Editor’s Note: Obviously, both the costs and obstacles that have to be overcome to set up and run a catering business vary hugely from place to place. As a result, we have taken the US as our model. Many of the examples given are relevant to other countries as well. However, this is not a ‘one size fits all’ article and you will need to do additional research on your particular location for information fine-tuned to your specific needs.
Successful catering businesses can be extremely profitable. However, like in all industries, there are costs involved in day-to-day operations and some businesses are more successful than others.
If you’ve been thinking about starting a catering business, one of the biggest questions you probably have is whether or not your venture will be profitable.
This is a question that needs to be broken down into different sections. Therefore, in today’s article, we’ll be exploring the profitability of the food catering business.
In addition to revealing the average catering salary, we’ll also be breaking down the costs of starting up and running a catering business. Then you can decide for yourself whether catering is a profitable industry.
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What Is The Average Caterer’s Salary?
As of 2022, the average U.S. salary stands at $53,490. By comparison, a caterer just starting in the industry is likely to earn about $30,000 per year. So, when you first set up a catering business, you can expect to earn significantly less than the average American’s salary.
With that being said, high-end catering businesses or established caterers who are well-known in their area can earn much more than the average caterer’s starting salary.
Once your business is established, if you produce high-quality catering, you could earn up to $80,000 a year. This is considered a very good salary in the U.S.
The math speaks for itself here: caterers don’t usually make a lot of money when they start. However, over time, with enough dedication, they can begin to earn significantly more than U.S. average salary.
See our post Is A Catering Business A Good Idea? What You Need To Know Before Starting for some additional information
How Much Does It Cost To Start A Catering Business?
Based on the above figures, you might have come to the conclusion that catering is likely to be a profitable business venture.
But before you rush into starting up a catering business of your own, you should be aware of some of the costs involved in simply starting up one of these businesses.
It’s difficult to put a definite figure on how much it will cost to open a catering business. It depends entirely on how big your business is, how many members of staff you employ, where you run your business, and what kind of catering your business provides.
With that being said, when you take into consideration the costs of premises, licensing, staff, equipment, ingredients, advertising, and transport, starting a cooking or catering business will probably set you back between $10,000 and $50,000.
Depending on where within this margin your starting costs fall, you might or might not make a profit in your first year.
For example, if you spend $10,000 starting your business and make $30,000 in the first year after launching, you will make a profit provided that additional costs or losses over the course of the year don’t set you back too much.
Perhaps looking at other catering businesses may help you. See our post on Subway Catering: Guide To Menu, Prices & More for another perspective.
What Is The Average Catering Profit Margin?
A healthy profit margin in any business is considered to be between 7 and 10%.
Catering businesses, on average, have profit margins of 7.5%, although some established and successful catering businesses have profit margins of around 15%.
Are Home Catering Businesses Profitable?
Many entry-level caterers consider running their catering business from home instead of paying to rent or buy premises.
While this can certainly shave off some of the initial costs of starting up a catering business, home catering businesses tend to be less profitable on average.
Whereas the average catering business has a profit margin of between 7% and 8%, home catering businesses typically have profit margins of around 4%.
Perhaps trying something different might work for you. See our article on Nigerian Catering Food Ideas for inspiration
How Can I Make A Profit In Catering?
Although there is no magic formula to success when it comes to opening and running a catering business, there are some steps you can take to give your business the best chance of being profitable.
The first thing you should do if you want to make a profit from your catering business is to find your niche and stick to it. You want to attract clients that look at your business and think that it’s absolutely perfect for their event.
If you don’t have a niche, your services might be suitable for a wider demographic, but you’ll struggle to stand out from the competition.
On the other hand, if you make your business specific to certain types of events or themes, you will stand out more to clients who know exactly what they’re looking for.
Additionally, you should try to cut costs where you can as long as it doesn’t interfere with the quality of your catering or service. Try to rent equipment where possible and hire wait staff from agencies on a temporary basis.
If you can outsource elements of the event planning and running outside of making and delivering the food, you should do so. This will allow you to direct your attention towards the most important thing driving your business’ profit: food quality.
Check out our post on What Are Good Foods To Cater? – 20 Popular Catering Dishes
So, is the food catering business profitable?
In theory, you could make up to or even over $80,000 from your catering business.
When you start out, though, your salary might be closer to $22,000 – $30,000, and you’ll also have to consider the average cost of starting a catering business (anywhere from $10,000 to $50,000).
The average profit margin for a catering business is roughly 7% or 8%, although this is lower for home catering businesses, which average just 4% in terms of their profit margins.
Basically, it’s definitely possible to run a profitable and successful catering business and to make significantly more than the average U.S. salary from catering. However, in order to achieve this, you will need a solid business strategy.
This involves finding your niche and budgeting carefully, even if this means outsourcing, hiring temporary wait staff from agencies, and renting equipment wherever possible.