How to Start a Catering Business: From Licensing to Delivery Logistics

Do you dream of running your own catering business? Catering is a $14.4-billion industry, and with lower startup costs than a restaurant, it’s a viable option for aspiring food entrepreneurs. Whether you decide to go all-in with a full-time catering service or test things out with with a part-time operation, there are steps you need to take before you can open for business.

In this guide we’ll cover everything you need to get started, from business basics through menu planning to the often-overlooked details of delivery logistics.

Start with the basics

All new business owners need to go through the same basic steps at the start. Basic business planning advice that applies to any business is easy to find online or though local business orgnisations – we’ll try to focus on elements that are specific to catering businesses.

1. Choose a name and write a business plan

Before you do anything else, sit down and come up with a business name for your catering company. Don’t let this step be an afterthought. 

Your company name will shape your image, so make sure that it’s:

• Memorable
• Evocative
• Easy to spell

Keep it short and simple. A name like “Fork and Knife Catering” is easy to remember. “Seasons of Flavor Catering and Culinary Creations”? Not so much.

Once you have a name, start working on your business plan. The Small Business Administration (SBA) has a few excellent plan examples you can use as inspiration. 

2. Understand your costs and whether you need financing

Startup costs for caterers can vary widely, depending on what types of events you want to focus on, whether you’re running a home-based catering business, your target market, and other factors.

But generally, the catering industry has lower startup costs compared to the restaurant industry or even a food truck operation. According to Entrepreneur magazine, initial costs can range from $10,000 - $50,000, with $30,000 being the average.

Expect to spend the bulk of your upfront investment on:

• Commercial kitchen space. You’ll need access to a certified kitchen for food preparation.
• Equipment, like ovens, refrigerators, transport containers, serving utensils, and more.
• Furniture, like tables, chairs, and possibly even decor.
• Licenses and permits to operate your business legally. Depending on what you offer, you may also need to obtain a liquor license.
• Business insurance, particularly liability coverage, to protect your catering operation if there’s an accident.
• A company vehicle, if you don’t have one already.

Remember that things like equipment, furniture, vehicles, and even kitchen space can be rented or leased. It’s worth spending time to calculate the financial implications of owning vs renting, especially when you’re just starting out.

Your financing options include:

• Small business loans, like SBA-backed loans 
• Grants
• Investors

Understanding your initial startup costs is crucial. Take the time to map out all of the equipment you’ll need and research costs to get an accurate estimate of your capital needs. 

3. Choose an entity type and register your business 

The business structure you choose will affect your liability and how you file taxes with the IRS. You have quite a few options here, each offering advantages and drawbacks:

• Sole proprietorship: Does not require formal registration, but you are personally responsible for all liabilities as a sole proprietor. 
• Limited liability company (LLC): Provides some liability protection for owners, serves as a separate legal entity, and is typically taxed as a sole proprietorship. However, there are yearly administrative costs and personal tax liabilities to consider.
• Corporations (C-corp): Taxed separately from owners and provides limited liability to owners. Raising capital is easy through the sale of stock, but double taxation is a concern.
• S corps: Provides limited liability to owners, avoids double taxation, and profits are only taxed once. Capital can be raised through the sale of stock. However, this entity can be costly to form, and stockholders are limited to residents or citizens of the United States.
• Partnerships: Provides liability protection, and profits are only taxed once. However, partners are jointly and individually liable for each other’s actions.

Some caterers start out as sole proprietors or partnerships and then evolve into an LLC or corporation as they grow.

Not sure which business entity type is right for you? Consult with a business lawyer. 

Registering a catering business

Selecting an entity type is the first step. Unless you plan to operate as a sole proprietor, you will also need to register as a business. Each country has its own systems, but in the United States you will need to:

• Register your business with the Secretary of State.
• Apply for your employer identification number (EIN) with the IRS.

Your EIN is your business’s tax ID, but aside from managing your taxes, you’ll also need it to:

• Hire employees
• Operate your business legally if you have a partnership or corporation
• Pay excise and sales taxes

Applying for an EIN is simple, but make sure you register your business first. 

4. Get all necessary licensing and insurance

Most businesses need some form of licensing and insurance to operate. Catering is no exception.

