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How to Run a Catering Business: 8 Running a Catering Business Tips
Running a catering business requires next-level organization skills. You’ll be managing your staff, building or customizing menus for every occasion, and tracking expenses to make sure you’re staying profitable. And, catering includes the wild card of prepping, cooking, and serving in unfamiliar environments.
It can be a lot of fun, but catering is also a stressful line of work with tight timelines and once-in-a-lifetime events on the line. There’s a lot of moving pieces, a lot of expenses to control, and ever-changing variables based on event sizes, locations, and preferences. Plus, high volume cooking is a lot harder to do well than cooking plates to order. It takes great training, communication, and teamwork to cook 400 steaks to perfection, all to be served at a high-stakes, one-time event.
Catering also involves long-term client relationship management, because the interactions with customers go well beyond the length of one lunch or dinner service. Typically, caterers will work with customers for months leading up to an event, so ensuring they have a good experience from start to finish is critical in keeping their business for years to come.
We’ll cover everything that caterers need to know to run successful businesses in 2022 and beyond. New owners of catering businesses will learn the fundamentals, and seasoned caterers will come away with tips on how to grow their businesses sustainably.
8 Tips for Managing & Optimizing Key Catering Business Operations Costs
1. Find the Perfect Location for your Catering Business HQ
Catering businesses have a wide range of space needs. Caterers that stick to small events with under 50 guests typically only need a small office, a storage space for servingware and decor, a small prep kitchen for a couple of cooks, and maybe a small walk-in fridge and freezer, but many companies make do with a commercial freestanding fridge and freezer.
But for catering companies that do weddings, galas, retirement parties, engagements, corporate events, and award shows, their space needs will be much larger. They’ll still likely only need a small office, and maybe a tasting room, but they’ll also need a large prep kitchen where a dozen cooks can work, huge walk-in fridges and freezers, and a small warehouse for storing servingware and decor.
In either scenario, it can be hard to find the perfect location for a catering company. You’ll want it to be centrally located, since you’ll be serving all around your city and surrounding area. You’ll also need a van (or several) and a space that has a good loading dock.
Wherever you do end up choosing to make your catering HQ, be sure to review and negotiate your lease before you sign it. And know that the larger the space, the larger your variable overhead costs will be, including rent or a mortgage, utilities (like gas, water, and electric). Other overhead costs, like internet, insurance, and administrative and legal costs, won’t be space-specific, but can vary month to month, so it’s important to keep an eye on them and track any increases.
2. Secure Catering Licenses and Permits and Find a Lawyer
There are many types of permits to get for your catering business before you’re able to start taking bookings. You’ll likely need a caterer’s permit, a food handler’s permit, liquor license, employer identification number (EIN), and many others. Start these applications early, as they can take a long time to complete and longer to process. Consider also working with a lawyer if you encounter any complications throughout the permitting process.
3. Find and Train your Catering Team, and Keep them Engaged with Good Pay
Catering businesses need cater waiters, cooks, dishwashers, event managers, and administrative assistants to keep the food coming and keep customers happy. For better or worse, catering staff often have somewhat more flexible, unpredictable schedules than their peers working in restaurants, with more work in high seasons (the summer and the winter holidays), and less between January and May — so you may need to hire seasonally.
Labor cost is a sizable part of any catering business’s expenses, and it might fluctuate significantly in the high season compared to slower times, as well as when comparing events of different sizes. Through trial and error, find the perfect number of staff for each type of event you cater — having too many people on staff will lead to bloated labor costs and employees without much to do, and having too few may save you a few dollars but leads to chaos on the team and poorer service.
So much of a customer’s satisfaction with your services will come down to the work of your staff, which is why it’s so important to hire the best hospitality staff in your area, and train them and pay them well. Find room in your catering business budget to pay them a living wage or better, even if that’s way more than your local minimum wage plus tips. Offering benefits like health care, at least for full-time staff, also helps to attract the best talent.
