chefs at a new catering business looking over budget sheet

How to Start a Catering Business & Keep Your Costs Down

Starting a catering business can be very intriguing because it’s known to have a much smaller overhead than owning a restaurant. However, as with any business, it’s easy for your costs to get out of hand. And when your costs start to spiral, you could end up on the path to closing your brand new business. In this post, we’ll show you how to start a catering business and execute successful event planning, while still keeping your costs down.

Wondering how to start a catering business? First, consider your costs.

Startup Costs

One of the biggest reasons that new catering companies fail is because they don’t consider their total startup costs.  The cost of starting a catering business can depend on a few factors.

1. How big should you be?

Consider the size of the catering business you want to start compared to the amount of capital you have. Remember, there’s no shame in starting out small and growing your business. Starting out small means you can live up to the promises you make your clients at each stage of growth and scale intelligently.

2. What services will you offer?

Catering is more than just providing food, it’s also how it’s presented. Will your catering services be only for buffets? Will you plate the food and serve it to your guests? Depending on what you choose, can also determine the amount of staff you need. If you keep the big picture in mind during your startup phase, then you’ll be successful in the long run.

Labor Costs

Labor costs need constant attention and balancing. It’s not easy having enough staff for a big event while keeping your costs down. Having too small of a staff on hand can hinder the guest experience, while having too much staff can hinder your overall bottom line.

Most successful catering businesses keep their labor costs within 16 to 17 percent of their gross sales. Easier said than done? Controlling your labor cost is all about balance.

1. Control your turnover.

A CAP study finds that replacing a past employee with a new hire costs more than hanging onto one. For high-turnover, low-paying jobs earning under $30,000 a year, you’ll pay an additional 16 percent of what the original employee would have made. For example, the cost to replace a $10/hour retail employee would be $3,328. And the replacement costs only go up as the salary does!

2. Be smarter about scheduling.

The days of spreadsheets and stamping timecards is over. By using project management software to keep track of your scheduling and individual events, you’ll keep the right amount of people on hand and avoid unnecessary overlap.

3. Improve training.

Better employees mean less turnover and fewer hands needed on deck. It’s on you to set your employees up for success by offering the best training possible. If you’re having trouble with your training sessions, gather feedback from some of your more senior team members on what you could improve.

4. Analyze your compensation.

Like we said, hanging onto an employee is cheaper than searching for someone new and bringing them on. So instead of the extra 16 percent you’re going to spend on recruiting, why not take 5 percent of that and offer a high-performing employee a bonus or raise?

Food Costs

Food costs should be a big percentage of your total gross sales. As a catering business, it looks bad to show up to an event without having enough food for everyone. At what point though, do you consider the amount of food you throw away? Throwing away food is basically throwing away money in your pocket. Unlike restaurants, caterers get the advantage of getting a head count before an event. However, what if your guests think your portions are too small or you get a few party crashers?

1. Use an inventory management system

Every entrée begins at the base level with its ingredients. If you eyeball everything you need for each dish, you will either go over or go under the amount you need. Start by making sure you have a clear guest count from your client before the event. If they’re unsure, then don’t place your ingredient order. (Hint: Using a catering calculator can go a long way in keeping tracks of ingredients and costs.)

2. Control your portion sizes

Multiple dishes with smaller portions are always a cost saver over having a buffet. It takes longer to serve; therefore, people get fuller faster.  If you or your client is dead set on serving food buffet-style, don’t put all your food out at once. Most likely, you will either get food wasted on the buffet table or on people’s plates because their eyes were bigger than their stomach. Any food you don’t use is then stored for future use.

3. Turn leftovers into lead generation

Instead of letting your leftovers go to waste, use them to your advantage. Find prospective corporate clients in your area and offer a free lunch using whatever extra food you have from an event. It’s a great way to show them what your team can do with leftovers and let your flavors make the pitch. Or, win more clients by letting them know you’ll use donate leftovers to a local cause of their choosing. Either way, showing a commitment to reducing waste is one of the catering trends that appeal to clients and keep costs down.
tomatoes and mushrooms on cutting board next to a knife

Equipment Costs

You must have equipment to facilitate your services as a caterer. But from renting a commercial kitchen to the delivery vehicle and equipment repairs, those equipment costs can add up quickly.

If you’re fresh to the catering industry, you don’t need to go out and buy everything brand new. Just like the restaurant industry, it can be a good idea to start your venture off with used equipment — especially energy-efficient equipment. The price tag will be higher for energy efficiency, but it will pay off in the long run in lower utility bills. Maintenance and repair costs are also something you’ll want to watch for, so don’t be afraid to shop around and get multiple opinions.

Marketing Costs

Every good business needs great marketing to survive. Sure, you might provide the best catering services in the industry, but if no one knows who you are, then you won’t have any new clients. These days, word of mouth can only get you so far. With people spending hours of their days online and in front of various devices, you need the funds to embrace a strong digital presence. It doesn’t have to be expensive if done right.

1. Make the most of social media marketing.

Platforms like Facebook and Twitter are great for running a combination of paid ads for just a few dollars a day. By following social media best practices, you’ll boost engagement and bring in a whole new audience that you wouldn’t have reached otherwise. Plus, as you grow your following, you’ll be able to rely more on organic posts instead of spending loads on paid advertising.

2. Create a visually stimulating online presence.

You need to build an online presence that stands out and showcases how your catering business elevates events. There are plenty of ways to do it, but when you’re online, visuals are the key. So hire a photographer for a few of your biggest events to get images that satisfy a potential client’s appetite and separate you from the crowd. Then use those photos across your website, social media efforts, and even print collateral to give event planners a taste of what you can do.

Technology Costs

You’re probably familiar with some of the technology you’ll need — inventory management, a catering CRM, etc. — but technology is making other elements of catering easier too. For instance, new event catering software allows you to diagram event spaces collaboratively with clients, and even lets clients include any guest management deals right in the diagram.

As you start out, you’ll want to start out with the absolute essentials. As you begin to realize your pain points, look for a software solution based on the areas where you feel you need the most help.

If you’re wondering how to start a catering business, the first thing you need to look at is your potential costs versus the amount of capital you have. By following these tips for caterers, dedicating yourself, and putting in the hard work, you’ll stretch your funds and create a flourishing catering business.

Brittany McDaniel

Brittany McDaniel is the Digital Marketing Manager at Caterease Software. Caterease is an industry-leading catering and event planning solution serving over 50,000 users worldwide. Brittany spends her days composing blogs and developing the overall web presence of Caterease. When you can’t find her passionately writing or sharing the next event trend, you can find her at one of the beautiful beaches near the Caterease headquarters. Feel free to connect with her on her Linkedin.