The Economics of Starting and Running a Catering Business

Eric Goldschein

Eric Goldschein

Eric Goldschein is a freelance journalist who covers entrepreneurship, small business trends, emerging technologies, culture and sports. He was previously the managing editor of SportsGrid.com, and has written for Business Insider, Trep Life, the Huffington Post and more.

You can contact him at ericgoldschein.com, or on Twitter at @ericgoldschein.
Eric Goldschein

If you’re interested in starting a catering business, you probably have your reasons. Maybe you’re an excellent cook; maybe you love throwing parties; maybe you’re interested in event planning and want to get the ball rolling by catering.

Or maybe you’re like Dannella Burnett, of Gainesville, Ga., who formed her catering business back in 2009, and your reason is simple and sweet.

“I figured if I could cook for other people and put food on their plates, I could put food on my family’s plate,” Burnett says of her decision to start Oakwood Occasions.

But as Burnett knew even in her nascent stages of the business, catering is about much more than putting food on plates. It’s about thinking your way through stressful situations, about planning for the unexpected, and most importantly, about running a business just like you would any other.

Here are some important matters to keep in mind when getting a catering business up and running.

You should have a business plan and access to capital

Burnett made the decision to start her business out of necessity, when her husband lost his job in the wake of the Great Recession. She had previously worked in food and retail management, and she fell back on that experience when it came time to find a new source of income.

“A woman at my church said, ‘Why don’t you reopen your catering business here at the church?’ I didn’t think you could do that, but we called the health department and had them do a site visit at the church kitchen. It was deemed sufficient for commercial use, so I had my church kitchen licensed as a catering commissary, and I launched the business with zero capital, zero plan. Nothing but me, myself, and I,” Burnett explains.

Burnett then found herself in business well before she expected to be. Despite making things work, she says luck took the place of capital and wouldn’t recommend that path to other future caterers.

“There are some things that I could look back on that I would say either by sheer doggedness or dumb luck, the next right thing did happen,” she says. “Was it more stressful because there wasn’t a plan at the beginning or there wasn’t capital? I think definitely.”

Access to capital is especially important, Burnett notes, for the catering industry: “Most small businesses fail because they don’t have the capital to get them through the ebbs and flows. And in something like the catering business, there should naturally be some ebb and flow, whether it’s the seasonality of the type of catering that you do, or the calendar—seasons and holidays.”

Speaking of which, in your business plan you should address what your niche within the catering business will be. Catering weddings is much different than doing it for professional or personal events, so plan accordingly.

Source your vendors for all your supplies

Once you decide on the type of catering you’ll be doing, look into sourcing all the supplies you need, including linens, utensils, china, even tables and chairs for some events, and of course the food.

When it comes to non-food items, Burnett suggests renting first, before buying things outright.

“At the beginning you can rent anything you might ever want or need,” she says. “And renting is great: You know what the cost will be and you don’t have the upfront cost of purchasing something.

“But at some point though you want to buy those things yourself, because you still can charge for them and basically you’re paying for the ownership of them. And they ultimately pay for themselves.”

Acquire all the necessary licenses and clearances for your kitchen

As with most industries involving food prep, you can’t just, well, do it. You need to obtain a business license from the state, as well as a food handling license. You also need to pass a county or state health inspection—a residential kitchen likely won’t cut it, so consider looking for a commercial kitchen that has already been approved.

There’s also worker’s compensation insurance and certain permits or licenses to work out of certain venues—the monthly or annual costs of which can cut into profit margins.  

If you’re unsure of what will be required, get in touch with your local Chamber of Commerce, Small Business Development Center, or the Small Business Administration to find out more.

Expect the unexpected—financially and mentally

You should have extra capital when you start out, and continue to budget wisely as you go, because you never know when something will go wrong in the catering industry.

Things break, so you have to replace them. Maybe you started off with china for 200 and now you only have china for 150 because they break,” says Burnett, listing the things that caught her off-guard when starting out. “Repairs to vehicles: catering can be hard on your vehicles, so you’ll need replacements to tires. The price of gas, when it went sky-high, it had an impact. Food was costing more. And people understood that food cost more to a certain extent, but people still had in their head that they need to do a lunch for $10 or $15 a person, and when the price of gas and food has gone up, it’s easy for that not to be profitable.”

