Getting started: Catering

April 2, 2001: 8:21 a.m. ET

You need a lot more to get started than a stack of gourmet recipes

NEW YORK (CNNfn) - You love cooking, love parties and love the praise lavished on you by friends and family when you serve them your special dishes. And somewhere in the back of your mind, you are batting around the idea of starting a little catering company to turn those talents into profit.

You're not alone. People are always wanting to get into catering because they think its fun, said Laura Silverman, a catering manager in North Lauderdale, Florida.

And fun it can be. Helping people plan parties means being part of the happy occasions in their lives. But catering is also a tough business, one in which most people don't survive. It's expensive to launch a catering company and you have to be prepared to operate in the red for several years before turning a profit.

Cooking for eight has almost nothing in common with cooking for 200. And clients will complain about things your family won't because they are paying for your service. In other words, your skill in the kitchen is only one aspect of the business, and in no way guarantees success.

Sure you can cook, but can you plan?
A lack of business sense is, according to caterer Jerry Edwards, the most common pitfall in this profession, the primary reason most caterers go out of business.

"It's primarily creative people who get into catering," said Edwards, who owns Chef's Expressions in Timonium, Md. "People don't think about establishing an image, or having a business plan and they don't know who their customer is."

Edwards said his own journey in the catering business took years to perfect. It started at the age of 20 when he bought a sandwich business in Baltimore for $2,000. The business prospered in part because of low overhead and in part because he quickly expanded to provide delivery service to the surrounding office buildings.

Two years later, Edwards opened a gourmet food store and was soon being asked to provide catering to customers. As the catering became more profitable, the gourmet food store was swallowed by the ever expanding catering kitchen in the back of the shop.

Getting Started is a column that runs Mondays in CNNfn's Small Business pages. Click here to read past stories on starting your own adventure travel business, karate studio, soap-making company and pet sitting service.

It took 10 years in the food business, said Edwards, to perfect his image, properly manage his marketing, and nail down the type of clientele he should be chasing. Rather than taking clients as they came to him, Edwards now finds them by connecting with local wine societies, convention bureaus and upscale wedding locations.

Today, his company, which has revenue of about $2 million a year, caters only to high end clients.

A big ball of dough
The catering business is as much about selling as anything else, said Silverman. When customers hire a caterer, they don't know what they are buying until the night of the party so you have to be able to sell them your service at a price that is right for your business.

"They are handing over thousands of dollars and they have a vision of this party that you have to be able to provide," said Silverman.

Silverman suggests that anyone contemplating a catering business should have experience in the food industry. Or, if they really want to go out and start their own company, they may want to try to start small by opening a baking business and expanding from there.

There are several reasons for this. First, most people don't realize all that goes into running a catering company. Yes, the food is part of the equation. But you also have to know about pricing food, about event planning and managing food preparers and waiters.

Second, and perhaps more important, most people don't realize how expensive it is to get a catering business started. You can't cook in your home kitchen so you have to find a space to rent. Many caterers rent kitchens in church basements or schools or in restaurants that have gone out of business.

If you have to buy all the equipment Ц stoves, ovens, dishwashers, pots and pans Ц Edwards warns it's going to cost you as much as $200,000 to $500,000. Many people sink much of their own money into the business and most have to seek outside financing in the form of a bank loan or a partner.

"An overhead fan alone is going to cost $30,000," said Edwards.аа

Silverman added caterers also have to get licenses from the Department of Health and must carry liability insurance.

Cook now, relax later
The high cost of starting this business means most people don't see a profit for at least three years, and owners draw little if any salary during that time. Trying to get to the break-even point means cooking, hiring and marketing the business is a near-total time commitment in the early years.а

Edwards said he worked every day of the year Ц minus Thanksgiving and Christmas Ц for his first five years in catering. Edwards, who is also a consultant to people trying to get into catering, said many owners make about $50,000 after being in the business for five or six years.

It took Edwards 10 years, by his own estimation, to become a "contender" in the Baltimore area. Now, after 20 years in the business, he's getting to relax just a little bit and really enjoy the fruits of his hard work.

"I can say now, after doing it for 20 years, it's a lot of fun," said Edwards. "You get to meet a lot of amazing people and a lot of really fun people."