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Starting a Successful Catering Business

Introduction

Starting your own catering business can be both financially rewarding and fun. Whether you cater events on a full-time or a part-time basis, the opportunities are excellent. Each catered event is a new experience and challenge with a new group of people. With the rewards and fun come demanding work, for which you will need stamina and the ability to work under pressure.

Getting a License and Permit

No matter where you decide to open your catering business, you will need to obtain the proper and required license and permit. Bear in mind that licensing requirements vary from place to place, so before you proceed with your catering business plan, do your homework and conduct research on what you need to do in order to obtain all the necessary licenses and permits.

In most, if not all, cases, specific laws dictate what professional caterers must do to meet requirements for these licenses and permits. For example, depending on your geographic location, the local Health Board provides guidelines for the distribution and sale of food products to ensure the safe preparation, handling, as well as protecting the safety and well being of the public.

Getting a license to operate a catering business will more than likely include a physical inspection of your company to ensure that it meets all mandated food sanitation requirements. After your business has been approved to receive the proper business license, the local Health Department will conduct regular inspections of your business. These inspections are required to insure full compliance with food sanitation rules developed to protect the public from food borne illness, for example. Unfortunately, outbreaks of food borne illness have been as a result of such things as poor hygiene by employees and others, inadequate cooking, and improper cooling and storage of food.

In terms of the required permits, your business will likely need to get one for food service as well as a food handler's permit for you and your employees. Some cities may stipulate that your private kitchen can't be used for commercial food preparation. If that is the case, you may also need to find or build other facilities.

Location of a Catering Business

In many places, local law requires that the food operation area be separate from the kitchen facility of your home. The local Health Department, or a similar government agency, will inspect the area that you intend to use for food operation before they will issue a license. Plans and specifications for construction or remodeling of an area must be submitted to the Health Department for review. Complete partitioning and solid, self-closing doors must separate the food operation area from your home kitchen. There must be separate sinks for food, utensil washing and cleaning. There also must be a separate sink to be used only for hand washing. Water and sewage supplies and plumbing systems must be approved. Be sure the equipment and food-contact surfaces meet your local Board of Health Department’s regulations.

Location of a Home-Based Bakery

Regardless of where you decide to locate your business, your local governing body more than likely has the authority to see that clean and wholesome bakery products, such as cakes, breads and cookies, are prepared under proper conditions. Check to see if your business requires a license or not for a home-based bakery. If it does, the local Health Department, or one of its affiliated agencies, will have to inspect the facility that you intend to use. A separate kitchen is not required, but the products and ingredients must be kept separate from those used by your family. Also, the local governmental agency may require the formulations (recipes) of the products that you intend to prepare as well, as flow processes for these products. To insure that good manufacturing practices (GMP) are used, all products must undergo basic laboratory testing to make sure that they are not adulterated with bacteria that cause foodborne illness.

If the products will be sold to retail outlets, they must be labeled. The label must include: 1) name of the product; 2) net weight of the product; 3) name and address of the manufacturer and 4) a list of the ingredients in descending order by weight. All packaging used for the products must be made of food grade sources, as recognized by the governing food and drug administration agency as well as other government entities. Be sure to conduct due diligence and find out which agencies have authority over businesses such as your, and inquire about mandates and other requirements specific to running such operations.

Determining Your Product and Market

The development of a business plan will aid you in planning a successful business. Prior to starting a catering business, you need to determine your type of businessãi.e., cakes, receptions, seated dinners, box lunches, picnics, hors d¼oeuvres, or dessert courseãand the type of food you will serve (primarily convenience or "from scratch"). Analyze your market. Ask yourself the following questions to see if your business venture will satisfy at least one of the following fundamental elements of success. If not, you probably do not have a viable business idea.

The questions are:

  • Will the business serve a presently unserved need?
  • Will the business serve an existing market in which demand exceeds supply?
  • Can the business effectively compete with existing businesses because of some "competitive advantage?"

Decide whom you will target as customers. Who is your competition? What are their strengths and weaknesses? Where will you get supplies? Decide how you will promote your business. Will you need to employ staff to help with production, service, and cleanup? What other skills do you need to make your business successful? For additional information on developing a business plan, contact your local governmental agency that is responsible for providing this, and similar documents, to small business owners, including those who are starting a catering business.

