find food or catering-related searches trending in your region. Input food items or ingredients into Google Trends to see which are becoming more popular. Plus, Google Trends allows filtering by region or city, so you can see what's popular in your specific area. Maybe “taco catering” is trending in Southern California, while “clam bakes” are popular in New England.

Side note: While it’s beneficial to understand and adapt to trends, it's also essential to remain genuine. If your catering business specializes in Italian cuisine, suddenly adding a trending Korean dish might not resonate with your audience.

Google My Business taco catering

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C. Surveys & polls: Consider running short surveys on your restaurant’s social media or mailing list to understand what your current audience might want in a catering service.

Here’s how restaurant owners can leverage surveys and polls to research their market to identity customer preferences for a catering service:

  • Menu Selection: Surveys can help determine which dishes from the restaurant’s menu are favorites and should be included in the catering service.

  • Pricing Willingness: Understanding what price point customers are comfortable with helps in setting competitive yet profitable prices.

  • Service Styles: Discover whether customers prefer buffet-style, plated meals, or boxed lunches for different occasions.

Bar-B-Que

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Let’s say you’re the famous Cedric Grolet trying to open a side catering business.

A few quick questions on people’s favorite food items can help you test the waters. Here’s a good example that consists out of a single question, which doesn’t feel pushy at all:


Cedric Grolet

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Side note: Your current restaurant customers and your catering business’s prospects may not overlap. That brings us to the next point.


1.2. Understand Your Customers' Demographics and Psychographics


  • Demographics: Demographic features include age, gender, income level, marital status, etc. You can find this information using a social media listening tool, like Brand24 or Agorapulse, or through local surveys.

  • Psychographics: This info regards your prospects’ interests, lifestyle, behaviors, and personal preferences. Use data from your website analytics or social media analytics.

PRO-TIP: Also, gather insights by reading review websites and engaging with your local community on specific forums or social media groups. You can also conduct a competitor gap analysis using SEO tools like Ahrefs or SEMrush. You should understand:


  • The occasions for which they would require catering.
  • The food themes and cuisines they prefer.
  • Values, such as sustainable, locally-sourced organic ingredients.
Demographics vs Psychographics

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1.3. Scrutinize Competitors’ Strategies and SEO


This step is essential because you won’t be alone in your market. Your catering business should stand apart from the competition.

And since most people look for catering companies online, you want to rank as high as possible.

That’s why you must look at all your competitors’ strategies, from their offers and audiences to their unique selling points and SEO strategies.

Here’s how:

  1. Jot down your main competitors.
  2. Visit your rivals’ websites to understand their service offerings, pricing strategies, and any unique selling propositions (USPs) they leverage.
  3. Read online reviews about your competition on Yelp or Google My Business. Look for customer insights into what they love or hate about your rival businesses.
  4. Use tools like SEMrush, Ahrefs, SEOKart, or Moz to research the keywords your competitors rank for. Use this intel to find keywords with low competition and high search volume to develop your content strategy.

Example:

Here’s an example from a successful catering business, Delightful Bites by Corrin Elizabeth. Let’s try and be concise because you can honestly write a separate piece just on this topic.

According to Ahrefs, the website’s organic competitors are as follows:


Delightful Bites by Corrin Elizabeth

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Luckily, we can exclude Pinterest and Australian caterer Eatability.

Let’s focus on Bitefull.

The brand presents itself as a full-service caterer:


Catering and Events

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And Ahrefs shows there are few common target keywords.

Therefore, Delightful Bites could target some of the keywords Bitefull is using in its content strategy to attract a broader market.

Some of these keywords have a very low competition, which means they are easy to target and rank for, replacing Bitefull in the search engine result pages:

Ahrefs2

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1.4. Identify Gaps in the Local Market


Now, put together the info you found so far. Focus on the overlaps and, more importantly, the gaps.

Look for:

  • Unserved niches in your area, such as vegan, paleo, or gluten-free catering. Use the insights you have already gathered from Google Analytics, social media listening tools, and your SEO tools.

