Last Updated: 10/29/2024
If you’ve been thinking about starting a culinary business, now’s the time! The food industry forecast is looking bright, with the U.S. food service market expected to maintain steady annual growth at a rate of 4.05%.
If you’re a chef or foodie dreaming of breaking into this industry, you’ve come to the right place. We’ve broken down how to start a culinary business into 11 steps that you can start following today.
Plus, you can download our culinary business plan template and use it to begin organizing your new operation and beginning your journey to food business success.
1. Refine Your Concept
Business Type
There are no shortage of food businesses to choose from, including catering, mobile bartending, running a food truck, and more. Identify which one appeals the most to you and works best with the vision you have for your business.
Location(s)
Food business owners aren’t limited to brick-and-mortar spaces. You might consider running your business from home, if your local cottage food laws allow this, or renting out a commercial kitchen to prepare your food products.
Alternatively, you can operate your business from a wide variety of locations if you’re running a food truck, catering, or mobile bartending business.
Even if you aren’t fixed to one specific location, you should consider the geographic area you want to do business in. Will you stay within your city limits or venture to other counties, or even other states?
Legal Structure
The legal structure of your business refers to the type of business entity you want to run. There are many different types of entities, but here are the most common types for culinary businesses:
- Sole proprietorship: No legal distinction between you and the business you own
- LLC: Legally separates you and your business
- Cooperative: Legal structure in which there are multiple members who all own a share of the business
You may want to meet with a business attorney or tax professional to discuss the best structure for your business before you choose one. An attorney can also help you change the structure of your business later on if you feel a different entity type would suit it better.
2. Conduct Market Research
Identify and Analyze Your Target Customer
Every business has an ideal customer they’re trying to reach. This is the type of person who will resonate the most with what you’re selling, whether that’s a product or a service.
To identify your target customer, consider the following:
- Their demographics: Age, gender, income level, etc.
- Their buying behaviors: How often they eat out, what price they’re willing to pay when eating out, and so on.
- Their lifestyle: This can include anything from dietary restrictions to physical activity.
Research Your Competition
Knowing your competition is just as important as knowing your customer. By identifying who you’re competing with in this space, you can better differentiate your business from theirs and find ways to get ahead of them.
When analyzing your competition, look at things like:
- Who your direct competitors are (businesses that offer the same or similar products or services in your area)
- Who your indirect competitors are (businesses that don’t offer the same products or services you do, but your customers might choose over you)
- Your competitors’ strengths and weaknesses
- Your competitors’ menus and pricing
- Customer reviews for your competitors
Analyzing the Market
Beyond your customers and your competitors, you should have a good understanding of the market as a whole in order to identify how your business fits into it.
You can conduct a market analysis by doing things like:
- Looking into industry trends: This includes popular cuisines, dietary lifestyle choices or restrictions, and new tech such as online ordering or delivery options.
- Researching the seasonality of your industry: Identify what your peak sales times are, when to expect slow periods, etc.
- Understanding the size of your market and projected growth: Find this data in government reports and industry studies.
3. Build Your Brand
A Compelling Mission Statement
The Right Business Name
Unique Brand Colors and Logo
4. Secure Funding
The amount of money you need to start a culinary business depends on a few factors: the type of equipment you need, the cost of your ingredients, what part of the country you’re operating your business in, and more.
For example, even just within the food truck sector there’s a wide range, beginning at $46,700 and going up to $187,440.
If you don’t have all that cash on hand, there are several different options for financing a new culinary business:
- Small Business Administration (SBA) loans: These are low-interest government loans designed to help small businesses get started. Plus, they have longer repayment terms than many other loans.
- Grants: You may be able to obtain a small business grant through a government or private organization. Grants are great because you don’t have to pay them back — but they are highly competitive and most require a lengthy application process.
- Private investors: Often called angel investors, these are individuals who will loan you money to start a culinary business in exchange for equity.
