The Legalities of Putting Up A Catering Business: Complying With All Legal Requirements

Choosing the Type of Business Structure

As you start offering catering services, you may notice your income increase overtime, especially when you cater to corporate functions. Of course, this is good news to your business, but all your efforts will be for nothing when the governing authority flags you for operating a non-registered business. So it is very important to decide the type of business structure and then proceeding with the registration. For example, in the US, the IRS will red flag a caterer earning over $600 without being incorporated.

The chosen business structure will be dependent on how you want your business to be taxed and what liabilities you can risk. A sole proprietorship company entails you, as the owner, to be held accountable to whatever unfortunate incidents in your operation. This is riskier compared to limited liability caterers and corporations. Remember that you will be serving food to the public so it would be best to go for a business organization that’s able to protect your own personal asset against any lawsuits.

Limited liability company frees the owners from personal liability for debts or any liabilities the company incurs. This corporate structure is a combination of general partnership and corporation. Corporations are seen as considered as the structure with the most advantages when starting a business because they have their own identity under the law. It exercises all the rights of an individual entering into business transactions and is led by board of directors.

So what business structure will you choose?

  • Sole Proprietorship
  • General Partnership
  • Corporation
  • Limited Liability Company

Crafting Contracts and Obligations

A business contract with a client will include the major services to be offered, how these services will be offered and how they will be paid for. This will provide you with some form of protection if something goes wrong. The contract should be well-detailed. Agree on who will be contracting the venue and taking responsibility of the damages.

Prioritizing Licensing

Some states have different types of licenses so select one that suits your business structure. Also, you make need to look into food-service license and liquor license.

Understanding Health Codes

There are health rules regarding how food is prepared and handled. All of these are done to ensure that caterers provide customers with high-quality and risk-free services. Hire a consultant to ensure that your equipment passes the standards set forth, and that your employees are well-trained to comply with the health rules and regulations.

Protecting Assets

There are a lot of risks associated with catering businesses: fires, food poisoning, and other hazards. Insurance will help you cope with these risks. Buy a policy that will cover up all of these incidents. Seek advice from experienced caterers on what kind of policy will suit you best.

The Booming Catering Industry: Facts and Statistics

Factual and Statistical Info

The revenue from the catering market worldwide is expected to reach $265 billion US dollars 4 years from now with an estimated compound annual growth rate of 5 percent according to Research and Markets. Significantly, the market encompasses the major sectors in various communities including schools, elderly facilities, sports centers, and even hospitals. These institutions outsource their food service needs so they can lessen their spending and focus their labor force on more important matters.

Recent Technomic study shows that the catering industry in the U.S. made about $537 billion dollars in total sales last 2017 with a continuous growth rate due to easy and fast online ordering system. There are more than 10,000 caterers in America, employing about 110,000 people altogether. Most of these businesses are small and locally controlled that don’t account for a large portion of the market share. The demand for their services is higher in densely populated areas.

The Asia’s largest catering market and the second in the world, China reached an estimated revenue of $616 billion US dollars as reported by the China Cuisine Association. At the moment, it has around 5 million active companies in the catering industry. This has been attributed to the implementation of online to offline marketing strategy where customers are encouraged to order food by going to the caterer’s physical shop rather than online.

Just imagine how many people are choosing the convenient and practical way of catering food to their guests to celebrate life milestones. Statistics show that caterers are in demand for the following occasions: weddings, engagements, birthdays, corporate events, graduations, holiday parties, and even funerals. There’s also an increasing need for food services in trade shows and conferences worldwide.

Reports show that the money spent on food service mainly depends on how much corporate clients or individual consumers can spend for certain occasions. That is why catering companies often offer various packages, and sometimes even create meals suiting the most limited budget on the line.

To be able to serve large groups opens a series of catering opportunities for them so it is rare for them to turn down any offer, deal or invite. However, although the demand still exists, customers are less likely to order for catering services during uncertain economic times.

Based on Koncept Analytics’ market research, the 3 major factors fueling the increasing demand for contract and self-operated caterers are the people’s need for customized food orders, the rise of the middle class, and the continuing use of digital technology.

The 2018 Analysis of the World’s Contract Catering Market by Orbis Research

By Segment

  • Business & Industry (B&I)
  • Education
  • Healthcare
  • Elderly Facilities
  • Government Agencies
  • Sports & Entertainment

By Region

  • North America
  • Europe
  • Asia Pacific
  • Latin America
  • Africa
  • ROR (Rest of the Regions)

By Country

  • United States
  • Canada
  • United Kingdom
  • France
  • Germany
  • Others (Spain, India, China, Japan, Australia & Brazil

So what type of food catering service would you prefer to establish in your own local community?

  • Contract Catering