Family-Based Business

Catering Successfully

Ken Myers and Wanda Olson

Introduction

Setting up your own catering business can be both financially rewarding and fun. Whether you cater events on a full-time basis or just part-time on weekends and evenings, the opportunities are excellent. Each catered event is a new experience and challenge with a new group of people. But the work is demanding; you'll need stamina and the ability to work under pressure.

Minnesota Law

Minnesota law (Chapter 28A.04,157.03) requires a caterer "regularly engaged in business" to be licensed and to meet other state requirements. Two examples of how "regularly engaged in business" can be defined are:

By advertising (e.g., newspaper ads, posters) for or verbally soliciting potential business.
When a reasonable amount of income and/or time is involved.

The question that many ask is, "Can I cater from my own home and not be licensed?" Legally, no. Minnesota law requires anyone preparing food for sale to do so in an approved kitchen facility. Before making this kind of investment, you may wish to start your business using one of these two approved options:

Prepare the food at the client's home or at another designated site. Your contract is for services to plan, prepare, and serve. You cannot prepare food in your own kitchen and transport it to the client's home unless you have an approved kitchen facility.
Rent and/or use an approved cooking facility, such as a church, school, child care, or community kitchen.

If you are engaged in business, whether licensed or not, you can be held personally responsible for any product you sell that causes Injury, be it a foreign object in the product or Illness/food poisoning.

Licenses

All businesses preparing food for distribution and sale are regulated and licensed to operate as a food establishment by either the Department of Health or the Department of Agriculture. Bakeries are licensed by the Department of Agriculture because the food products are under its jurisdiction, and restaurants are licensed by the Department of Health. If the business is a combination of products, apply for the type of license that comprises the majority of the business. Compliance with these food regulations, together with good food-handling practices, Is necessary to prevent food-borne Illnesses from occurring. Before applying for a license, obtain zoning approval from the county, city, or township office having jurisdiction.

The Department of Health and the Department of Agriculture have the power to shut down a business if it is unlicensed or if it does not comply with regulations. In many areas, enforcement of the food establishment license for the Department of Health rests with the local Board of Health; usually a warning notice with a time limit is issued. If you do not advertise or publicize your business, you may not be reported. You can expect to be reported if you are either very successful or if there is a case of food poisoning.

If you are licensed with the Department of Agriculture, they will inspect your establishment every four months. The Department of Health inspects establishments licensed with them at least once a year.

Development of this publication was a cooperative effort by Community and Natural Resource Development, Home Economics, and Agriculture.

Codes

If you wish to have an approved kitchen facility in your home, you can either convert part of your house or add a room, as long as this space is not accessible from the family living area and the water, sewage, and plumbing systems are approved. Many kitchens have side entrances and could be closed off from the rest of the living area. An efficiency kitchen for family use could be located in a utility room or a dining/family room. A separate building could be converted into a commercial kitchen or bakery.

A safe water supply is essential. Private water systems must be constructed according to Department of Health specifications. The water supply must meet water purity standards and is tested for coliform, nitrates, and surfactants. Private sewage systems must be constructed according to specifications of the Minnesota Pollution Control Agency (MPCA) and must be designed to handle the additional load from this business.

The greatest concern for the plumbing system is that it be free of any cross connections, back-siphoning, or backflow which could contaminate the water supply. Potential locations are: toilet tanks, hoses attached to nozzles or faucets without a backflow prevention device, wash basins with an overflow drain higher than the water faucet opening, clothes washers without a built-in anti-siphon device, or a water softener discharge line not elevated above the drain in the floor.

There must be separate sinks for food, utensil washing, and cleaning (mopping). Toilet and hand-washing facilities are also needed.

Updating the electrical service is almost always a necessity in order to meet the electrical requirements of any commercial equipment. Changes in plumbing or the electrical service may require the entire system to be brought up to code. Change of use of the building may require total compliance with the building code.

The quantities and types of food prepared, particularly the perishable nature of the food, affect the equipment and conditions required by the inspector. Refrigeration equipment must be able to maintain temperature requirements. This is especially critical if potentially hazardous food is prepared, served, stored, or transported. All equipment and surfaces must be easily cleaned and sanitized.

If your application is to the Department of Agriculture for a bakery license, the equipment must be appropriate for the products to be prepared; the equipment and related work surfaces must be easy to clean. If the application is to the Department of Health for a restaurant license to operate a commercial kitchen, equipment and materials used must meet National Safety Foundation (N.S.F.) standards. These require an approved three-compartment sink or a commercial dishwasher, as well as stainless steel counter tops in the primary food preparation area. Used equipment is often available. Other N.S.F. standards relate to the surfaces of the walls, ceilings, and floors. At a minimum, a wall surface must be painted with a high-gloss enamel. Back splashes must be of ceramic tile, glass board, or a polyester-type panel; back splashes around heated areas are either stainless steel or the canopy from the range hood. The floor at a minimum must be vinyl of Vs-inch thickness (commercial grade) with a four-inch base coving.

Equipment

The equipment needed will vary with the quantity and type of food to be served. Many persons who prepare and serve the food in the client's home are able to get into the business with a small investment in equipment. A good set of knives and a heavy-duty food processor and mixer are basic for many operations. Anything you purchase should be easy to clean and as durable as needed. Serving containers, including large bowls and trays, may be needed; some specialty serving items can be rented. If you offer the preparation of specialty foods as part of your menus, you may need additional or special equipment or pans for them. Other items you may wish to consider include skirtings for tables and items for use in centerpiece arrangements.