To learn more about hospitality businesses going the extra mile to do right by their staff, watch our free video course on restaurant staffing.
4. Track Food Cost Percentage Often
Food cost percentage looks different in a catering business than in a restaurant, but it’s just as important a metric to keep an eye on.
Because of the pre-planned nature of catering, it’s a little easier to control your margins. Ideally, you’ll have a calendar booked months in advance, knowing how much revenue will be generated by each event and how much you’ll need to spend on inventory to provide those amazing culinary experiences. Make sure your catering menus are built with both profitability and flavor in mind.
Ideal catering food cost percentage for a restaurant is around 28-32%, but because of high-volume inventory order discounts and advance planning of each event, caterers should be able to get their food cost percentage down a bit lower than that.
If you notice your food cost percentage going up, thanks to rising costs of ingredients or vendor changes, it might be time to price your catering menu packages a little higher.
5. Market your Catering Business
Part of what makes catering so exciting is that every single event is a marketing opportunity. If your food is great and the service outstanding, every attendee of every event will be clamoring for your business card — which, by the way, you should always have on hand at events, and leave a little pile of them where guests can find them.
That being said, it’s still important to pursue a few other types of catering marketing initiatives to keep your business growing in your community and beyond. Catering business social media marketing is a great place to start: post photos and videos of your food and staff, and of the events that you cater, can help make your catering business niche look irresistible and draw in new business. Sending an email newsletter that sends out promotions and special menus to your past customers can also help grow your revenue.
6. Create a Catering HQ Layout that Works
Caterers have a much easier task when it comes to layout and design than their peers in restaurants do: since patrons will only ever see the front office and maybe a small tasting room, there’s no need to budget a ton of money on interior aesthetics beyond those two spaces.
But the layout of a catering prep kitchen, as well as the fridges and storage areas, must be thoroughly planned, tested, and improved once your cooks start spending their days working there. For example, if there aren’t enough counters, or freezer space, or fridge shelves that accommodate large containers and hotel pans, you’ll run into issues and cooks will have to waste time figuring out solutions. Ask your cooks how they’d improve the flow of the space and make improvements based on their suggestions.
7. Invest in Professional Services
Silverware rental companies, specialty ingredient purveyors, laundry services, social media marketing freelancers, accountants, and lawyers are all professional services that catering companies use regularly. Budget for these additional costs, knowing that some will be needed more frequently than others.
8. Stay Stocked with the Best Catering Equipment, Transportation, and Technology
Catering companies do most of their food prep at their headquarters, which are decked out like any professional kitchen with ovens, stoves, prep tables, fryers, microwaves, dry storage, fridges and freezers, and all the smallwares that cooks could possibly need. But then, they pack up all the food (and some equipment), transport, and unload at their event location, with cooks doing final prep and presentation work onsite. That means your business will need a dedicated van (or a fleet of them) to get everything from point A to point B without spills or drama.
Even with site visits, it can be hard to predict what equipment will be needed onsite and what will already be available. So that you’re not caught in a pinch, always make sure to have the following items in your van:
Folding prep tables
Extra cutting boards
Extra high-use smallwares (like scissors, microplane graters, tasting spoons)
And using a mobile point of sale can make beverage service at an event a lot easier, whether it’s a cash bar or an open bar. Running every drink order through the point of sale can reduce inventory errors and generate data that helps with accurate and profitable pricing of an open bar option.
How to Successfully Run a Catering Business With No Experience
Read industry articles, like this primer on how to open a catering business, and pursue free online courses, like this one on how to manage a food and beverage team.
Meet with local caterers or event planners and learn from their years of expertise. Every city and town is different, so events, venues, and customers will have nuances that you’ll want to know about. What kinds of events do they find most profitable? What venues are a nightmare to work with?
Shadow a catering business owner. Caterers have very varied jobs, with one day being full of client meetings and proposal preparation, and another day full of staff scheduling, and another spent in the prep kitchen with the cooks. If you’re able to, following a caterer around for a week will give you a solid glimpse into what it takes to do the job well.
