The catering business is considered to be among one of the most delicate industries because they are involved in cooking food for a large number of people per time. For this reason, the business is subjected to regular inspections by relevant health officials from the local health department.
If you run a catering business in the United States of America, you are expected by law to comply with the laid down rules and regulations of the industry. In the United States of America alone, there are 139,060 caterers as of 2022, this is an increase of 4.1% from 2020.
They employ about 250,000 people (both contract and full-time employees) and most of them are doing pretty well in the business because there are loads of business opportunities available to caterers in the United States of America. The Industry generates over 7 Billion US Dollars annually through events such as weddings, holiday parties, corporate functions, funerals, birthday parties et al and the figure is still on the increase.
Steps on How to Start a Catering Business With No Money
1. Conduct Market Research
The first step in conducting market research for a catering service is to develop market-based research questions in line with your overall business goal and objective. In this regard, you should source information that will help you maximize your business, information that will help you know what your potential market is looking for from a catering service, and that will help you operate your catering service with less stress.
a. Who is the Target Market of a Catering Business?
- Families (Homes)
- Schools (boarding house and campus et al)
- Wedding Ceremonies
- Event Planners
- Sport Centers
- Corporate Organizations
- Managers of public facilities
- Carnival Organizers
b. Is Catering Service a Profitable Business?
Yes, the catering service business is profitable and statistics show that the industry generates an average of $7 billion annually in the United States of America.
c. Are There Existing Niches in the Industry?
Though there is no niche area in the catering service business, it is common for some catering services to specialize in any of the following;
- Corporate Catering
- Wedding Catering
- Holiday Catering
- Breakfast Catering
- Picnic Catering
- Box Lunch Catering
- Cocktail Party Catering
- Pig Roast Catering
- BBQ Catering
- Canteen Management
d. Who are the Major Competitors?
- Compass Group
- ZeroCater
- Rocky Top Catering
- Leading Caterers Of America
- DJ’s California Catering
- Ravishing Radish
- Brother 2 Brother Catering
- Herban Feast
- Sirico’s Caterers
- Junzi Kitchen
- On Safari Foods
- Corky’s Chicago Catering
- Chinese & Vietnamese Cuisine Catering
- Corporate Caterers
- CrepeTime! ™ Catering.
e. Are There County or State Regulations or Zoning Laws for Catering Business?
Yes, there are county, state regulations and zoning laws for catering services, and players in this industry are expected to work with the existing regulations governing such business in the county or state where their business is domiciled. The FDA requirement for an offsite caterer who will be serving food without temperature controls are;
- Use equipment that is NSF-approved as safe for outdoor use
- Employ a certified master chef level by the American Culinary Federation (ACF)
- Provide calibrated thermometers, clean aprons, closed-toe shoes, and hairnets
- Provide written procedures, prepared in advance, made available upon request to authorities
f. Is There a Franchise for Catering Business?
Yes, there are franchise opportunities for the catering service business, and here are some of them;
- Corporate Caterers
- CrepeTime!™ Catering
- Apple Spice Box Lunch Delivery & Catering Company
- Bayside Lemonade (Specializes in fundraising, catering, and vending at special events throughout NY and NJ.)
g. What Do You Need to Start a Catering Business?
- A Feasibility Report
- Business and Marketing Plans
- Business Licenses and Permits
- A Good Kitchen Facility
- Computers, Laptops, and Servers
- EIN (Employer Identification Number)/Federal Tax ID Number.
- A Corporate Bank Account
- Cooking and Serving Wares
- Employees
- Startup Capital
Memorable Business Name ideas for Catering Service
- Delicious Delight® Catering Services, Inc.
- Dora Williams® Catering Services, LLC
- Rex Brown© Catering Services, Inc.
- Food Solutions® Catering Services, Inc.
- Food Expats™ Catering Services, Inc.
- Jade Jason™ Catering Services, LLC.
- Joan Blaze© Catering Services, LLC
- Lara Williams® Catering Services, Inc.
- Food Pros© Catering Services, Inc.
- Mary and Martha© Catering Services, Inc.
- Juliet Marko® Catering Services, Inc.
- Mary June® Catering service, LLC
- Perfect Hedge® Catering service, Inc.
- Foodie International Caterer Corporation, Inc.
- Monic Lewis® Catering Services USA LLC.
- Shannon Steve® Catering Service, Inc.
- Cloe Adolphus® Catering Services USA LLC
- Food and More® Catering Service, LLC
- Cherry Wade® Catering Services USA LLC
- Clean Serve® Catering Services USA LLC.