  • A potential unique selling point for your catering business, such as a specific cuisine. For example, Delightful Bites specializes in Creole Southern Comfort Food:
Who we are

Price points you could leverage, for example...

  • A market for premium, high-end catering or one in the budget-friendly space.

  • High-end catering typically uses premium ingredients (often locally sourced, organic, or rare imports), offers extensive menu customization, provides upscale presentation, and may include additional services like personalized menu creation, event design, and dedicated servers or bartenders. Prices range from $75 to $250 per person and $3,000 to $10,000 for events. Bill Hansen Catering is one such example.


  • Budget-friendly catering focuses on providing value. They might offer limited menu options, use standard ingredients, have simpler presentation styles, and often operate on a more self-serve basis (like buffet style rather than plated service). The price per person is $10 to $100, and events may range up to $3,000. Kompass Kulinary fits this range.

  • Service gaps in your rivals’ services, such as late deliveries, lack of customization, or poor presentation. These service gaps can be identified by spying on the customer reviews of your competitors on company review platforms such as Glassdoor, among others.

Now piece all this information together to outshine your competitors!

2. Build Your Business Plan

The leap from idea to reality requires a well-structured business plan. This isn’t just a bureaucratic step; it’s your road map. And here are the practical steps you can take:


2.1. Define Your Business Goals


You can’t plan a journey without knowing your destination.

Business goals are that end destination when you’re launching a catering business.

Focus on specific metrics, such as:

  • Acquiring a certain number of clients in the first year, per month or per week: Specific metrics, such as client acquisition rates, will depend on various factors like your business size, location, market saturation, and promotional efforts. A good ballpark would be 1-3 events per month during the first three months, 3-8 monthly events until your 6-month anniversary, and 8-15 monthly events between 6 to 12 months after launching your business.

  • Offering a specific number of menu items: Your goal could be to build a menu of 20 food items during the first year, even if you only start with 10.

  • Launching in a particular region: Pick your region based on the previous market research we have explained above. Look at data from your competitor analysis and consider your operational capacity.

2.2. Explore Required Financing Options


The financing options to consider include:

  • Self-financing, using your savings or restaurant revenues.
  • Bank loans with favorable interest rates, tenures, and conditions.
  • Investors, such as venture capitalists or angel investors.
  • Crowdfunding on platforms like Kickstarter.

There are no readily available examples of catering businesses that disclose their financing sources.

But you don’t need that.

Instead, speak with your financial advisor to find a bespoke solution for your needs.


2.3. Craft Your Mission Statement


Having a mission statement means understanding your reason for existence. That will help you:

Decide the strategies that align with your goals Explain to prospects what makes you different

This mission statement relies on three pillars:

  1. Purpose: Realize why you’re starting the business.
  2. Values: Jot down the principles that will guide your business.
  3. Vision: Explain where you see your business in the future.

Here’s an example: “[Brand Name] delivers world-class, authentic [cusine type] catering to enrich celebrations and champion sustainability.”

Notice a good example from On Safari Foods (focus on the first two sentences):

On Safari Foods

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Junzi Kitchen goes straight to the point as well:


Junzi Kitchen

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2.4. Do Financial Forecasting

Financial forecasting helps you set a good budget. And having that budget is essential to give your business a good start instead of drowning in intricate finances.

Consider:

1. All initial expenses, from equipment to licenses:


CategoryItems
Business Licensing and PermitsBusiness license fees, health department permit, liquor license (if applicable), event or specialty permits for specific venues or event types.
EquipmentCommercial ovens/stoves, refrigerators and freezers, prep tables, shelving and storage, cooking utensils (pots, pans, knives, etc.), dishwashers or sinks, serving dishes, trays, and platters, portable heating or cooling units for events.
VehiclesPurchase or lease of vans or trucks for transporting food and equipment, vehicle maintenance costs.
Technology & SoftwarePoint of sale (POS) system, accounting software, event management software, employee scheduling software.
Office Supplies and EquipmentComputers, printers, office furniture (desks, chairs, file cabinets).
UniformsChef coats, hats, aprons, uniforms for servers or other staff.
Employee TrainingCosts associated with training courses or materials for new employees.

