Pros and Cons of Starting a Catering Business

PROS:High demand market. As you may have learned, there is a high and renewable demand for food. From groceries to restaurants, people are spending much of their time and money at these establishments to get something their bodies need to survive. You won’t necessarily need to worry about finding customers with a desire for your product. Relatively low start-up. Many catering companies have started from the back of their vans and have flourished from there. Depending on your state’s laws, you would not be under as strict requirements as you would operating a full service restaurant or take out. Even if you are required to use a state approved kitchen, much of the financial responsibility and approval issues may fall on the kitchen owner. Steady work. If you are successful enough to land a few steady contracts, you could have a steady flow of work ahead of you. Many institutions such as schools, hospitals, and offices contract their food service outside of the institution. This leaves plenty of year round work for functions, events and meetings that may occur there.

CONS:Large supply market. As with many industries, high demand also means high supply, as many companies flock to participate in an industry where there is high potential. Ever wonder why there’s a fast food restaurant on every corner? It may be hard to compete with the supply and when the market is that saturated it can become more difficult to find customers who aren’t willing to just order take-out for their events. Relatively high start-up costs. While it’s true that the start-up costs are relatively low when considering those of a full service restaurant. They still remain high when compared to those of the average home based business. State licensing costs can be just as high and while you may not need to own a restaurant, you may still be required to use a commercial kitchen to operate your business which can be expensive. This will lead to higher costs which have to be passed on to the customer, lowering the demand. Hard to find contracts. While you may find yourself, hosting your friends’ parties or cooking dinner for your child’s sports’ team, you may have trouble getting those contracts that may provide steady work. Many of the above stated institutions, have their own set catering companies, which are usually national or large corporations that contract their catering service all over the country and hire employees to operate for them, usually for years at a time. It can be very difficult to get a foot in when dealing with such stiff competition. Expensive service. While there are still many people who can’t simply provide a box of pizza to the guests at their events, you may find your customers wagering with the price you charge. Remember that with a catering business, you aren’t just providing food but a service. Ever wonder why fast food restaurants often don’t do catering or delivery? This service not only costs food and its preparation, but transportation, time and additional serving equipment. These factors are something that do not need to be considered with fast food restaurants as these costs are fixed and often are non existent for them. Also, their business is about volume, so they can make only a few cents off of each burger. However, the catering business is quite opposite to that.

SUMMARY: The food industry can be very rewarding and starting a catering business is one way to go about getting into it. However, there are costs, demand evaluations and market supply factors you should consider before taking the plunge.

TIPS: One way to lower your costs, is to take advantage of the cottage laws your state may have. These laws allow you to work from your own kitchen without having to rent space or obtain a food license. You can also look into becoming a private chef and hosting parties for people at their homes, as this, in some states, does not require a license.

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