Good Food-Handling Practices

Sanitation rules have been developed to protect the public. Knowing how disease-causing bacteria grow and spread will help you to prevent potential problems. Disease-causing bacteria do not necessarily leave detectable odors or tastes in food. The only way to protect food against this type of bacteria is through proper hygiene and sanitary food-handling and storage techniques. Most food-borne disease is caused by bacteria spread by food workers through poor personal hygiene or poor handling techniques. Examples of good practices include: washing hands often, using clean utensils and work areas, and keeping foods out of the temperature danger zone (40-150 degrees Fahrenheit). For sanitary purposes use plastic gloves whenever appropriate. Professional Cooking by Gisslen has an excellent section on sanitation.

Catering Contracts

As with any business agreement, a catering contract should be in writing. Memories are short and a written agreement can save you from potentially embarrassing situations and financial loss. Drawing up a simple contract is not difficult and asking a lawyer to review it can be wise. It should be clear and simply stated and should include the following types of information:

Definitions (parties involved, dates, time, place)
Taxes
Guarantee
Deposit
Cancellation provisions
Payment in advance
Tips
Price increases
Extras
Excused non-performance
Provisions for beverages
Conduct of event
Displays and decorations, patron's property
Security

Menus

To compete successfully a caterer must be able to suggest menus that show a balance in color, texture, shapes, sizes, cooking methods, flavor, and cost. Standardized recipes are essential. These must be tested for quality prior to using, and it is important to establish the edible cost-per-portion (total cost of ingredients divided by the number of portions the recipe yields). Contact other caterers outside your area and review their menu selection. This will help give you ideas as you develop yours. At first it may be best to specialize in food dishes you do well and feel comfortable with while you're learning. Remember, your job is to serve the client's needs, so be prepared to take reasonable suggestions.

Developing an information packet that includes menus, examples and prices, other services you provide, and past events you have catered can be very helpful. Have available some pictures that show how you would present the food.

Your Product and Market

Prior to starting, you need to assess such things as:

The type of catering you want to engage in - cakes, full dinners, parties, hor d'oeuvres, weddings, and whether you'll be preparing from scratch or with convenience foods.
Who your clients are - clubs and organizations, working mothers, etc.
What is your competition?
Is there a need/demand for your services?
Will you need to employ staff to help with production, service, and clean-up?
Are there other services you should offer or coordinate?

Determining Your Selling Price

Besides finding your edible cost-per-portion for that particular menu, you must also review other variable costs as well as fixed costs. Fixed costs include purchases of equipment, service ware, and insurance. Variable costs are those expenses that fluctuate, such as supplies, recipe ingredients, and utility bills. Many of these costs must be expended over a period of time.

Some persons "as a rule of thumb" charge two-and-a-half to three times the cost of ingredients. In many situations this amount will cover labor and overhead and provide a reasonable profit. Nevertheless, you must also consider your competition, any special services you may be offering, and the types of events you are catering.

Insurance

Insurance is a necessary expense. This would include product and personal liability and additional coverage for the part of your home used for a business, any car or truck used for business purposes, and worker's compensation if you hire employees. Insurance protects you from the unexpected.

Business Record-Keeping

Record-keeping is not difficult but it is important and can be time-consuming depending on the amount of business you generate. An office supply store can supply needed forms for keeping track of all business transactions for evaluation and tax purposes. Your local Small Business Administration office can supply a wealth of information on record-keeping procedures.

Start-Up Costs

If you start your catering business by renting (as needed) the use of other kitchen facilities, utensils, tables, tablecloths, etc., initial costs will be minimal. This will also allow you to:

build a reputation
develop some capital for investment and expansion
evaluate how much time and money you really want to invest and the impact that this business will have on your family

The other option would be to lease or build; in both cases you are making a substantial investment. The cost of equipping an approved structure with the needed equipment (kitchen tables, refrigeration, stoves, etc.) can run $10,000 and up depending on the size and availability of used equipment.

If you have questions or wish to request a copy of any regulations or specifications, check with your local county or city health officials or call or write:

Department of Agriculture
90 West Plato Blvd.
St. Paul, MN. 55107
(612) 296-2627

Department of Health
717 SE Delaware Street
Minneapolis, MN. 55440
(612) 623-5341

Minnesota Department of Agriculture (Regional Office)
Box 491
Fergus Falls, MN. 56537
(218) 739-7218

Minnesota Department of Agriculture (Regional Office)
Nicholls Office Center
410 Jackson Street
Suite 150
Mankato, MN. 56001
(507) 389-2026

References

Baking Industry Sanitation Standards Committee. Sanitation Standards for the Design and Construction of Bakery Equipment and Machinery. 1981
Gisslen, Wayne. Professional Cooking. New York: Wiley, Inc., 1983.
- Basic cooking principles as well as general sanitation, equipment, and utensils.
Minnesota Department of Agriculture. Bakeries, Minnesota Rules. Chapter 1550.
Minnesota Department of Agriculture. Consolidation Food Licensing Law. Chapter 28A.
Minnesota Department of Health. Requirements for Food and Beverage Establishments. Statute Chapter 4625
Sherry, John E.H. Legal Aspects of Foodservice Management. NIFI, 1984.
- Reviews principles such as liability and contracts essential to any Foodservice business.
Shugart, Grace. Food for Fifty. New York: Macmillian Publishing, 1985 (7th Edition).
- Contains essential measurements, charts for adjusting recipes, and a wealth of recipes.
Splaver, Bernard. Successful Catering. New York: CBI, 1982.
- Covers equipment, transportation, planning and execution of catering both on and off premises.

Ken Myers is assistant professor in the Division of Hospitality and Home Economics, University of Minnesota Technical College, Crookston.

Wanda Olson is an Extension Specialist and associate professor in the Department of Design, Housing, and Apparel, University of Minnesota, Twin Cities.