2. Operating recurrent costs, such as ingredients, staff salaries, and transportation:


CategoryItems
Rent or MortgageKitchen space (commercial kitchen rental if you don't own a space), office space (can sometimes be the same as the kitchen space), storage space for equipment and supplies.
UtilitiesWater and sewage, electricity, gas, trash disposal, phone/internet.
InsuranceGeneral liability insurance, property insurance, workers' compensation, business vehicle insurance, liquor liability insurance (if applicable).
Marketing and AdvertisingWebsite development and hosting, branding (logo design, business cards), initial promotional materials (brochures, flyers), signage (for your office, vehicles, etc.), initial advertising campaigns (online ads, print ads, etc.).
Recurring Office SuppliesBasic office supplies (paper, pens, etc.).
InventoryFood ingredients for initial events or tastings, beverages (including alcohol, if applicable), non-food consumables (napkins, disposable plates/glasses, etc.).
Professional ServicesLegal fees (for business structure setup, contract drafting, etc.), accounting or bookkeeping services, consulting fees (business consultants, food industry experts).
SalariesEveryone in your team needs compensation.

3. Projected revenue based on your market research:


CategoryItems
Industry ReportsPurchase or access industry-specific reports from market research firms like IBISWorld, Mintel, or Statista. These reports often contain data on market size, growth rates, and customer preferences.
Trade AssociationsAssociations related to the catering or events industry might publish statistics, trends, and reports that can be invaluable. Examples include the National Restaurant Association or the International Caterers Association.
Competitor AnalysisStudy competitors in your area. Look at their pricing, offerings, and customer reviews to estimate market rates and demand.
Local Government DataSome local governments publish data on businesses, which can be used to estimate market size and growth.
Industry Events and ConferencesAttending events related to the catering or broader food and beverage industry can provide insights into market trends and give you the opportunity to ask peers about their experiences.

Pro tips:

  • Calculate when you expect your revenue to cover your initial investment and ongoing operational costs.
  • Use professional software like Wix or Xero, or hire an accountant to ensure your calculations are correct.

3. Legalities & Licenses

Your new catering business needs to comply with all the legal requirements. Here’s what to consider, but check your local laws to ensure you don’t miss anything:


3.1. Required Licenses


To register your catering business, you’ll need:

  1. A business license 2. Food Handler’s License to sell food to the public
  2. Specific catering license
  3. Liquor license if you plan to serve or sell alcohol

3.2. Register Your Catering Company


First choose a business structure depending on your needs and financial forecasts, such as:

  • Sole proprietorship
  • Partnership
  • LLC
  • Corporation

You should take into account the following variables:

  • Liability: Protecting personal assets from business risks.
  • Tax implications: Different structures have varying taxation policies.
  • Operational complexity: Reporting requirements, paperwork, and compliance vary.
  • Future expansion plans: Plans to attract investors, issue shares, or expand globally.
  • Cost: Costs associated with maintaining the business structure (annual filings, franchise taxes, etc.)

Here’s a simplified table based on turnover, keeping in mind that turnover isn't the sole determinant:


Expected Turnover RangeMost Appropriate Business StructureReasons
$0 - $50,000Sole ProprietorshipSimplified tax filings and operational procedures are suitable for businesses with low turnover. Liability is personal, so it's more appropriate when risk is minimal.
$50,000 - $200,000Partnership or LLCPartnership can distribute income among partners, while an LLC provides more liability protection. Both structures are suitable for medium turnover businesses with increased risk exposure.
$200,000 - $1,000,000LLCAt this turnover, businesses often have more complex operations and may benefit from the liability protection of an LLC. The tax structure can be more favorable, and it allows for more growth flexibility.
$1,000,000 and aboveCorporationHigh turnover businesses with substantial assets and risk would benefit from a corporation's rigorous structure. It offers the most significant liability protection, more complex tax benefits, and is better for attracting significant investment.

Pro tip: Consider the taxes you’ll pay for each before deciding.

Next, choose a business name that’s not trademarked or infringes on another company’s rights.

