Catering Business Overview
Catering businesses prepare, transport, and serve food and beverages for events ranging from intimate gatherings to large-scale celebrations. These businesses handle everything from menu planning and food preparation to service and cleanup at various locations, including private homes, corporate offices, rented venues, and their own facilities. Caterers work with clients to create customized dining experiences for weddings, corporate functions, private parties, graduations, and other social occasions.
The catering industry serves diverse client needs through multiple operational approaches. Some caterers focus exclusively on food preparation and delivery, while others provide complete event services, including staff, equipment, and coordination. Most catering operations combine both on-site and off-site services, adapting their offerings based on event requirements and venue specifications.
The business models that caterers typically operate under include:
- Full-Service Event Catering: Comprehensive food service, staffing, equipment rental, and event coordination for both corporate and social events
- Drop-off Catering: Preparation and delivery of prepared foods without service staff or additional amenities
- On-Premise Catering: Operating from a dedicated venue or banquet hall where all events are hosted
- Corporate Catering: Specialized focus on business clients, providing regular meal service for meetings, conferences, and corporate events
- Mobile Catering: Food preparation and service from specially equipped vehicles or portable units
Related: Checklist to Start a Business
How Do Caterers Make Money?
Catering businesses build their income primarily through food and beverage sales for events. Each event typically includes a per-person charge that covers ingredients, preparation time, and basic service costs. Most caterers collect deposits when clients book events, with final payments due before or immediately after service.
Beyond food sales, caterers create additional income through various event-related services. Equipment rentals can form a substantial revenue source, with clients paying for tables, chairs, linens, dishware, and decorative items. Service staff fees contribute significantly, as clients pay for servers, bartenders, and event captains. Many caterers also earn through venue rental fees when hosting at their facilities.
Beverage service presents another notable income opportunity, particularly through alcohol sales and bartending services. Transportation and delivery fees, along with setup and cleanup charges, add to the revenue. Some caterers expand their earnings through consultation services, helping clients plan menus and coordinate event details. Others maintain steady income through ongoing corporate accounts, providing regular meal services for business meetings and functions.
Industry Statistics
Catering businesses operate under NAICS code 722320, which includes businesses that provide food services for events and functions. Let’s examine some statistics about this industry’s performance and structure.
Catering Industry Size & Growth: The catering industry generates $14.8 billion in annual revenue. Over the past five years, the industry has experienced an annual decline of 1.3%. Looking ahead, the industry shows signs of recovery and growth of 7.7% through 2030, driven by increased corporate marketing budgets and a return to in-person events. Companies are allocating more resources to functions like holiday parties, product launches, and investor celebrations, providing caterers with expanding opportunities (IBISWorld).
Number of Caterers: There are approximately 102,000 catering businesses operating across the country. The industry includes both small independent operators and large corporate caterers. Major companies like Elior Group, Delaware North Companies, and ISS A maintain significant market presence, though their combined market share remains relatively modest, indicating opportunities for smaller operators (IBISWorld).
Catering Average Profit Margin: The average profit margin for catering businesses is 8.1%, though this can vary based on factors such as business size, location, and service offerings. Recent inflation in food prices has impacted profitability, particularly for smaller operations (IRS).
States with Most Caterers: California and New York lead in catering business concentration, attributed to their dense populations and strong economies. These states offer abundant opportunities due to their high median incomes and active business communities. Other states with significant catering presence include Texas, Florida, and Illinois (U.S. Census Bureau).
Startup Stories
Also See: Ideas for Naming a Catering Business
Costs To Start a Catering Business
Starting a catering business typically costs between $25,000 and $150,000. The range reflects different business sizes and service levels, from small home-based operations to full-service catering companies with dedicated facilities.
When starting a catering business, here are some of the more expensive items to consider:
Commercial Kitchen Space requires between $15,000 and $75,000. This includes leasing and renovating a commercial kitchen facility to meet health department standards. The space needs proper ventilation, cooking equipment installation, and storage areas for food and supplies.
Equipment and Supplies cost between $10,000 and $40,000. A catering kitchen’s foundation is composed of professional-grade ovens, refrigerators, warming units, and cooking equipment. It also includes serving equipment, portable heating units, food transport containers, and basic small wares.
Delivery Vehicles can cost between $20,000 to $45,000. A reliable commercial van or truck equipped with proper temperature control systems helps transport food safely. The vehicle needs sufficient space for equipment, supplies, and prepared food.
Initial Inventory requires $5,000 to $15,000. This covers basic food ingredients, disposable items, cleaning supplies, and paper products. It also includes basic pantry staples, spices, and commonly used ingredients for different menu items.
These estimates provide a general overview of startup costs, but actual expenses will vary based on location, size, and business model.