Start-Up Costs

You may choose to start your catering business by renting items to keep initial costs to a minimum. You may rent the use of kitchen facilities, utensils, tables, tablecloths, serving equipment and other items. This will allow you to: 1) Build a reputation; 2) develop some capital for investment and expansion and 3) evaluate how much time and money you want to invest and the impact that this business will have on your family.

Developing a Creative Menu for Special Events

Factors affecting menu planning include the type of event, time of event, number of people to be served, available equipment, number of food preparers and servers and the amount of money to be spent.

The menu needs to include a variety of foods that are acceptable to the customer and the occasion. Be able to suggest menus that show a balance in color, texture, shape, sizes, flavor, cooking methods and cost. Plan to include nutritious foods from each of the food groups, including:

  • Meat, poultry, fish, dried beans, eggs and nuts;
  • Bread, cereal, rice and pasta;
  • Vegetables;
  • Fruits;
  • Milk, yogurt and cheese.

Plan for eye appeal by using at least four colorful foods on each menu or food tray. Plan for contrast in texture and flavor. Contrast crisp foods with soft, creamy foods. Use strong and mild flavored foods together. Balance light and heavy foods. Use foods that complement each other.

As a caterer, you will need to decide whether you will make all foods "from scratch," or purchase some convenience foods. If you make all foods, consider your skills, equipment and time as you plan menus. Also, it is important to prepare a quality product of standard consistency. Develop a quality standard for each item. Use "high-tech" equipment designed to produce a consistent product. After considering skills and equipment, compare the cost of caterer-prepared items with purchase costs. Evaluate for cost savings and quality consistency. Do this for each item offered before determining a pricing structure.

Develop an information packet that includes sample menus and prices, other services you provide, and past events you have catered. Develop a portfolio of pictures that shows how food was presented at these events.

Every caterer needs to develop a contract to operate in a professional, business manner. Write the contract in simple language that both parties can understand and state the terms of the agreement. Have an attorney review the contract form. Include the following items in the contract, as applicable. These are:

  • Names, addresses and telephone numbers of parties involved (buyer and seller);
  • Date of the agreement and date of the event;
  • Time of event;
  • Location of event;
  • Room set-up, decorations, tablecloths, etc., to be used;
  • Type of menu;
  • Estimated and guaranteed attendance;
  • Service arrangements;
  • Duration of activity;
  • Entertainment;
  • Pricing arrangements and potential price increases;
  • Deposit required (25, 30, or 50 percent of cost when the contract is signed);
  • Discount (if any) for full payment at the time contract is signed;
  • Cancellation provisions specifying cases of cancellation because of illness, broken engagement or death. The contract needs to specify how much of the deposit will be retained due to cancellation.
  • Applicable taxes;
  • Include space for signatures at the bottom of the contract form.

Carefully consider contract terms, write them in simple language, and print them in a size that is easy-to-read. This is to insure that everyone understands the terms of the contract.

Insurance

Insurance is a necessary expense. This includes product and personal liability, as well as coverage on the space used for the business, equipment, vehicle used for the business, and worker's compensation for any employees. Insurance protects you from the unexpected. For more information on insurance issues, can contact your local insurance agent.

Pricing for Profit

To operate a profitable catering business, you need to decide on a price that is appropriate for the services rendered. Determining the costs of catering an event is the most important part of covering your expenses and earning profits. Caterers price their services using different methods. The pricing formula that covers your costs and provides a profit is as follows:

Materials + Overhead + Labor + Profit = Price

Materials include the costs of the food or beverage items. Also, include any shipping and handling costs incurred to acquire these materials.

Overhead costs are the variable and fixed expenses that must be covered to stay in business. Variable costs are those expenses that fluctuate including vehicle expenses, rental expenses, utility bills and supplies. Fixed costs include the purchase of equipment, service ware, marketing and advertising, and insurance. After overhead costs are determined, the total overhead costs are divided among the total number of catering jobs expected.

Labor costs include the costs of food preparation and service. Also included are relevant taxes , vacation time, retirement and other benefits such as health or life insurance. To determine labor costs per hour, keep a time log. When placing a value on your time, consider the following: 1) Your skill and reputation; 2) wages paid by employers for similar skills and 3) where you live. Other pricing factors include image, inflation, supply and demand, and competition.

Profit is a desired percentage added to your total costs. You will need to determine the percentage of profit added to each menu item or type of event.

Determining a price is not easy. It is as much an "art" as it is a "science." There is no one exact price. Base your price on the type of event being catered, special services offered and your competition. When considering your competition, your three pricing choices are to: 1) Charge the same as your competition; 2) charge more than your competition or 3) charge less than your competition. It is important to cover all your costs if you want to stay in business. There are computer programs available to help you price foods and keep financial data for decision-making.

