How to Start a Catering Business – The Essential Steps
Starting a catering business can be an exciting but challenging venture. With high competition and operational complexity, it’s crucial to plan strategically to maximize your chances of success. Whether you’re looking to start a café, pub, restaurant, or catering service, follow these essential steps to get your business off the ground.
1. Research Your Market
Before you invest in equipment or sign a lease, conduct market research to understand your competition, target audience, and market demand. Consider:
What types of catering businesses already exist in your area?
Who is your target customer base (corporate clients, weddings, casual dining, etc.)?
What’s the demand for catering services in your chosen market segment?
Is there a gap in the market that your business can fill?
2. Secure a Suitable Premises
Finding the right premises is crucial. Consider the following:
Limit the length of your lease where possible to maintain flexibility.
Look for fully fitted premises to reduce start-up costs.
Ensure that the space meets health and safety regulations and is suitable for food production.
3. Create a Strong Brand Identity
Your brand identity should align with your target market. This includes:
A memorable business name and logo.
A well-defined brand message that resonates with your audience.
A strong online presence through a website and social media.
4. Ensure Legal & Regulatory Compliance
To operate legally, you’ll need to:
Register as a food business with your local authority (UK requirement).
Obtain necessary alcohol and food licenses if applicable.
Comply with food safety standards and allergen labeling laws.
5. Understand Pricing & Gross Profit Margins
Pricing your products correctly is vital to your success. Use this formula to calculate your Gross Profit Margin (GPM):
For example:
If a dish sells for £10 (after VAT or £12 with VAT) and costs £3 to make, the GPM is 70%.
Using a system like Rocket-OS.io can help track costs, calculate margins, and record allergens to keep customers safe.
6. Register for VAT & Understand Tax Obligations
Even if you’re below the VAT threshold, registering for VAT is often beneficial in hospitality as most businesses exceed the threshold quickly. Key considerations:
Certain food items are zero-rated for VAT, while others are taxable.
Understanding VAT rules ensures correct pricing and compliance.
7. Optimise Operational Efficiency
Keeping costs under control is critical. Focus on:
Staff management software to efficiently plan shifts (e.g., Rocket-OS.io or similar platforms).
Payroll services if you can’t afford an in-house accountant.
Digital ordering platforms like Deliveroo, Uber Eats, or Just Eat to boost revenue – but keep in mind that these charge commissions of 30%+, so they work best as an incremental revenue stream rather than a sole business model.
8. Look for Contracts & Tenders
Local authorities and businesses often put out catering contracts that you can tender for. These opportunities:
Provide consistent revenue.
Have low start-up costs.
Are more suited to cafés and daytime operations rather than evening restaurants.
9. Get the Right Financial & Staff Support
Payroll and bookkeeping are critical, especially if you take on bank loans.
If you can’t afford a full-time bookkeeper, consider outsourcing payroll to ensure staff payments and tax filings are accurate.
10. Test & Validate Before Full Launch
With a high failure rate in hospitality, it’s essential to test your concept before making large financial commitments. Key steps include:
Conducting footfall counting at potential locations.
Asking passersby for feedback on menus and pricing.
Running a pop-up event or catering trial before committing to a permanent site.
Final Thoughts
Starting a catering business combines creativity, operations management, and financial planning. By conducting thorough market research, understanding your costs, securing the right premises, and using efficient management systems, you can reduce risks and set up a successful food business.