You may need:

• A business license issued by your state or local municipality.
• Health permits and food handler permits, depending on where you plan to prepare your food, and if you’re transporting it.
• Liability insurance to protect against financial losses if an accident causes injuries or property damage.
• Workers’ compensation insurance, if you plan to hire staff. 

Licensing and insurance requirements for a food business vary from state to state, so check with your local health department and Secretary of State to learn more. 

5. Choose your pricing model

Most catering services use one or a combination of pricing models:

• Per-person. For example, $50/head for a plated meal or $35/head for a buffet.
• Tiered. Different levels or packages of services are offered at various price points. A basic tier, for example, could include a basic menu, whereas the top tier might have a 4-course tasting menu and a full bar. 
• À la carte. Allows customers to customize their menu items and services.
• Fixed-price menu items. Ideal for customers who want a straightforward selection process.

When setting your pricing, consider what types of events you will focus on. Clients booking corporate lunches, for example, are typically looking for efficient service and simpler menus. Wedding clients, on the other hand, have higher expectations and budgets, which means you can set premium prices.

💡 Don’t forget to factor in these costs:

• Delivery fees
• The cost of your insurance and liability coverage
• Cancellation and change policies

6. Create your marketing strategy

If you want to run a successful catering business, you need a solid marketing plan that includes:

• Word-of-mouth
• Referral strategies
• Social media marketing

Marketing plans can be highly complex with multiple moving parts. If you’re looking for more in-depth guidance, Perfect Venue has an excellent guide on effective strategies for catering companies that you can use to expand your reach.

7. Have a plan for hiring and training staff

You’ll need employees to cater your events. Consider:

• How many staff you’ll need to start. You may only need one or two employees to get the ball rolling.
• Training costs. If you want to prepare employees before you start catering events, you’ll need to set aside a training budget. Topics like food safety and food handling are essential to ensure you meet local requirements and keep your customers safe.
• Uniform costs. These can add up if you’re hiring multiple people.

It may be tempting to skip training at the start, but it will set your business up for success and help you create a blueprint for future hiring policies. 

Beyond the catering business basics: Focus on the food

With the basics out of the way, you can start focusing on the fun stuff: the food. You may already have some ideas in mind, but before you dive in, make sure that you take the time to do the following:

1. Market research

We’re going to assume that you’ve already done some research and know there’s enough demand for another food service business in your area.

But demand research isn’t the only thing you need to focus on. You also need to consider your competitors.

Create a spreadsheet detailing each competitor’s:

• Name
• Cuisine type
• Pricing
• Demographic 
• Size

If most of the competition is focused on corporate lunches (sandwiches, salads, etc.) or Southern-inspired dishes, offering vegan, BBQ, or Italian cuisine can help you stand out in the crowd.

Before you go all-in on a cuisine, use social media, surveys, and conversations with locals to determine whether there’s demand for whatever cuisine you have in mind.

2. Choose a niche

What kind of market do you want to work in? Do you feel more comfortable doing:

• Corporate events?
• Birthday parties?
• Weddings?
• Product launches?

Choose a niche that fits your passion and the type of catering you’d like to offer. If you prefer casual buffet-style events without lots of pressure, for example, don’t focus on formal weddings.

When weighing your options, consider profitability and whether it would align with your lifestyle.

For example, weddings and upscale events tend to be more lucrative than meal delivery or corporate lunches, but those higher profit margins may come at the expense of weekends, long hours, and tons of coordination.

Be honest and choose a niche that will allow you to do what you love while remaining profitable and maintaining the lifestyle you prefer.

3. Draft a menu and test your creations

Once you know what types of food you want to prepare and the demographic you want to focus on, you can start drafting a menu.

Start with 3-5 core dishes that you know you can make consistently well, in bulk, and with great presentation. Then, build the rest of your menu around these dishes.

Don’t forget to test your food. Recruit family and friends to sample your menu and give detailed feedback on the taste, price, and visual appeal.

Build an efficient delivery and logistics operation

Even if you offer on-site catering, you still want to give potential customers the option to have their event catered at a venue of their choosing.

Careful coordination and proper delivery route planning will be essential if you don’t want your food quality and presentation to suffer.

