Do you love quality food and have a passion for hospitality?
Then starting a home catering business could be a great career to pursue.
But have you considered the legal aspects that come with running a business?
This article gives a step-by-step guide to starting your own catering business from home and staying legally compliant with local regulations.
Why Start a Home-Based Catering Business
Starting a catering business from home has several advantages, including lower overhead costs, flexible hours, and the ability to control the quality of the food and service.
It also allows you to take personal care of your customers and build a loyal customer base — meanwhile fulfilling your passions for food and hospitality.
There are some drawbacks to consider, such as limited space for food preparation, zoning regulations, and potential challenges in scaling the business.
Additionally, building credibility and competing with larger, established catering companies can also be difficult.
10 Steps to Starting a Catering Business From Home
If you’ve contemplated the pros and cons of why you want to start a home-based catering business, let’s begin with writing a business plan.
1. Develop a Business Plan
Writing an elaborate business plan will be your main guide and reference to how you will run your business.
It draws out clear goals and presents a legitimate document that states you’re serious about your intentions.
Below, are key factors to include in your business plan.
To determine the target market for your catering business, you should first analyze your ideal customer. Consider their age, income, place of residence, and lifestyle.
Also, take a look at your competition and find out how you can make your business stand out from the rest.
You can use this information to create customer personas and develop a marketing strategy that speaks directly to your target audience.
Starting a catering business from home can involve a range of costs.
Some of the potential expenses may include:
- Obtaining necessary licenses and permits
- Purchasing kitchen equipment and supplies
- Building a website
- Marketing and advertising
A home-based catering business can cost anywhere between $10,000-$80,000 depending on the factors mentioned above and the overall scale of the business.
Menu and Drinks
When developing a menu, it is important to consider the target audience, the theme of the event, and dietary restrictions.
The menu should also include visually enticing and delicious food while considering the cost of ingredients and preparation time.
Additionally, some events require a full bar, while others may be dry events.
So beverages should complement the food and consider the guests’ preferences.
To determine the pricing structure — the minimum amount needed to cover costs and make a profit while remaining competitive should be at the forefront of the pricing strategy.
A catering company’s pricing strategy should also consider the cost of ingredients, equipment, and labor.
Moreover, the pricing structure can be based on a per-person or per-item rate ranging from $20 to $200 per guest.
Always do diligent research on your competition and standard pricing in your area to ensure your competitive prices.
Name of Business
Choosing a unique name is critical for a catering company because it helps build a brand identity and differentiates the company from the competition.
A name should be memorable, easy to spell, and relevant to the type of food or service offered. The name should also be able to be used as a domain name and on social media platforms.
Also, it’s best to ensure the name is not already trademarked by another business.
You can learn how to protect your chosen business name by registering it here.
Research the Home-Based Catering Business
If you plan on cooking all your home-cooked specialties and sending them off to events for your clients to enjoy — you may have to reconsider.
While some states allow operating out of your home kitchen, others may require a commercial kitchen or prohibit home-based food businesses altogether.
This is why It’s important to obtain any necessary licenses and permits, such as a food service establishment permit.
There can be restrictions on the size and efficiency of your kitchen as well — further complicating your eligibility to use a home-based kitchen.
Consulting with a lawyer or business advisor can help ensure that all legal requirements are met and that the business is set up for success from the start.
2. Decide on Your Business Entity
The next step in starting your catering business is to choose your business structure. This decision will determine your legal obligations and how you run your business.
In this section, you’ll find the main types of business structures catering businesses choose from, plus their advantages and disadvantages.
A sole proprietorship is a type of business entity where the owner is responsible for all aspects of the business and personally liable for its debts and obligations.
- Simple and inexpensive to set up and maintain
- Complete control over the business
- Direct access to profits
- Easy to dissolve or sell
- Unlimited personal liability
- Limited access to capital
- Difficult to transfer ownership
- Difficult to raise funds
- Limited growth potential
A sole proprietorship is a good choice for entrepreneurs who want to start a small, low-risk business with minimal upfront costs. However, it’s important to consider the potential risks and limitations of this entity before making a decision.
A general partnership is a type of business entity where two or more owners share the responsibilities and liabilities of running the business.