Register Your Business
a. What Type of Business Structure is Best for Catering Service?
Even though there are several options when it comes to the business structure of a catering service business, the one that most players consider is LLC. It is common to consider LLC because providers want to protect themselves from lawsuits.
Please note that an LLC will need an EIN if it has any employees or if it will be required to file any of the excise tax forms listed below. Most new single-member LLCs classified as disregarded entities will need to obtain an EIN.
b. Steps to Form an LLC
- Choose a Name for Your LLC.
- File Articles of Organization.
- Choose a registered agent.
- Decide on member vs. manager management.
- Create an LLC operating agreement.
- Comply with other tax and regulatory requirements.
- File annual reports.
c. What Type of License is Needed to Open a Catering Business?
- General Business License
- Food Handler’s License and Permits
- Health and Safety Permit
- Commercial Kitchen License and Approval
- Zonal Permits (Applicable in some cities)
- Signage Permit
- Operational State Facility Inspections
d. What Type of Certification is Needed to Open a Catering Service Business?
These are some of the certifications you can work towards achieving if you want to run a catering service business;
- Certified Food Manager (CFM)
- Certified Professional – Food Safety (CP-FS)
- Certified Food Protection Professional (CFPP)
- Food Safety Manager Certification.
- ServSafe Food Protection Manager Certification.
- Certified Professional Catering Executive (CPCE).
e. What Documents are Needed to Open a Catering Service Business?
These are some of the basic legal documents you are expected to have if you want to legally run a catering service business in the United States of America;
- DBA
- EIN
- Business and liability insurance
- Federal Tax Payer’s ID
- State Permit and Building Approval
- Certificate of Incorporation
- Business License
- Food Handler’s License and Permits
- Health and Safety Permit
- Commercial Kitchen License and Approval
- Business Plan
- Employment Agreement (offer letters)
- Operating Agreement for LLCs
- Insurance Policy
- Online Terms of Use
- Online Privacy Policy Document
- Contract Document
- Company Bylaws
- Memorandum of Understanding (MoU)
f. Do You Need a Trademark, Copyright, or Patent?
If you are considering starting a catering service business, you may not need to file for intellectual property protection, copyright, patent, or trademark. This is because catering services do not require one except on rare occasions.
Cost Analysis and Budgeting
a. How Much Does It Cost to Start a Catering Business?
When it comes to starting a catering service business, the startup costs could range from $15,000 to over $150,000 depending on how much equipment the business owner decides to purchase and the commercial kitchen space leased. Please note that this amount includes the salaries of all the staff for the first month of operation.
b. What are the Costs Involved in Starting a Catering Business
- The total fee for registering the business in the United States of America – $750.
- Legal expenses for obtaining licenses and permits as well as the accounting services (software, P.O.S machines, and other software) – $3,300.
- Marketing expenses – $3,500, and as well as flyer printing (2,000 flyers at $0.04 per copy) for the total amount of $3,580.
- The cost for hiring a business consultant – $2,500.
- Insurance (general liability, workers’ compensation, and property-casualty) coverage at a total premium – $2,400.
- The cost for payment of rent for a commercial kitchen for 12 months at $1.76 per square foot in the total amount of $25,600.
- Other start-up expenses including phone and utility deposits ($2,500).
- Operational cost for the first 3 months (salaries of employees, payments of bills et al) – $30,000
- The cost for catering equipment (gas cooker, deep freezer, holding cabinets (keep foods at proper temperatures while transporting and waiting for mealtime), food pan carriers, hot food tables and accessories, catering carts, catering service trays, ice beverage bins, insulated beverage carriers, and dinnerware, portable catering and cooking equipment, such as commercial induction ranges, hand sinks, and cold food tables. buffet serving materials, including serving trays, beverage dispensers, and chafing dishes. et al): $25,000
- The cost of launching a website: $600
- Miscellaneous: $5,000
c. What Factors Determine the Cost of Opening a Catering Business?
- The size of the business
- The choice of location
- The required licenses and permits
- The type of commercial kitchen facility
- Additional service offerings
- The cost of hiring and paying a business consultant and attorney
- The cost for branding, promotion, and marketing of the catering service
- The cost for the purchase of catering equipment and serving wares.
- The cost for insurance policy covers
- The cost for registering the business
- Source of your supplies and ongoing expenses
- Cost of recruiting and training your staff
- The cost of the purchase and customizing of uniforms
d. Do You Need to Build a Facility? If YES, How Much Will It Cost?
