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The catering business is one of the most lucrative and profitable home businesses with a high potential for expansion and growth. It is both financially rewarding and fun. Each catered event – whether birthday parties for children, breakfast in bed and intimate candlelight dinners for two, company dinner parties for 50, and wedding receptions involving a hundred or more guests — is a new experience and challenge with a new group of people.
Whether you cater events full-time or part-time, the opportunities are excellent. However, catering is demanding, requiring stamina, ability to work under pressure, and excellent interpersonal skills. Your success will greatly depend on your reputation. To build a good reputation in the business, you should be willing to work hard and be able to work under pressure. This kind of entrepreneurial business is definitely growing and becoming more popular with people of all income levels.
Demand for Catering
The demand for catering has increased tremendously through the years. According to the National Restaurant Association’s 2008 Restaurant Industry Forecast reveals that social caterers are one of the fastest-growing segments of the restaurant industry, with sales expected to reach $6.4 billion in sales. As impressive as the figure may be, it is highly likely that it still underestimates the industry, as many home-based caterers are not even listed in the phone book.
The increased demand for catering business is driven by the rising number of higher-income households, the number of weddings and increased corporate events with companies, corporations, charities, civic groups, event organizers and individuals calling on caterers to host on- and off-premises events. Businesses of all sizes are using catered lunches, cocktail parties and dinner meetings to build their images and increase company sales. It is a matter of keeping up with the competition in promoting a company and/or product.
RELATED: Starting a Bakery: Success in the Niche Food Business
Present lifestyles have also given way to increased demand for catered food services. Instead of laboring for hours, even days, in the kitchen preparing for parties or events, many homemakers now call on a caterer to provide sumptuous and unforgettable feasts for their guests. An increasing number of working mothers are paying to have catered birthday and graduation parties and wedding receptions handled by caterers. The reasons are simple: if she is working outside the home, today’s mother does not have the time or the energy to do all the planning and staging of a memorable party.
Even the concept of eating out is slowly being changed by the catering business: instead of going out to a restaurant to partake of a good meal, families can call on a caterer for that same great food.
RELATED: 7 Things You Need to Start a Restaurant Business
Choosing Your Catering Approach: On-Site vs. Off-Site
Catering services can be broadly categorized into two approaches: on-site and off-site. On-site catering involves cooking and serving food at the event location, such as a wedding venue or hotel. On the other hand, off-site catering entails preparing food elsewhere and delivering it to the event location, commonly seen in corporate lunches and private parties.
As a home-based caterer, you have the flexibility to adopt either approach. You can prep at home and cook on-site or do all the cooking from your own kitchen and deliver the completed dishes. However, it’s crucial to research your local catering regulations, as they may dictate your business model.
Navigating Legal Requirements
Before diving into your catering venture, you must understand and comply with local regulations. Does your city, county, or state permit catering from home kitchens? Ensure your kitchen meets health department guidelines, which may involve additional equipment like ventilation, a three-compartment sink, and non-permeable surfaces.
Sometimes, you might still require a commercial kitchen for off-site catering. Consider cost-effective options like renting shared kitchen spaces or collaborating with local churches, restaurants, or community centers.
Acquiring Licenses and Permits
Each locality has unique requirements for permits and licenses. You’ll likely need a business license and health department inspections for home-based catering. In cases where alcohol is served, a liquor license may also be necessary. Thoroughly research and adhere to all regulations to avoid future financial or legal complications.
Securing Liability Insurance
Even with stringent food safety measures, there’s always a slight risk of food-related issues. Protect your business and personal assets with liability insurance tailored to the catering industry. Consider updating your homeowner’s insurance as well, as your business operates from home.
Start-Up Costs of a Catering Business
Catering offers an opportunity for starting a food service business with a lower initial investment than opening a traditional restaurant.
Your goal should be to provide quality catering services, making each event memorable. Your business needs to provide exceptional catering services from food selection and preparation, serving food and utensils, setting up and cleaning up the designated serving area, coordination and consulting of foods to serve for a given event, and beer and wine bar.
In the catering business, you can start as small or as big as your wallet will allow. Your catering business can offer catering services for corporate events, meetings, holiday gatherings, picnics, weddings, family reunions, birthdays, graduations, and more.
RELATED: How to Start a Food Business
Success in catering hinges on managing your finances effectively. Start by estimating your startup costs and projected income. Optimize your budget by exploring second-hand equipment, bulk ingredient purchases, and potential funding sources such as small business loans or savings.