- Shared responsibility and workload
- Easy to set up and maintain
- Pooled resources to raise capital
- Simplified taxes
- Unlimited personal liability for all partners
- Profits must be shared among partners
- Difficulty in transferring ownership
- Potential for disagreements and conflicts among partners
A general partnership is designed for two or more people who want to start a business together and share the responsibilities and profits.
But much like a sole proprietorship, this form of partnership has potential risks and limitations, such as unlimited personal liability,
It is also advisable to have a written partnership agreement to clarify the responsibilities and expectations of each partner.
A limited partnership is a type of business in which one or more general partners manage the business and are personally liable for its debts — and one or more limited partners contribute capital but have limited liability.
- Limited liability for limited partners
- Attracting investors is easier due to limited liability
- Tax benefits for limited partners
- General partners can raise capital while retaining control
- General partners have unlimited personal liability
- Limited partners have limited control over the business
- More complex to set up and maintain
- Requires a written partnership agreement
A limited partnership is for those who need additional capital from investors but want to limit their personal liability.
However, there can be conflicts between partners that can lead to legal disputes.
Moreover, legal counsel should be sought before forming a limited partnership.
Limited Liability Company
A limited liability company (LLC) is a type of business entity where the owners have limited personal liability for the company’s debts and obligations.
- Limited personal liability for owners
- Flexible management structure
- Pass-through taxation (profits and losses are passed on to owners)
- No limit on the number of owners
- Fewer formalities and record-keeping requirements compared to corporations
- Can be more expensive to set up than a sole proprietorship or partnership
- Tax laws and regulations can be complex
- Some states have annual fees or franchise taxes for LLCs
- Limited life span if a member dies or leaves the company
An LLC is a good choice for businesses that want the liability protection of a corporation but the flexibility and simplicity of a partnership/ sole proprietorship. It’s important to carefully consider the tax implications and regulations in the state of operation before forming an LLC.
A corporation is a type of business entity that is legally separate from its owners and shareholders, providing limited liability protection.
- Limited personal liability for owners and shareholders
- Ability to raise capital through the sale of stock
- Perpetual existence, regardless of changes in ownership
- Enhanced credibility with customers and suppliers
- Tax benefits, including the deductibility of business expenses
- More complex and expensive to set up and maintain than other entity types
- Double taxation of profits (profits taxed at both the corporate and individual levels)
- More formalities and record-keeping requirements
- Potential for conflicts between management and shareholders
A corporation is for businesses that plan to raise capital through the sale of stock and have a long-term growth strategy.
However, it’s important to carefully consider the costs and formalities associated with forming and maintaining a corporation. Plus, the potential for conflicts between management and shareholders.
3. Register Your Business
Registering a business involves several steps, which vary depending on the type of entity and the state or country of operation.
Generally, the process involves choosing a business name, registering for a tax ID number such as the Employer Identification Number (EIN), obtaining any legal documents, and registering the business with a registered agent.
4. Obtain Necessary Licenses, Permits, and Qualifications
Next, you will need to obtain any necessary licenses, permits, and qualifications for starting a catering business.
Here are the main aspects to consider:
Licenses and Permits
- Research and obtain any required licenses and permits from the state or local government, such as a food service establishment permit or business license
- Check with the local zoning board to ensure that home-based catering business is allowed in the area
- Obtain any necessary tax ID numbers
Food Safety Qualifications
- Determine the necessary food safety qualifications required by the state or local government, such as a food handler permit or eTIPS certification
- Develop and implement a food safety plan that meets regulatory requirements and follows best practices
- Train employees in food safety practices and ensure that they follow the plan at all times
It’s important to thoroughly research and comply with all legal requirements to avoid fines, legal action, or damage to the business’s reputation.
5. Open a Business Bank Account
Opening a business account helps separate personal and business finances, streamline accounting, and build business credit.
To do this, you will need to select a bank or credit union, provide documentation such as a tax ID number and fill out the necessary paperwork.
A separate business account also contributes to a professional image — making tracking expenses and preparing taxes easier.
6. Get Business Insurance
Many liabilities can be involved when handling food and beverage if not done correctly. Business insurance covers liability claims, property damage, and other risks.