But preparing for the unexpected is about more than budgeting. Most events are catered at a venue that can be 30 minutes, an hour, or even a few hours away from the kitchen. That can put you in a tight spot.

“The ability to be a MacGyver is a requirement. Every venue is different, and if you forget something, you’ve gotta figure out how to make it work,” Burnett says.

Prepare, outfit, and train your staff

It’s unlikely you can cater an event all by yourself, so a staff is a requirement. Hiring and training staff is something that came organically for Burnett, so whatever is best for your business is recommended here.

“At the first location, we brought on staff members one by one as we needed people. There was no real formal training from the beginning,” she says. “But when we moved into our new location, at the Hall County Government Center, we opened up a café, coffee shop, and expanded the catering business at the same time. Since we were going to have in-house staff as well as catering staff, we had to go through a much more extensive training period.”

Here’s another place where having capital at the start comes in handy: If you’re hiring and training staff before they actually work an event, you need to set aside training dollars.

Additionally, uniforms, including vectorized logos, can be “really cheap or really expensive,” in the words of Burnett.

“Hey, I want aprons with logos on them—getting that logo vectorized for $75-$80, then $5-$7 apiece depending on how big you want the logo. Then you have to buy the apron. If you need 20, 30, 40 of those, that adds up,” she says.  

Your best marketing opportunity is during other events you cater

When it comes to marketing and advertising your business, Burnett has one suggestion that trumps all the rest.

“When you’re putting food in somebody’s mouth, that’s the best time to find your next client,” she says. “It’s through the guests that are attending the events you’re catering for.”

Otherwise, it depends on what kind of catering you specialize in. If you focus on weddings, you’ll want to attend bridal shows—which involve bringing food samples and sometimes buying a booth. Corporate catering might involve more focus on LinkedIn advertising, where you can buy leads; you might also pay people to knock on doors and pass out fliers to bigger businesses.

“Really, it’s about networking. A lot of word of mouth, a lot of referrals,” she says. That’s where the putting food in someone’s mouth tactic comes in.  

Custom pricing gives your customers everything they need, nothing they don’t

Pricing your work depends greatly on where your business is located and what kind of catering you do. Many businesses create price tiers that provide a certain level of service and amenities for various amounts. Burnett never went down that route.

“I started off doing custom proposals for people, and I’ve stayed with them throughout these 9 years,” she says. “It takes a lot more time, but a lot of my proposals get accepted, rather than a package deal where it may or may not fit what someone is looking for. If they don’t need something, if it doesn’t pertain to their event, it’s not going into their pricing. If they need more, they pay for more; if they need less, they pay for less.

To get an idea of what costs what, Burnett says that her price per person has varied from $7-$8, for light appetizers for cocktail hour, up to $80 for filet and lobster.

“It varies because we do buffets, plated dinners, simple appetizers, or where we’ve just dropped off food and they’ve served it themselves—to very high-end menus with unique ingredients,” she explains.

***

Catering isn’t an easy business. Burnett says you need to “know what you’re getting into,” due to the physical and demanding nature of the work.

“You can be a great cook, and that doesn’t necessarily make you a great caterer,” she says.

But Burnett was able to build a massively successful business—so much so that she actually began tapering off of catering this year to focus more on event planning—off little more than an idea that was born in a church kitchen. So if you’ve got the will for catering, there’s undoubtedly a way.

Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved, or otherwise endorsed by any of these entities.
Eric Goldschein

Eric Goldschein

Eric Goldschein is a freelance journalist who covers entrepreneurship, small business trends, emerging technologies, culture and sports. He was previously the managing editor of SportsGrid.com, and has written for Business Insider, Trep Life, the Huffington Post and more.

You can contact him at ericgoldschein.com, or on Twitter at @ericgoldschein.
Eric Goldschein

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