The start-up costs for a catering business will depend on what you put in your kitchen and can range from $1,000 (if you work from your own kitchen) to $80,000 (if you outfit a professional kitchen). Most caterers do the cooking on-site, either using their own facilities or equipment provided by the clients. However, you would still need to do some prep work in your own kitchen facilities (e.g., pre-cutting vegetables, etc.)
To keep your initial costs down, you can opt to start your catering business by renting items. You may rent the use of kitchen facilities, china, utensils, tables, tablecloths and linens, serving equipment, and other staples. Plenty of vendors exist to help you pull together the perfect event — decorators, designers, event planners, florists, bakers, and rental companies for portable toilets, cooking equipment, tents, chairs, linens, tableware, glassware, and silverware. You can start buying your own equipment only when you have steady revenues. By renting equipment, facilities, and supplies, you can use your first few months to build your reputation, develop capital for investment and expansion, and evaluate how much time and money you want to invest.
There is also the question of staffing, as starting a catering business solo is nearly impossible. Check the costs and viability of hiring temp workers through the staffing agency vis-a-vis keeping employees on a payroll. Word of caution: when hiring temporary workers from the staffing agency, give ample time before the event to meet the people to see what they look like and whether they can complete the tasks you need them to do.
You can also take the start-up period as the time to determine how this business will impact your family.
Income Potential
The income potential of catering depends on the size of the events you cater. Determine the number and scale of events you can realistically cater each year. Your choice should align with your business goals, whether a full-time venture catering large events or a part-time gig focusing on intimate, high-end gatherings. Strive to strike a balance between income and expenses to ensure profitability.
Like any other business, however, catering requires excellent management and organizational skills for the business to succeed. Your ability to keep your operating costs down while maintaining a high-quality service is also essential.
A quick survey of successful caterers nationwide shows that they began with zero capital by working out of their homes. The basic starting-up investment would appear to be around $500, with some big spenders capitalizing their idea with as much as $15,000 to get off to a fast start.
Many claim that profits in the catering business are the best in the food and beverage industry. An in-demand caterer in a large metropolitan area can easily gross upwards of $200,000 per year, while a small part-time caterer in a small town can count on at least $50,000 annually.
To cut down costs, you can employ several strategies to help keep your bottom line richer. You can use your house as your office, hire employees, and rent a kitchen in a nearby facility only when you have catering events. With its seasonal nature, catering usually does not require many year-round employees. However, it is very important that your business not only provides great food but high-quality service. The catering staff must be responsive, flexible, and professional to the client’s needs.
RELATED: Home Businesses with High Income Potential
What You Need to Open a Catering Business
The catering business is tough, with the details of preparing food off-premises and on-site for hundreds of people oftentimes mind-boggling. It is not easy to cater to an event of 400 people, much more if you start to do thousands, some 60 miles from your home (what if you forget the sauce?). Successfully running a small catering business takes much more than a passion for cooking and a knack for preparing tasty dishes. You have to be a superb planner and manager as well. You need to be extremely organized yet flexible enough to be able to deal with last-minute changes. You also need a strong affinity for people and a kind of intuition as to what people enjoy in different environmental settings.
Crafting Your Signature Menu
Your menu sets the stage for your catering business’s success. Choose a culinary niche, whether it’s regional cuisine, farm-to-table, or plant-based catering. Specializing narrows your clientele but enables you to stand out. Offering a variety of dishes and pricing tiers provides flexibility for your customers.
Pricing your menu requires carefully considering food and labor costs and overhead expenses such as insurance and kitchen rental fees. Ensure that your chosen dishes align with your service method, whether buffet-style or off-site delivery, to maintain quality during transport and setup.
As the culinary sophistication and desire to be entertained by many people have grown, customers today are looking for the catered experience to be more restaurant-like. Many caterers now offer signature dishes and house specialties as customers broaden their culinary experience. Others offer a family-style menu, especially for large informal functions and corporate meetings.
Caterers today have to be adept in satisfying the taste buds and excel in food preparation. To wow the socks off the clients, many caterers give ample focus on plate presentations, venue selection, and table decoration, among others. Some even hire artists to improve the presentation of the food, while some go to such lengths as indoor pyrotechnics, confetti guns, and laser-light shows. Others employ in-house artists to customize each catered event, from passing platters to plate presentations. Given the intense competition, caterers nowadays are prepared to do anything to keep the customer happy (and coming back for more).