It is not compulsory to build a new facility for your catering service (commercial kitchen), but if you have the required finance, it will pay you to build your commercial kitchen facility. The truth is that building or reconstructing a commercial kitchen facility will help you come up with an edifice that will conform to what is expected of commercial kitchens in your city.
e. What are the Ongoing Expenses of a Catering Business?
- Supplies – prosthetic devices (such as cooking ingredients, replacement of spoons, forks, knives, serving wares, and gas).
- Fueling and maintenance of equipment and utility truck
- Utility bills – (phone bills, signage and software renewal fees et al)
- Salaries of employees
f. What is the Average Salary of your Staff?
- Chief Executive Officer (Owner) – $65,000 Per Year
- Chief Cook – $45,000 Per Year
- Human Resources and Admin Manager – $42,000 Per Year
- Sales and Marketing Executive – $28,000 Per Year
- Accountant – $32,000 Per Year
- Kitchen Assistants – $26,100 Per Year
- Servers (Contract Staff) -$25,000 Per Year
- Cleaners/Dish Washers – $24,000 Per Year
g. How Do You Get Funding to Start a Catering Service Business?
- Raise money from personal savings and sale of personal stocks and properties
- Raise money from investors and business partners
- Sell shares to interested investors
- Apply for a loan from your bank/banks
- Apply for business grants and seed funding from the government, donor organizations, and angel investors
- Source for soft loans from your family members and friends.
Write a Business Plan
a. Executive Summary
Delicious Delight® Catering Service is a catering business that will be based in Chicago, Illinois, USA. Our intention of starting a catering business in Chicago is to deliver the best quality catering services at an affordable price to our customers. Our services will involve catering for parties, outdoor events, weddings, holiday parties, birthday parties, corporate events, picnics, anniversaries, special events et al.
b. Products and Service
- Corporate Catering
- Wedding Catering
- Holiday Catering
- Breakfast Catering
- Picnic Catering
- Box Lunch Catering
- Cocktail Party Catering
- Pig Roast Catering
- BBQ Catering
- Canteen Management
c. Mission Statement
To establish a standard catering business that will meet all the catering needs (cooking, event planning, rentals, training, and consultancy services) of people in Chicago and neighboring states.
Vision Statement
To become the number one catering service provider in the whole of Chicago, Illinois.
d. Goals and Objectives
The goals and objectives of the catering service business are to provide high-quality food and beverages. To provide a friendly and welcoming atmosphere. To provide professional, hygienic, and attentive service. To provide value for money.
e. Organizational Structure
- Chief Executive Officer (Owner)
- Chief Cook
- Sales and Marketing Executive
- Accountant
- Kitchen Assistants
- Servers (Contract Staff)
- Cleaners/Dish Washers
Marketing Plan
a. SWOT Analysis
Strength:
We are a complete catering business that does not offer outdoor catering services alone but also offers consultancy services, rental services, and training. The truth is that people will prefer to engage a client that can provide them all they need to make their events a memorable one.
Weakness:
Our weakness will be the challenge of hiring and keeping the best cooks/chefs on our payroll since most of them would want to work for themselves. This challenge applies to almost all catering business owners. Another weakness is that we are new in Chicago, IL.
Opportunities:
When it comes to catering services, the available opportunities cannot be quantified. Any entrepreneur can start his or her own outdoor catering business anywhere in the world and still make huge returns on his or her investment.
At Delicious Delight Catering, we take pride in the fact that we are one of the few catering companies in Chicago that offers a wide range of related catering services hence we are likely going to maximize the opportunities available in the industry.
Threat:
There are a couple of first-class catering companies in Chicago IL, and they are a threat to us. They pose a threat to us because they are already established, their brand is well-accepted and they have a huge clientele base. If our competitors develop expensive marketing and sale campaigns that will mean that we will be trying to catch up.
b. How Do Catering Services Make Money?
Catering services make money by offering the following services;
- Cooking and serving food as requested by their clients
- Rent equipment and supplies
- Outsource items to other event-planning vendors
- Offer cooking and catering training and consultancy services.
c. Payment Options
- Payment via bank transfer
- Payment via credit cards
- Payment via online bank transfer
- Payment via check
- Payment via mobile money transfer
- Payment via bank draft
d. Sales & Advertising Strategies
- Introduce your catering service business by sending introductory letters alongside your brochure to households, corporate organizations, religious centers, schools, and key stakeholders
- Advertise on the internet on blogs and forums, and also on social media like Twitter, Facebook, LinkedIn to get your message across
- Create a basic website for your business to give your business an online presence
- Directly market your catering services.
