Now You’re Cooking: How to Start a Small Food Business

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In 2017, the average U.S. consumer spent a whopping $3, 365 on dining out. That’s a 6.7% increase from “food away from home” spending in 2016.

After all, they have so many options, with there being over a million U.S. restaurant locations. In total, these establishments make $825 billion in sales annually.

Now, who wouldn’t want to tap into that money well?

Launching a food business of your own, as rewarding (and lucrative) as it can be, isn’t a one-step process. There’s a lot involved. Research, testing, and licensing are only the tip of the iceberg.

Don’t worry though, as we’re here to guide you on how to start a food business on the right foot, so be sure to keep reading!

What’s Cooking?

What’s for breakfast? Or lunch? Or dinner?

What will you literally be cooking and offering your potential diners?

It’s important that you love everything on your future menu, but the bigger question is if it would sell. It should at least be something proven to sell, like sandwiches that half of U.S. adults eat every day. Or pizza, which an average American will eat about 6, 000 slices of in their lifetime.

Research is even more important if you’ll “innovate” and offer something you invented. “Coddled Eggs with Truffle Oil” sounds pretty awesome, but will it taste as amazing?

Unless you have other people (like your very blunt friends or family) test it out, you won’t know for sure. The foodie world is much like any other industry — it’s vital to test inventions before rolling them out.

Build a Solid Food Business Plan

Having an idea of what your menu will look like will make it easier for you to build a business plan. This “documentation” should include the following aspects:

Business Name

Once you have a list of potential menu items, you can use them to get inspiration for your business name. Especially those that you think will be “best-sellers”.

Or, you can go with a name that holds something like a sentimental value for you. What’s important is that your brand name and logo will convey that you’re a food establishment. It should also be a name you’d love for as long as your business is in operation.

Once you’re 100% sure about your restaurant’s name, register it as soon as you can. Keep in mind that over 543, 000 small U.S. businesses open every month. One of them can register the same name you want first, forcing you to come up with an alternative.

food business. Photo by Edward Eyer: at Pexels.
food business. Photo by Edward Eyer: at Pexels.

Business Entity

Before you start a food business, decide if you want (and can) run it solo, or under sole proprietorship. It’s the simplest form of business, giving you the right to make all the decisions. But, it also means you don’t have anyone to share the responsibilities with.

Other common business forms include a general partnership and Limited Liability Company (LLC). Remember, your choice in a legal structure will affect your taxes, so be sure with your decision!

The Location

Will you be opening your restaurant on your property? While this means you’ll work from home, your state laws may require you to have a separate kitchen. That includes using separate kitchen appliances, tools, and supplies.

If you’ll rent out a commercial property, be sure to scope the traffic in the area. It should be a high-traffic area, with lots of people on foot, commuters, and vehicles passing by. Make sure the spot also has enough parking spaces.

Startup Budget

Starting a food business requires quite a big budget and appliances are only one part of that. There’re also the cooking utensils, inventory (ingredients), rent, utilities, and labor. Don’t forget licensing and registration fees, as well as marketing and advertising costs.

The good news is, there are many types of small business lines of credit and loans you can apply for. These can help you get the funding you need for inventory and equipment purchases, and even rent.

Get All Necessary Licenses and Permits

To run a small food business, you need to get a business license and a separate food service license. If you’re selling alcohol, you also need to obtain a liquor license. Secure your Employer Identification Number (EIN) too, which is your business’ tax number.

A certificate of occupancy, a sign permit, and a seller’s permit are also often required. Depending on your state, you may also need a building health permit. To ensure 100% compliance, check with your state and local government.

Also, as you’re gathering these documents, start memorizing food regulations and laws. You and your entire team should know the Current Good Manufacturing Practices (CGMP). Make sure everyone also goes through Hazard Analysis & Critical Control Points (HACCP) training.

The laws are particularly strict when it comes to handling perishables. For starters, because they have a higher risk of contamination and spoilage. Consumption of contaminated or spoiled foods can lead to foodborne diseases.

Inventory monitoring programs, like this software, can help with the management of perishables. You can easily track packaging, delivery, and expiration dates. That way, you’ll know if you’re running out of supplies and if your current supplies are about to go bad.

Schedule a Trial Run

A few weeks before your opening date, gather your family, friends, and co-workers for a dry run. If you can, have them test everything that’s on your menu. Note all their opinions and use those insights to improve what needs improving.

Use this as an opportunity to get insights about your product pricing too. Ask for their honest, even blunt opinions if your prices are too high or too cheap.

Remember, once you decide on a certain price range, you need to stick to that in the long run. If you increase your prices a month from the day you opened, that won’t bode well with your customers.

If you haven’t decided on a price yet, check out your competition. Find out how much they’re charging for similar products. You want your prices within the same range so your business can stay competitive.

Start Spreading the Word

Once you’ve accomplished the above, it’s time to spread the word about your food business! You already have a sign permit, so it’s already legal for you to put up those signs and banners. But remember, you also need to go digital with your marketing techniques.

You need online marketing because 90% of Americans spend a lot of time on the Internet. In short, having an online presence lets you get the word out about your new restaurant faster.

Unsure how to market your new food establishment, be it a home bakery or a full-service restaurant? Then be sure to check out our ultimate guide on marketing a new business!

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Melissa Thompson

Melissa is a mother of 2, lives in Utah, and writes for a multitude of sites. She is currently the EIC of and writes about health, wellness, and business topics.