RELATED: 10 Things You Need to Know When Starting a Home Business
Establishing Your Business Entity
Choosing the right business structure is a critical decision. Consult with professionals to determine if a sole proprietorship, limited liability company, or another entity suits your needs. Once decided, register for an Employer Identification Number (EIN) with the IRS.
Managing Finances: Separate Business and Personal Accounts
Maintain separate bank accounts for your business and personal finances. This practice not only simplifies tax preparation but also provides a clear overview of your profit and expenses.
Assessing Your Equipment Needs
Analyze your equipment inventory to identify any gaps. Consider investing in additional appliances like ovens or refrigerators if your menu includes baked goods or requires extra storage. Chafing dishes, Sterno, serving utensils, and dishes are essential for maintaining food quality at events.
Storage can be a challenge. Evaluate whether your storage space at home is sufficient or if renting a nearby storage unit is necessary to keep catering supplies organized and accessible.
Building Vendor Relationships
Forge relationships with wholesale food suppliers who can provide bulk ingredients at favorable prices. Consider sourcing from local farmers and small food producers if it aligns with your menu. Additionally, explore partnerships with rental vendors for linens, flatware, and plates to enhance your service offerings.
Marketing Your Catering Business
Effective marketing is key to attracting clients. Tailor your marketing strategy to your target demographic. Traditional methods like local advertisements might appeal to an older crowd, while tech-savvy customers may respond better to social media campaigns featuring high-quality photography.
A professional website is essential for online visibility, showcasing your menus, testimonials, photos, and pricing. Share your story and credentials, such as any relevant culinary education, to highlight what separates your catering business.
As with most businesses nowadays, looking at how your catering business can use the Web to market your business and generate more clients is important. Some catering businesses now offer online orders for entrees, sandwiches, salads, breakfast, beverages, and desserts, often with a minimum of 48 hours’ notice.
Staffing Your Events
As your catering business grows, consider hiring staff to ensure smooth operations, especially for larger events. Whether you need servers, bartenders, or kitchen assistants, having a reliable team is crucial to delivering exceptional service.
Collecting Reviews and Testimonials
Satisfied customers can be your greatest advocates. Encourage past clients to leave positive reviews and testimonials, which can significantly influence potential clients’ decisions. Utilize bookkeeping software to automate review requests after each successful event.
Celebrate Moments with Food
Starting a home-based catering business is a journey of challenges and rewards. As with any business, your success will be directly related to the soundness of planning and the working of that plan. Start small and keep it simple. Understand exactly what your client wants, and give him what he wants in the way of service that reflects upon the client in a complimentary manner.
Education plays a vital role in your success. While there is no requirement to get special education or training to become a successful caterer, taking some culinary institutes or vocational school courses can significantly help improve the quality of your food offerings. Consider enrolling in culinary entrepreneurship programs like Escoffier’s Online Food Entrepreneurship, which covers core culinary principles, marketing strategies, and business planning to equip you with the knowledge and skills needed for culinary entrepreneurship. You can also start out by working for one or more catering businesses to learn about the catering business and how the business works.
Launch your catering business today and celebrate life’s special moments through food. To take the next step in your culinary entrepreneurial journey, contact us and begin your program.
Additional Resources:
Associations:
- International Caterers Association (ICA), 91 Timberlane Drive Williamsville, NY 14221, tel: 877.422.4221 fax: 888.210.4634
- National Association of Catering Executives, 2500 Wilshire Blvd., Suite 603, Los Angeles, CA 90057 (213) 487-6223
- National Restaurant Association , 311 1st St., N.W., Washington, DC 20001 1-800-424-5156
Recommended Books on Catering Business:
- How to Start a Home-Based Catering Business, 6th: *Become the top caterer in your area *Organize menus for parties, corporate events, and weddings … caterer (Home-Based Business Series)
- Catering: A Guide to Managing a Successful Business Operation
- The Professional Caterer’s Handbook: How to Open and Operate a Financially Successful Catering Business (with CD-ROM)
- Catering Like a Pro: From Planning to Profit
- Off-Premise Catering Management
- Cooking Up a Business: Lessons from Food Lovers Who Turned Their Passion into a Career — and How You C an, Too
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