It can also protect your personal assets in the event of a lawsuit or litigation.
As mentioned earlier, consulting with a legal professional about the types of insurance you need will be best to keep you legally compliant.
From this, business insurance can provide you peace of mind and protect the business from financial loss.
7. Set Up Your Kitchen
If you’ve ensured your legal compliance with your kitchen regulations, let’s review how to set up your kitchen.
Here are the main steps to consider:
- Purchase or lease necessary equipment, such as ovens, stoves, refrigerators, and storage containers
- Ensure that the kitchen has proper ventilation, lighting, and plumbing
- Stock up on essential supplies, such as cooking utensils, dishware, and cleaning supplies
- Develop and implement a cleaning and sanitation plan to ensure food safety and maintain cleanliness
- Train employees in food safety practices and proper equipment use
- Regularly maintain and inspect equipment to ensure it’s functioning properly
A well-equipped and organized kitchen can increase efficiency and ultimately contribute to the success of the business. Making it critical to prioritize food safety and cleanliness in the kitchen to prevent contamination and ensure a sanitary environment.
8. Hire and Train Your Team
If you wish to hire a team and scale your business with the help of passionate employees — hiring and training a competent team is essential for the success of your catering business.
Here are the main steps to consider:
- Determine the roles and responsibilities needed for the business and create job descriptions
- Recruit and screen potential candidates, such as through job postings, referrals, or staffing agencies
- Conduct interviews and select the best candidates for each position
- Develop a training program to ensure that employees are knowledgeable and skilled in their respective roles
- Provide ongoing training and support to maintain employee satisfaction and ensure high-quality service
- Foster a positive work culture and encourage teamwork and collaboration
It will be hard to grow your business if you do not hire people who are capable and excited to come to work. Ensuring a pleasant work environment is paramount so your clients can benefit from a professional, friendly, and happy staff.
9. Choose Your Delivery System
From the kitchen to the customer, the speed and efficiency of your delivery system will play a big role in the quality of your service.
When it comes to fresh food, you want to deliver your goods as quickly as possible without compromising the aesthetic appeal of the dish.
That said, here are the main delivery options available in the market:
- Self-delivery: The business uses its vehicles or personnel to deliver the food
- Third-party delivery: The business partners with a third-party delivery service, such as Uber Eats, DoorDash, or Grubhub
- Pickup: The customer picks up the food directly from the business location
Whichever method you choose, the delivery method must be reliable and professional so that your reputation as a catering service won’t be tarnished.
10. Market Your Business
Marketing is essential for the success of any business, and the catering business is no exception.
Here are some effective ways to market a catering business:
- Optimize your website for search engines and ensure it’s mobile-friendly
- Use SEO or PPC advertising to increase online visibility and attract potential customers
- Create social media accounts and regularly post engaging content, such as food photos, menu updates, and customer reviews
- Provide free tastings or samples to potential customers and receive feedback
- Hire influencers or food bloggers to promote the business on social media
- Join exhibits, expos, or food festivals to showcase the business and network with potential customers and partners
- Offer discounts or promotions to first-time customers or referrals
- Partner with local businesses or charities to sponsor events or donate food
Marketing is an ongoing process that requires consistent effort and creativity. By implementing a mix of these strategies, a catering business can increase its visibility and attract new customers.
Fired Up to Start a Home-Based Catering Business?
If you love food and have a passion for hospitality, starting a home-based business can be a fun and lucrative venture.
It can take a lot of preparation and execution to make things work. Plus, it can be a headache to maintain legal compliance and tax implications.
With doola, we take care of your finances and keep you organized so you can focus on creating delicious dishes and growing your business.
To ensure that the financial aspects of the business are taken care of, contact us today to get a free consultation for our bookkeeping services.
Is catering business from home profitable?
Starting a catering business from home has the potential to become a lucrative business venture.
How much does it cost to start a catering business from home?
The initial investment to start a catering business from home can cost between $10,000- $50,000 depending on quality, number of staff, and overall business size.
What do you need to start a catering business from home?
Depending on your state, the licenses and permits you need will vary. However, setting up a kitchen and delivery system is essential.