Business Record Keeping

Record keeping is not difficult, but it is important and can be time-consuming. You need to develop a system that helps you keep track of income, expenses, and profit or loss to determine business growth and for tax purposes. Contact a local accountant for assistance in setting up your record keeping system to save time and money later. Additional information on record keeping and taxes can be obtain from your local library, bookstore, the appropriate governmental agencies, including one that assists local small businesses.

Food Safety

To be successful in the catering business, one must produce delicious food that is safe and wholesome. The production of safe foods is your responsibility. Time and temperature abuse of foods contaminated with foodborne pathogens, such as Salmonella, Campylobacter and Escherichia coli O157:H7, will certainly lead to a foodborne outbreak that would likely destroy your reputation and business. Foodborne illness can be avoided if you and your employees follow safe food handling practices.

  • Purchase high-quality foods from a reliable vendor. The food should be in good condition with the packaging intact, fresh (not beyond expiration date), and at the proper temperature.
  • Store potentially hazardous foods, such as meat, poultry, eggs, milk and fish, immediately in the refrigerator (33 to 40°F) or in the freezer (-10 to 0°F). Dry staples should be stored at 50 to 70°F. Practice First-in-First-Out (FIFO) to insure safety and quality of your menu items.
  • Ideally, frozen foods should be thawed in the refrigerator 18 to 24 hours prior to preparation. However, thawing under cold running water (<70°F), in the microwave, or extending the cooking time are all acceptable methods for thawing food. If the cook time is extended, be sure that the recommended internal cook temperature for the food is reached.
  • Cook food thoroughly to the recommended internal temperature for the appropriate amount of time. Meats (including ground beef), fish, shell eggs, and pork should be cooked to 155°F for a minimum of 15 seconds. Poultry should be cooked to 165°F for at least 15 seconds. Cooking times and temperatures for beef roasts will depend upon roast weight and oven type. Use a meat thermometer to measure internal cook temperatures.
  • In the catering business, large quantities of food are generally prepared in a central kitchen and distributed to clients. Proper cooling and hot-holding are critical for preventing the growth of possible foodborne pathogens. Hot food may be prepared and distributed in temperature-holding equipment to the client or the food may need to be cooled below 41°F, distributed cold, and reheated. To cool food properly, portion the food in clean, sanitized shallow containers and place in the refrigerator immediately. Make sure the food is covered, dated, and reaches a temperature less than 41°F within a 4-hour period. Also, food may be cooled rapidly by placing on a bed of ice and stirring the food every 15 minutes.
  • Hot food for distribution and holding should be held at a minimum temperature of 140°F. Make sure the hot-holding equipment is set to maintain the temperature of the food above 140°F. If the temperature of the food should drop in the danger zone (41 to 140°F) for 2 or more hours, discard. Placing cold food dishes on beds of ice should hold the food below 41°F.
  •  REMEMBER: Keep hot foods "HOT" and cold foods "COLD." Reheat all potentially hazardous foods including leftovers to 165°F. Gravy should be heated to a boil (212°F). Discard leftovers stored in the refrigerator beyond 3 days (Gravy 2 days). Leftovers stored in the freezer should be consumed within 4 months.
  • Practice good personal hygiene when preparing and handling food. Wash hands before food preparation, after handling raw foods, after using the restroom or at any time the hands become soiled. Gloves may be worn when handling and preparing food. However, gloves can become soiled as easily as hands and should be changed often.
  • Take measures to prevent cross-contamination of food.
    • Clean and sanitize food contact surfaces such as counter tops, cutting boards, equipment and utensils. One tablespoon of bleach per gallon of water is an effective sanitizing agent.
    • Wash fresh fruit and vegetables thoroughly under cold running water. In refrigerator storage, make sure fresh fruits and vegetables are wrapped or stored in containers separately from raw meats.
    • Wear clean clothes and aprons when preparing food.
    • Do not use the same towel to wipe food contact surfaces that you use for wiping hands.
    • Clean storage and kitchen areas regularly.
    • Practice good housekeeping.
    • Implement a pest control program for eliminating the spread of disease.

Provide safe food for your clients by following and practicing food safety guidelines. Make sure that you and your employees are current with local and other regulatory requirements for food service establishments. This way you can rest assured that the food you provide to your clients is safe and wholesome.