Finally, register with local authorities. Depending on your jurisdiction, that can be your city, county, or state.

3.3. Health and Hygiene Rules

Catering companies have different health and hygiene rules than restaurants. You may need the following:


  • Food Safety Certification: Many regions require at least one person (often the business owner or a manager) to be certified in food safety.

  • Kitchen inspection: If you’re using your restaurant kitchen, it may already meet standards. But if you're setting up a new space, health department inspections are a must.

  • Safe food-handling practices: Train your staff regularly so everyone handles the produce and equipment correctly. Ensure they get their Food Handler’s License if needed. This means you can avoid any health issues in the long run.

3.4. Insurance


There are multiple types of insurance you should consider for your catering business:


  • Business Owners Policy (BOP): An all-in-one package including General Liability Insuarance, Commercial Property Insurance and Business Interruption Insurance.

  • Workers' Compensation: Protects your employees from work-related injuries, covering them their medical costs and lost wages.

  • Cyber Liability Insurance: Protects your business in case your Point of Sale system is subject to a cyber attack causing loss and damages.


Insurance ProductExamples of IncidentsHow Insurance Covers the Incident
General Liability InsuranceSlips and falls at an event; damage to client property.Covers legal fees, medical costs, or property repair costs.
Product Liability InsuranceFood poisoning from catered food; allergic reactions.Pays medical bills or legal claims from affected parties.
Liquor Liability InsuranceDrunk guest causes an accident; underage drinking issues.Covers legal fees or damages arising from alcohol-related incidents.
Commercial Auto InsuranceDelivery van accident; theft of company vehicle.Repairs or replaces vehicles, covers medical fees from accidents, and may cover lost income.

3.5. Contracts


Having clear contracts gives you a solid base for operating your business. Consider contracts for:


Pro tip: Outline all terms, pricing, and cancellation policies to prevent legal disputes.

4. Designing Your Menu

Your menu is arguably the most significant representation of your catering business. Your clients will interact with, choose from, and ultimately judge you on your menu.

Plus, it helps you stand apart from the competition.

Here’s how:


4.1. Choose Dishes and Themes


The dishes and themes help you gain a competitive edge, so:


  • Research market trends: You already did this in step 1, but it’s essential to stay up to date on current food trends, from popular diets and dishes to global culinary trends.

  • Play to your strengths: Start with what you know best. If your restaurant specializes in a particular cuisine, bring that expertise into your catering menu. If you have access to seasonal ingredients, use that.

  • Use theme-based menus: Create unique themes such as “Farm-to-Table,” “Mediterranean Summer,” or “Do-It-Yourself Menu.” These themes highlight your unique selling point and make your events more cohesive.

Example: Made By Meg Catering offers the Signature Drinks menu option for some weddings.


4.2. Set Your Menu Prices


Setting prices for products and services is a major problem for most businesses. The same principles in menu pricing for restaurants apply to those for catering.


Menu Pricing Method 1


StepDescriptionFormula
Understand Ideal Food CostIdeal food cost is generally 25%-35% of operating expenses. Calculate the cost of raw ingredients for each dish.
Set Menu PriceUse the calculated ingredient cost and desired food cost percentage to set the menu price. Consider additional costs like preparation, service, and overheads.Price = Ingredient Cost / Desired Food Cost Percentage
Determine Actual Food CostConsider starting inventory, new purchases, and ending inventory to calculate the actual food cost.Starting Inventory + New Purchases – Ending Inventory = Actual Food Cost
Compare Food Cost PercentageCompare your food cost percentage, ideally between 28%-32%, to industry standards for performance insights.

Menu Pricing Method 2


StepDescriptionExampleFormula
Choose Gross Profit MarginDecide the profit margin you want for a menu item, using industry data to set a realistic profit.
Calculate COGSCalculate the Cost of Goods Sold (COGS), which is the raw ingredient cost.Chicken Caesar Salad ingredients cost $4.
Set Menu PriceIf aiming for a specific gross profit margin, adjust the menu price accordingly.Aiming for a 65% profit margin, proposed price is $12.Gross Profit Margin = (Menu Price - COGS) / Menu Price

Innovative Menu Pricing Method


MethodDescription
Match Competitor PricesSet your prices similar to your competitors to emphasize your unique brand characteristics without major price differentiation.
Price LowerSet your prices slightly below the competition to appeal to budget-minded customers or those looking for a casual dining experience.
Price HigherPrice your offerings above the competition to convey a premium dining experience or higher perceived value to your customers.

