The Ultimate Guide to Starting a Catering Business in Texas
Are you thinking about starting a catering business in Texas? As a small-business option, a catering company is a great choice.
Texas has a large population and bustling cities throughout the state. There’s also a wide range of culinary and cultural histories that blend to make the Lone Star State so special.
Catering companies and people that choose to sell their home-made food can target specific markets or types of services. Some caterers work exclusively on wedding receptions while others focus primarily on corporate events. Catering businesses will need to develop not only a concept and menu but also have the equipment and transportation to successfully execute catering events.
What do you need to successfully launch a Texas catering business? Here’s a closer look.
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1. Develop a Concept
Catering businesses need to stand out amidst the competition. To do so, your business can develop a menu of popular, unique and delicious food options that attract customers. Tantalizing the taste buds is an important part, some would say the most important, of your catering concept.
You’ll also need to consider the target market for your business. There are many options, including:
- Weddings, engagement parties and bridal showers
- Family celebrations, such as birthdays, anniversaries, graduations, baby showers and bar/bat mitzvahs
- Business events, including formal dinners, award celebrations, retreats, product launches and holiday parties
- House parties
- Concessions and food trucks
No matter what concept you choose, be sure to consider the competition and how to position your company with potential clients
2. Create a Business Plan
A business plan is a detailed document that requires research, planning and plotting out your strategy for your company. It’s an important exercise to do to spell out details about your business, competitors and services.
The business plan spells our goals, strategies, customers and competitors in detail. Here are the main components:
- Executive Summary. This high-level summary includes your mission statement, brief description of the company, names and bios of leaders, formal name and address, description of products and services offered and a financial overview
- Company Description. This section goes into more depth about your company’s purpose, what it does for others and how your customers benefit. It provides details about your customer base and their demographics, and what makes your products or services unique
- Market Analysis. This detailed information is the result of research you do to analyze the markets in which your business will operate. It looks at key industry trends and information about your competitors. It includes the names of competitors, what they offer, sales data and customer demographics and insights into what your company does better
- Descriptions. Here is where you will provide detailed descriptions of the products and services your company offers, including the history and purpose of each
- Sales and Marketing. This section lays out your sales and marketing strategy, detailed descriptions and the desired impact of those strategies on your customers
- Funding. This summary provides insights on your funding needs, including how much financing you need, how those resources will be used over the next five years, whether you’re looking for debt or equity financing, desired terms and conditions and how you plan to repay
- Financial Analysis and Projections. This section provides your financial analysis, past results and projections over a five-year period, with monthly or quarterly projections. It will include balance sheets if you’ve already started your catering company and charts and graphs that support your positions
- Appendix. At the end of your business plan, include key documents, including permits and licenses you’ve obtained, resumes of company officials, photos of your products or services, and your credit history
A business plan is an essential document when you are seeking funding, either from a bank or other financial institution, or from investors.
3. Choose a Business Structure
Establishing your business structure is an important element of launching your Texas catering business. A business structure is the legal entity under which your company operates.
There are many options when it comes to business structures. However, for small businesses, the two most common types are a sole proprietorship or a limited liability company (LLC).
Sole Proprietorship
A sole proprietorship is the simplest and most basic structure. In a sole proprietorship, you are the only owner and make all the business decisions related to running the company.
From a tax standpoint, a sole proprietorship is very simple. All the revenue, profits and losses, and deductions are passed through to the owner’s individual income tax returns. The business finances are recorded on Schedule C of Form 1040 on the federal return.
There is no formal paperwork required to form a sole proprietorship.
From a liability perspective, a sole proprietorship carries some risk. If there are court judgments against the business, the claimants come after the owner’s personal assets, including the home, personal vehicles or savings.
LLC
An LLC is a popular option for a business owner. In an LLC, owners, called members, have control of their business and how it operates. LLCs can be run by the owner or owners themselves or they can hire a manager to do so.
Taxes are handled the same as with a sole proprietorship, with revenues, losses and deductions carried through to individual tax returns.
With an LLC, however, there is more legal protection for owners. Except in cases of gross negligence, LLC business owners benefit from liability protection.
Forming an LLC in Texas requires completing paperwork and offering details about the company and its organization. This paperwork and filing logistics often lead businesses to turn to an experienced partner to manage the LLC creation and filing process.
4. Know State and Local Regulations
Food businesses are often subject to state and local guidelines related to operating their business. These guidelines are designed to promote food safety and protect customers.
Caterers in Texas are required to gain a health permit from the Texas Agency of State Health Services (TASHS) or the city or county health permit in which the business operates. However, home-based food businesses are not required to obtain a permit unless a client files a complaint.
In addition, catering businesses must have at least one staff member who is a TASHS certified food handler.
Your business will also require liquor licenses if you will serve alcohol. In addition, local zoning laws may dictate where you can operate a catering commercial kitchen.
Certification may also be needed, including a clean health certificate and catering training certificate.
5. Focus on Health and Safety
Any catering business needs to ensure that anyone eating your food is confident that it is prepared correctly. There are extensive guidelines for food handling and management, including:
- Employee cleanliness procedures, including for hand and arm washing
- Standards for
cooking , storing and reheating food - Equipment standards for utensils, temperature-measurement devices and other tools
- Reporting if employees have certain illnesses
- Cleaning and sanitizing surfaces, utensils and equipment
- Garbage disposal
Your business may be subject to local and state health inspections, which can examine the way you prepare and store food, your equipment and waste disposal
6. Develop Policies and Use Contracts
You want a clear and well-defined set of policies related to your catering business and include them on your website. Having these policies displayed can help clients understand your work and what you provide and protect you and your business.
Policies related to your catering business should be provided to your clients as part of your contract process. Consider, for example, what needs to be clear when catering in a client’s home:
- Who will buy ingredients
- Where food will be prepared
- Food storage guidelines
- Waste disposal requirements
- Pricing of items
- Payment schedules and requirements
- Cancellation policies
These policies provide clarity and can be used to resolve disputes should they arise. However, using contracts is essential for your catering business. You want to spell out all the details in a legally binding contract with each client.
An attorney can draft a standard contract that should be used with your clients. If a client requests changes to your contact, it is smart to have an attorney review it to ensure your rights are protected.
7. Obtain Insurance
Having insurance for your catering business is another way to protect you, your employees and your company. There are many potential liabilities that come with having a catering business.
Work with an insurance agent who has experience working with caterers to determine the types of policies and coverage levels you need. You’ll want to include general liability insurance which covers you and your employees and coverage to protect your property, equipment and tools. You also want to be sure your work vehicles (and employees who may be driving them) are protected with insurance coverage, too.
A catering business is an exciting opportunity to connect with clients and delight them with your food. Take the time to plan the important components of your business, such as a compelling concept, detailed business plan, business structure, regulatory requirements, health and safety focus, policies and contracts, and insurance coverage. You’ll have the infrastructure and foundation of a successful business.