- Bank loans: You may be able to get a good amount of capital from a bank loan and their fixed interest rates make it easy to know what you’ll owe each month.
- Personal savings: While you may not be able to start your business with only your own funds, using personal funds can help you avoid debt and interest.
- Crowdfunding: Indiegogo and Kickstarter are two great platforms for garnering financial support from the public to start your business. People often offer tiered rewards to encourage donations, such as merch.
- Microloans: These loans don’t usually exceed $50,000 and are offered by non-profits and community lenders.
- Equipment financing: Starting a culinary business often requires expensive cooking equipment, which is where equipment financing or leasing options can be a huge help. Instead of paying for the gear completely upfront, you can pay it off over time.
- Friends and loved ones: People in your life might want to give you a little financial assistance while you get your business up and running! If you agree to repay them, make sure the terms of this agreement are in writing and acknowledged by both parties to avoid awkward conflicts.
5. Obtain Necessary Licenses and Permits
The exact permits and licenses you need will depend on where you live and what type of culinary business you start. Here are some of the most common:
- Federal business registration: Even if you operate as a sole proprietor, you’ll still want to get a federal Employer Identification Number (EIN) for tax purposes. Plus, anyone hiring you on a contract basis may require you to complete a 1099 to get paid, and you’ll need an EIN for that.
- State business license: All businesses need a license to operate in their state, you’ll usually do this through your state’s Secretary of State office or a department specific to food businesses.
- City or county/zoning permit: Your city or county may require you to have a permit, especially if you run your business from home.
- Cottage food license: Some states allow you to run a food business from your primary residence. If you plan to open a home-based culinary business, your state might require you to carry a special license.
- Health department permit: You’ll need to pass an inspection from your local health department confirming your space is hygienic and safe for food preparation.
- Food handler’s permit: Many cities and counties require anyone preparing, cooking, or serving food to pass a test on food safety and obtain this permit.
- Sales tax permit: If you live in a state that collects sales tax, you’ll need this permit so the state can collect taxes on your food products.
- Mobile food vendor permit: Some jurisdictions require a special permit for running a mobile food business like a food truck, trailer, or beverage cart.
- Liquor license: If serving alcohol is part of your business plan, you need to get a liquor license from your state’s Alcohol Beverage Control board (ABC).
- Fire department permit: This typically involves passing a fire department inspection to ensure your cooking area meets fire safety standards.
- Waste disposal permit: Many food businesses generate a significant amount of waste, especially food waste, and your city might require you to carry this permit.
6. Protect Your Culinary Business With Insurance
One of the smartest investments you can make for your culinary business is liability insurance.
Like any industry, certain risks come with running this type of business. They can lead to expensive claims and lawsuits, such as:
- A customer slips on a wet floor during an event you’re catering and sues you to pay for their medical bills
- While cooking in the commissary kitchen you rent, you accidentally start a grease fire that damages one of the walls and your landlord holds you responsible for repairs
- A thief makes off with your generator while you’re setting up at a food festival
Culinary business insurance is designed to provide a financial shield against incidents like these, allowing you to continue running and growing your business without a significant disruption.
You can get the general liability coverage you need from FLIP starting at just $25.92 per month or $299 per year.
7. Choose Your Suppliers
Running a culinary business involves working with a variety of different suppliers for everything from cooking equipment to ingredients to your point-of-sale (POS) system.
But how do you go about finding the right suppliers for your business?
Here are a few different places to look:
- Local suppliers: Opting for suppliers in your area is beneficial for a number of reasons, including fresher ingredients and faster delivery times. Plus, it helps foster a stronger community when local businesses support each other!
- Wholesalers: Buying in bulk from wholesale distributors can save you a lot of money down the line. Do your research to find distributors that offer competitive prices without skimping on quality.
- Online suppliers: If you rely on specialty ingredients or equipment for your food business, it might be easier to source those things online instead of searching locally. Keep in mind that you’ll have to deal with longer delivery times and shipping costs if you go this route.