5. Choose Your Resources

The right resources ensure smooth operations and profitability. While dishes might win clients once, consistency in quality and service will keep them coming back.

Here’s what to consider:


5.1. Get the Necessary Equipment


Obviously, you need the right tools to prepare the right food. Essential equipment includes:

  • Transport vans
  • Chafing dishes
  • Serving utensils
  • Buffet setups
  • Portable stoves
  • Refrigeration units
  • Slow juicers, blenders, and other kitchen appliances

Here’s a complete list if you’re interested in more ideas.


Pro tips:

  1. Before making any new purchases, determine what you already have in your kitchen that can be used for catering. Jot down any other items you'll need.

  2. Invest in durable, high-quality equipment.

  3. If you don’t have the budget, consider renting larger or more expensive items.

  4. Catering businesses require increased flexibility because you’ll set up in different venues. So, pick modular, easy-to-transport, and set-up equipment.


5.2. Build a Talented Team


To build a talented team, you can leverage your existing staff. Some might have the necessary experience and interest.

If you need to hire additional chefs, pick people with previous catering experience. Working for a catering business is different than working in a restaurant kitchen; these people must work well under pressure and in different environments.

For a well-rounded team, don't overlook the vital role of servers. Hiring servers with diverse experiences can offer fresh insights. To cast a wider net for such talent, visiting job boards like Indeed, Adzuna, or Monster can be invaluable.

Also, ensure everyone has the right culinary skill sets.

Pro tip: Train your kitchen staff in catering, from preparing large volumes of food to ensuring quality remains consistent during transport and service.

6. Marketing & Branding

6.1. Trade Shows and Food Expos


These events are hubs for industry professionals, allowing you to:

  • Showcase your dishes and services
  • Network with suppliers, venue managers, and potential clients
  • Understand the latest trends in the food and events industry

Pro tip: Create a booth or stall that resonates with your brand. Include conventional and digital business cards, tasting samples, or a unique touch to become more memorable.

Here are some good examples:

#1 National Restaurant Association Show (NRA Show) (Chicago, Illinois):

NRA show

#2 Summer Fancy Food Show & Winter Fancy Food ShowWinter Fancy Food Show (New Your City and San Francisco):

Fancy Food Show

One of the best ways to become known is by partnering with a business your prospects already love. These companies will recommend your catering services, thus making them valuable allies.

Consider:

  • Event planners
  • Managers for venues that host specific events
  • Local wineries, craft breweries, or café

These companies may offer their clients a list of preferred or recommended caterers – and that’s you.

Here’s where you can find potential partners:

  • Industry directories and databases, such as the National Association for Catering and Events (NACE)
  • Your local chamber of commerce website
  • Industry-specific trade shows, expos, or conventions
  • Local networking events or business mixers
  • Local magazines, newspapers, or websites
  • Social media platforms or search engines (search by location + type of business)
  • Referrals from any current clients or contacts

Pro tip: Offer incentives for businesses that refer clients to you, such as a commission or discount.

Takeaways

  1. Research social trends, prospects, and competitors to identify gaps in the market.

  2. Define your business goals, set success metrics, and craft a compelling mission statement.

  3. Source your financing options and use financial forecasting to set a realistic budget.

  4. Conduct a SWOT analysis to understand your business's position.

  5. Obtain necessary licenses specific to catering, register your company, and obtain relevant insurance.

  6. Design a unique menu, picking dishes based on current trends and your strengths.

  7. Invest in hiring and training a talented team.

  8. Purchase high-quality essential equipment.

  9. Build your brand by using social media advertising, attending industry trade shows, and collaborating with other businesses in your area.

  10. Expand your services with new events, ancillary services, and niche themes.

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