Let your team teach you. As a first-time owner, you’ll be hiring people with much more experience than you, so let them show you the ropes, take their feedback with humility, and ask them to contribute ideas for everything from menus to staffing.
How Longtime Catering Business Owners Improve How They Run Their Business
Tips to Grow Sales and Improve Margins
Upsell customers with add-ons they can’t refuse. Prepare your pre-set menus, and add high-profit add-ons like homemade bread, an end-of-the-night nacho bar, or candy loot bags for kids.
Market your catering business. Always carry business cards at events, post regularly on your social media accounts (showing all the prep that goes into the event as well as the big, splashy images of the event itself), and send email newsletters to your customer base informing them about discounts, special dishes, new menus, and other business updates. Do whatever you can to stay on your customers’ minds.
Dig into your data and get picky about event types. Once you’ve been operating for a few months (or longer), look through your data, from your catering point of sale, your inventory system, and your P&L statements to track how your events perform and which types are the most lucrative. Then, pursue opportunities to do more of the events that work, and get picky about events that tend to cost you more than they’re worth.
Tips to Manage Costs While Increasing Revenue
Create event catering promotions for slow months. Don’t discount your services during busy months — you’ll already be booked and busy, so bring in as much revenue as you can in those hectic months. But use slower months, like January, March, April, and May, as opportunities to play with pricing and discounting in order to encourage your community to contract your services during these slow times.
Control alcohol shrinkage. Get bottle stoppers that automatically measure your bartenders’ pours. Especially at events with open bars, too-generous pours can very quickly eat into your profit margins — and lead to overserved and unruly guests.
Engineer every catering menu. When putting together catering menus for a client, have pre-made menus to start from that they can customize, instead of starting from scratch. And for each of these pre-made menus, ensure they’re very profitable to begin with — that means ensuring you can charge enough per plate to more than cover the cost of ingredients and labor that it’ll take to execute the menu, whether it’s for 50 people or 500.
Operating Costs Breakdown and Benchmarks for Successful Catering Businesses
It takes between $10,000 and $50,000 to start a catering business — much more if you’re looking to do very high-volume events right off the bat. Once you’re booked and you start staffing and catering events, there are many costs to keep track of and budget for, including:
Food and liquor cost
Equipment and transportation
Labor usually costs hospitality businesses around 30-35% of revenue, and hospitality utilities typically cost 5% of revenue, but it can be lower for catering businesses because they don’t need to account for powering a dining room in their space.
Food and liquor costs, location and transportation costs, professional services, and equipment costs can vary a lot depending on the size and type of events you cater, but the most important thing to keep an eye on is your overall profit margin. Are you making enough to cover your catering company costs? How much is left over in profit?
Catering company profit margins
Like other higher-margin hospitality businesses (like nightclubs and bars), catering businesses tend to bring in between 10-12% profit margins — much higher than restaurants, which hover around 3-5%.
How to Stay Up to Date on Catering Industry Trends
Get social. Follow catering companies in your city — it’s a great way to see how they’re responding to local and national trends, and to find opportunities for partnership.
Follow hashtags. On Instagram and TikTok, you can follow hashtags relevant to your segment of the catering business, like #weddingcatering, #eventcatering, #[your city]catering, #birthdaycatering, #valentinescatering, #weddingcaterer, and more.
Read hospitality publications, like On the Line, Catering Magazine, and CFE News.
Keep your eyes open when attending events in your city. Weddings and bar mitzvahs are joyous occasions, and they’re also a great place to get ideas for your business.
Make Every Occasion One to Remember
With a great team, menus that are as delicious as they are profitable, and your own style, brand, and presentation that set you apart from the pack, you can build a lucrative catering business.
Use the latest technology like the Toast Go 2 mobile POS system to help your catering business operate as smoothly as your chocolate fountain.
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