Don’t forget that negotiating prices is a big part of working with suppliers. You don’t necessarily want to go with the cheapest options at the expense of quality, but paying too much will really hurt your bottom line. However, there are many factors open to negotiation that don’t involve paying less.
- Suppliers are usually open to negotiating the following:
- Discounts for early payments
- Discounts for bulk purchases
- Delivery times
- Including training alongside purchases of new equipment or tech
Pro Tip: Before you negotiate with suppliers, make a list of things you aren’t willing to compromise on, as well as things you are. This could range from the quality of the ingredients or products you’re buying to delivery times.
Having this info prepped prior to starting this conversation with your supplier will help you stay realistic about what outcomes you expect and lead to better understanding between you and them.
8. Set Your Prices
Deciding what to charge for your products and services can feel like a daunting task, but it’s an important part of running a profitable culinary business.
Here’s what you need to do to set the right prices:
- Calculate costs: This includes the cost of ingredients for everything you serve (aka the “plate cost”), labor, overheads (rent, utilities, insurance, etc.), and packaging.
- Pick your profit margin: Decide how much you want to make for each product or service you sell. Look up what the typical margins are for businesses in your specific industry. For example, food truck profit margins typically range between 6–9%.
- Analyze market pricing: By looking at what your competitors are charging for similar products or services, you can get a better idea of what customers expect to pay for them.
- Choose your pricing strategy: Understand different pricing strategies and pick the one that works best for you and the goals you have for your business.
- Test and monitor profitability: Remember that you can (and should) adjust your prices if you need to. Conduct an annual assessment to make sure that your prices are covering your costs and maintaining your desired profit margin.
9. Establish Your Online Presence
Having an online presence is more important now than ever before. In 2023, 21% of people reported using the internet daily to find local businesses, meaning your online presence could be the first impression someone has of your food business.
Take these steps to begin building a name for your business online:
- Make a website: Your website is the digital hub for your business, containing everything from your “About Us” story to your contact information to possibly even an online ordering system. If you don’t have the budget to hire a professional to build a website for you, it’s relatively simple to create your own using platforms like Wix or Square payment processing’s site builder, Squareup.
- Create social media profiles: The best social media for food businesses are Facebook, Instagram, TikTok, and Pinterest — they’re all visual-first platforms. This allows you to showcase mouthwatering shots of your culinary creations, which is far more enticing for customers than reading about them.
- Make profiles on review sites: Many food business owners get nervous about inviting reviews, but they are extremely beneficial for your business! In fact, some studies have shown that reviews can boost your sales by 18%. Set up a free Google Business Profile and a free Yelp account so customers can spread the word about how great your food is!
10. Develop Your Marketing Strategy
One study showed that as many as 14% of new businesses fail due to poor marketing. Investing time and money into promoting yours can protect it from a similar fate. And you don’t have to be a marketing prodigy to get your business out in front of people and start bringing in new customers.
Here are a few tried-and-true marketing tactics you can use to promote your new culinary business.
Word-of-Mouth Marketing
What are you more likely to purchase: a cake you saw in an ad — or a cake your best friend told you was delicious and the best they’d ever had?
If you chose the latter, you’re not alone: 88% of customers report trusting recommendations from friends and loved ones over any forms of advertising. To generate buzz around your business, try doing the following:
- Offer exceptional customer service
- Create a referral program to reward customers with a discount or freebies when they successfully refer someone to your business
- Display positive customer reviews and testimonials on your website, social media profiles, and ads
Social Media Marketing
Social media isn’t just for big businesses. Small, local businesses have a lot to gain from promoting themselves on socials and 76% of them use social platforms as part of their overall culinary business strategy.
You can use your business’ social media accounts to market your business in many ways, including:
- Post high-quality images and videos that showcase your food
- Use Facebook and Instagram to create paid ads and promoted posts that target specific audiences
- Engage with your community by replying to comments and messages, encouraging customers to share pictures of your food, and reposting content customers post about your business
Pro Tip: Check out our top tips for promoting your business on Instagram and download your free copy of our eBook today!