- Advertise our business in community-based newspapers, local TV and radio stations
- List your business on yellow pages ads (local directories)
- Encourage the use of word-of-mouth marketing (referrals)
Financial Projection
a. How Much Should You Charge for your Product/Service?
According to Food Service Warehouse, many catering companies aim for a markup three times the price of the actual food costs when creating a final price for their menu. Hence we will charge;
- Formal dinner – $145 per person
- Informal food stations – $25 – $45 per person
- Buffet – $23 per person
- Corporate event – $70 per person
b. How Much Profit Do Catering Service Business Owners Make a Year?
It depends, but food businesses average 25 percent profit. Net profits from catering should be well over 30 percent, and ideally closer to 65 percent.
c. What Factors Determine the Amount of Profit to Be Made?
- The capacity of the catering service business
- The types of customized catering service offerings
- The location the catering service business is covering
- The management style of the catering service business
- The business approach of the catering service business
- The advertising and marketing strategies adopted by the business.
- The number of years the catering service is in business
d. What is the Profit Margin of a Catering Business?
It can range from 35 percent to 70 percent depending on the nature of the products and services in question.
e. What is the Sales Forecast?
Below is the sales forecast of a catering service business based on the location of the business and other factors as it relates to such startups in the United States;
- First Fiscal Year (FY1): $260,000
- Second Fiscal Year (FY2): $380,000
- Third Fiscal Year (FY3): $450,000
Set Up your Office
a. How Do You Choose a Perfect Location for a Catering Business?
- The demography of the location especially as it relates to the frequency of parties and events
- The demand for the services and products offered by catering services in the location
- The purchasing power of businesses and residents of the location
- Accessibility of the location
- The number of catering services in the location
- The local laws and regulations in the community/state
- Traffic, parking and security et al
b. What State and City are Best to Open a Catering Business?
- Los Angeles, California
- Chicago, Illinois
- New York City, New York
- Brattleboro, Vermont
- Tucson, Arizona
- Silver Spring, Maryland
- San Diego, California
- Portland, Oregon
- Richmond, Virginia
- Green Bay, Wisconsin
- Dallas, Texas
c. What Equipment is Needed to Operate a Catering Business?
You should be prepared to purchase a gas cooker, deep freezer, holding cabinets, food pan carriers, hot food tables and accessories, catering carts, catering service trays, ice beverage bins, insulated beverage carriers and dinnerware, portable catering and cooking equipment such as commercial induction ranges, hand sinks, and cold food tables.
Buffet serving materials, including serving trays, beverage dispensers, and chafing dishes. You will also need computers and laptops, internet facility, telephone, and office furniture (chairs, tables, and shelves), and all these can be gotten as fairly used.
Hire Employees
When it comes to hiring employees for a standard catering service, you should make plans to hire a competent chief executive officer (owner), chief cook, sales and marketing executive, accountant, kitchen assistants, servers (contract staff), and cleaners/dishwashers).
Launch the Business Proper
No catering service business opens its door for business without first organizing an opening party to officially launch the business. You can choose to do a soft opening if you are operating on a low budget or you can go for a grand opening party.
The bottom line is that with a proper launching of the catering service business, you will be able to officially inform people in your city that your catering service is open for business.
a. What Makes a Catering Business Successful?
- Having an innovative business idea
- Following a clear vision
- Creating a solid business plan
- Developing missing skills
- Finding the right talent and network
- Being financially prepared
- Building a strong company culture
- Maintaining excellent customer service and outreach
- Analyzing your competitors
- Being open to change
- Taking calculated risks
- Accepting and learning from feedback
- Never giving up.
b. What Happens During a Typical Day at a Catering Business?
- The business is open for the day’s work
- The to-do list is reviewed
- Employees go straight to their job description (purchasing of food ingredients, cooking of different meals, and packing of foods)
- For offsite catering, cooking equipment and employees are transported to the site where they are expected to prepare food and serve as the case may be.
- Deliveries of orders are made or food is served as requested.
- Catering equipment and serving wares are washed, cleaned, and returned to the warehouse
- The business is closed for the day.
c. What Skills and Experience Do You Need to Build a Catering Business?
- Excellent cooking skills
- Good managerial and human development skills
- Team-building & Interpersonal Skills.
- Excellent communication and negotiation skills.
- Organizational skills.
- A strong understanding of the catering industry
- Attention to detail and the ability to stand for long periods
- The ability to analyze quality or performance.
- Good supervisory skills
- Familiarity with all aspects of commercial catering and serving
- Experience in working as a commercial caterer
- Experience in managing people
- Experience in business administration