Here’s what to focus on:

1. Select a service delivery area

How large an area can you realistically serve without compromising quality and freshness? Without specialized transport equipment, it may be challenging to transport hot food more than 30-45 minutes before quality starts to diminish.

When setting your delivery area, focus on travel time and not miles. Why? Because in busy urban or suburban areas, driving 10-20 miles might take an hour with traffic. 

Many caterers use a 30-45-minute radius as their standard delivery area.

For large events and weddings, you might consider offering extended service with added travel fees. 

2. Choose your delivery methods and equipment

Delivery gives your catering business more options to generate revenue, but it’s not without challenges. To preserve the quality and flavor of your food, you need:

• The right equipment. Consider refrigeration options for transporting cold items or using a temperature-controlled vehicle for deliveries. 
• The right packaging. Insulated containers, aluminum pans, and food-grade plastic containers can help maintain food quality during transit.
• The right staff. Quick and efficient delivery and setup services can make all the difference in preserving freshness.

3. Set your timing and scheduling for deliveries

Timing and scheduling will be critical for your business. Food must arrive fresh and safe, but most importantly, on time.

To make events as smooth and seamless as possible, make sure that you establish:

• Lead time requirements for orders
• Same-day or rush order policies
• Delivery windows for each order
• Advance booking recommendations that adjust based on whether it’s peak or off-season
• Communication policies with clients

Setting lead time requirements will ensure your staff has enough time to prepare and deliver the food. If you want to accommodate last-minute or rush orders, put a premium price on this service to account for the additional work and effort involved.

As for the timing, you can set the timeline on an event-by-event basis, or you can build a standard timeline.

For example, let’s say a standard event (corporate lunch, private party, etc.) will start serving at 12 PM. Your timeline may look like this:

• 7-10 AM: Prepping, packing, and labeling.
• 10:00 AM: Load vans. 
• 10:15 AM: Depart for delivery.
• 11:30 AM: Arrive on-site.
• 11:45 AM: Set up on site.
• 12 PM: Serve guests.
• 1:30 PM: Clean up and take down.
• 2:30 PM: Load equipment back into vans for transport back.

Weddings and large events will need more setup time. The long window for transport (between 10:15 AM and 11:30 AM) is generous but will account for traffic. You can reduce this time and adjust your prepping and loading times accordingly. 

Be sure to clearly communicate delivery windows with clients to keep them in the loop and set realistic expectations. 

4. Focus on route planning to improve efficiency

As your catering business grows, you may need to manage multiple events in a single day. If you focus on the business market, for example, you could be catering corporate breakfasts in the morning, sandwich platters at lunchtime, and cocktail events in the evening. 

To manage multiple jobs and clients efficiently, good systems are essential — and route planning software can be your best friend. Delivery software like Routific makes it easy to automatically plan efficient multi-stop routes, factoring in traffic patterns and peak congestion times. It streamlines the entire process so you can sure of delivering food on time and preserving its quality. 

When planning routes, consider:

• Event start times.
• Time-sensitive orders that need to be prioritized.
• Coordinating hot and cold item deliveries.
• Whether you’ll need to come back to pick up serving equipment after the event.

Don’t forget to factor in vehicle capacity, overlapping events, and equipment distribution across your delivery points.

In other words, make sure your fleet can handle your deliveries and you’re not spreading your staff and equipment too thin.

Have a plan to make real-time adjustments

The unexpected can and will happen in the catering business. Route planning software and other technology solutions can help you make adjustments in real-time to stay on track.

Consider:

• Using GPS and traffic monitoring systems to keep an eye on your deliveries.
• Establishing communication policies for route changes to avoid confusion and delays.
• Building flexibility into your delivery days to accommodate last-minute requests.

5. Expand your delivery zone slowly over time

You have a proven menu, invested in equipment, and have standard operating procedures for your catering business. At this stage, you might be thinking about expansion.

It may be tempting to rush into a huge geographic area, but be conservative about your expansion.

Start with your core profitable zone and gradually expand as you add new vehicles to your fleet and hire more staff. 

Each time you consider expanding, analyze the area to gauge demand and profitability. Don’t forget to adjust your fees for long-distance events.

The takeaway

Starting a catering business can be rewarding, fun, and lucrative. But like with any other business venture, you need a solid plan. Follow the steps in this guide and leverage technology to build and scale your catering company over time.