Traditional Marketing
Even though we live in an increasingly digital world, traditional advertising mediums are alive and well. When combined with digital marketing tools, they can help you reach wider audiences and bring in more revenue.
Here are a few forms of traditional marketing to try out:
- Culinary business cards: Especially if your food business offers services such as catering or delivery, having business cards on-hand is a great way to quickly give potential customers information about your business.
- Partnerships: Working with other local businesses to throw a pop-up event or offer joint discounts can be a great way to cross-promote each other
- Print ads: Creating flyers to post in local businesses or other high-traffic areas can be a great way to showcase your menu and highlight any events you might be attending
11. Create Your Culinary Business Plan
Executive Summary
Company Description
More in-depth than the executive summary, this section should contain the following details about your business:
- Branding: This includes your business name, logo, colors, and fonts that you use for your business, as well as your brand voice and personality (seriously, funny, cheeky, irreverent, etc.).
- Sample menu and pricing: Include what products you’ll sell and what services you’ll offer along with your pricing structure.
- Legal structure of your business: Sole proprietorship, LLC, partnership, etc.
- Mission and vision statements: Your mission is the “why” you decided to start a culinary business, whereas the vision statement tells the big picture of what your business will become by fulfilling its mission.
Market Analysis
Identify your target customers and your competition in this section. Be sure to include details like:
- The demographics, buying behaviors, and characteristics of your target market
- A location analysis, where you explain why you’ve chosen to operate your business in a specific area
- A competitive analysis that identifies who your main competitors are and how you will differentiate your business from theirs
Marketing Strategy
Loans and Financing
Operation Costs and Financial Projections
Costs of Service Sold + Operating Costs = Total Operating Expenses
Certificate of Insurance (COI)
Adding your COI to your business plan is a great way to show investors that you understand the risks of your industry and are financially protected in case of an accident.
This shows them that you’re a serious professional and that they’re making a wise investment that won’t be wasted on paying for something that could’ve been covered by insurance.
FAQs About Culinary Business Strategy
- Providing stellar customer service by paying close attention to customers, responding promptly, and maintaining a friendly demeanor
- Creating a loyalty program that rewards repeat customers with incentives like discounts, freebies, or other special offers after a designated number of purchases or visits
- Using social media to engage with your customer base online, responding to their comments and messages
- Surprising and delighting customers with the occasional complementary sample, side dish, drink, or dessert
- Implementing feedback from customers to show them you take their opinions seriously and want to offer them the best possible experience
- Point of sale (POS) systems: Used for everything from processing sales to inventory management and analyzing sales trends
- Online ordering and delivery platforms: Includes third-party services like UberEats and DoorDash as well as your own online ordering system
- Customer relationship management (CRM): Software that allows you to analyze data you collect from customers, including feedback and order history
- Financial management tools: Includes bookkeeping software like Xero or QuickBooks as well as programs that help you manage your expenses like Expensify
- Use an inventory management system that tracks your stock levels and automates reorders
- Monitor and review your inventory on a regular basis (weekly, monthly, or quarterly depending on the size of your business)
- Use the first-in, first-out (FIFO) method to make sure you work through older stock and minimize spoilage and waste
- Evaluate your suppliers regularly to ensure your relationship with them is still benefiting you and they’re holding up their end of the deal
Make sure your inventory is stored and organized properly, adhering to temperature control and cross-contamination standards
Reviewed by: Kyle Jude
Kyle Jude is the Program Manager for Food Liability Insurance Program (FLIP). As a dedicated program manager with 10+ years of experience in the insurance industry, Kyle offers insight into different coverages for food and beverage business professionals who are looking to navigate business liability insurance.
Updated By Alex Hastings
Alex is a Marketing Copywriter at Food Liability Insurance Program (FLIP). In her free time, she enjoys reading, birding, traveling, and finding any excuse to get brunch.
