Starting a Catering Business
What you should know before you start a catering business.
Starting a catering business has its own set of legal considerations. These include choosing the proper business entity, obtaining licenses and permits, dealing with health and safety, creating policy statements and contracts, getting adequate insurance, and dealing with employees.
Choosing the Business Entity
While you could operate your catering business as a sole proprietorship or partnership, you should probably consider using a legal form that protects you from personal liability, such as a corporation or a limited liability company. Catering generally involves being in other people’s businesses and homes on a regular basis, dealing face-to-face with significant numbers of people eating food that you have prepared, and employees engaged in a lot of physical activity. This increases the likelihood that a person could be injured, or his or her property damaged—in which case you would want your catering business, not you personally, to be responsible for any liability.
Learn more about choosing a business structure.
Licenses and Permits
You will need to obtain at least a few licenses or permits in order to start your catering business. In some cases, such as a health permit, you most likely will need to look to a local government office. In other cases, such as obtaining a liquor license, you will probably need to work with a state agency such as a liquor control commission. Keep in mind that the liquor licensing process can be complicated and may require outside legal assistance.
Health and Safety
Because catering is all about providing people with ready-to-eat food, it is subject to significant regulations regarding food health and safety. Beyond needing to obtain a health permit, and possibly a further permit more specifically related to handling and preparing food, you can expect monitoring from your local health department similar to health inspections of restaurants. Local health authorities generally have a lot of latitude regarding what they can inspect, and health department inspections can cover many aspects of your catering business. Inspections may cover not only the food itself, raw and prepared, but also refrigeration systems, cooking equipment, and waste disposal, among other areas.
The health and safety of your workers is also an issue. The Occupational Safety & Health Administration (OSHA) has a variety of regulations relating to, among other things, eye and face protection, hand protection, and walking-working surfaces.
Policy Statements and Contracts
Different customers may have different ideas about exactly what services your catering business will provide. It is in your own interest to make clear in advance—in writing—what you will and won’t do for your clients. If you have a website, you should post your policies there. And, regardless of whether you have a website, you should provide a printed document containing the policy information to all of your clients before you reach an agreement and begin work.
For example, if you cater in people’s homes, you should indicate such things as:
- who will purchase the raw food
- where the food will be prepared
- if food will be prepared in a client’s home, requirements for adequate waste disposal
- pricing of various items
- payment policy
- cancellation policy
- food storage service policies
Many of these same types of rules would also apply to catering to businesses.
Beyond a general set of rules, it is also useful to work with each individual client to create a written plan for the specific services to be provided.
Policy statements aside, keep in mind that in order for a contract for services to be legally binding, (a) you and your client must agree on what the contract is for (there must be a “meeting of the minds”) and (b) there must be an exchange of value (also known as “consideration”—in the case of a catering business, usually the exchange of catering services, including food, for money). If the services involved will be completed in less than a year the contract need not be in writing; however, a written contract is always safer. You should consider drafting—or having a lawyer draft—a standard contract that you can modify for individual clients.
To learn more about policy statements, business contracts, and related matters, see Legal Guide for Starting & Running a Small Business, by Fred Steingold (Nolo)
There are particular risks associated with catering, such as employees slipping and falling on your premises while preparing food, diners or employees getting hurt from hot liquid or broken glass, or someone becoming seriously ill from the food itself. These are on top of more generic business risks such as fire, theft, or other sources of property damage or personal injury.
Try to work with an insurance agent who has previous experience writing policies for people involved in preparing and serving food. For property coverage, try to make sure that all business property of any importance, from plates to stoves, is fully covered. For injuries to people, make sure you have an excellent general liability policy. This should cover not only spilling boiling coffee on a diner, but also damages from someone who becomes gravely ill from eating the food you have prepared. In addition, make sure you have proper vehicle insurance to cover yourself and any employees while traveling to and from your clients’ businesses and homes.
Most catering operations have at least a few employees; moreover, in many cases there can be relatively frequent turnover. You should inform yourself about basic employment law issues such as illegal discrimination, workers compensation, and how to handle the hiring process. With regard to hiring in particular, learn how to:
- create a useful job application that does not include illegal questions
- check references or make other preemployment inquiries, again without violating privacy laws or otherwise seeking illegal information
- ask interview questions that are both useful and legally permissible
Also, keep in mind that there are some employment laws that may be specifically relevant to catering businesses, such as minimum wages for tipped employees.
A good resource for general employment issues is The Employer’s Legal Handbook, by Fred Steingold (Nolo). Also, many key employment laws are administered through the Department of Labor, and there are a variety of informative webpages within the Department of Labor website.