Search
  1. Home
  2. Business Finance
  3. How to Start a Food Business
Published 23 February 2024
Reading Time
17 minutes

How to Start a Food Business

Starting a new business can be daunting at the best of times, but setting up a food business can be particularly challenging. Our complete guide offers information on licences, food hygiene, starting a food business from home and much much more.

If you are passionate about food, you may have already considered starting your own food business. Whether it’s a food truck, a quirky café, a chic restaurant or cupcakes from your home, our guide will take you through the steps to help make your dream food business a reality. From how to register your food business, what licences you might need and how to fund your new venture, read on to find out more.

Why start a food business?

  • Be your own boss: As the owner of your own food business, you can decide when you work, how many customers you take on and what your company culture should be like. This aspect of running a business can be particularly useful if you prefer to be self-employed because you need flexibility due to childcare or other commitments.
  • Share your passion: Starting a food business is an opportunity to spread joy to others with the food and drink you love, whether you are perfecting old favourites, showcasing little-known cuisines or creating something brand new.
  • Bring people together: Cafés and restaurants can become crucial parts of local communities, serving as hubs for friends, clubs and community groups. 
  • Work from home: Not every food business is a café, restaurant or food truck. Starting a food business could increase your independence, while allowing you to tap into your culinary passion from the comfort of your own home.

Start a food business in 5 steps

1. Research and choose your market

Before setting up your food business, it is a good idea to conduct some market research. This will help you assess your competition and your potential customers, giving you a better idea of the market you are about to enter. 

You might do this by looking at competitors or customer preferences online, getting in contact with similar companies, visiting rival businesses’ premises or simply surveying customers.

The questions you need to keep in mind are:

  1. Is there a demand for my food business?
  2. Who is my target market?

Once you complete this research, it is likely time to consider what type of food business you want to be:  

  • Café or restaurant: Whether it’s a Michelin-starred restaurant or a greasy spoon café, these businesses share many of the same responsibilities and considerations. Owners will have to find premises, hire staff, kit out their kitchens and decorate their dining spaces. These businesses can be a big challenge to start but offer the chance to build a space with its own identity that can become an integral part of the local community, as well as hugely rewarding for you as the owner.
  • Street food: A street food business will let you take your kitchen to wherever you think hungry customers will be. These vendors are often run by just one or two people and can be hyper-specialised – doing one thing but prioritising doing it extremely well. You will still need certain licences and to buy or rent a food truck, temporary premises or a pitch at a local event, but this will likely require less start-up funding than a café or restaurant.  
  • Food production: If customer-facing operations are not your thing, you might consider food production. You can run this kind of business from a commercial kitchen or from the comfort of your own home and decide to sell at different outlets, be they physical or online.
  • Catering: If you want to make food for large events, this might be the business for you. Challenges can include organising food transportation, combining large-scale with good quality and finding the right premises for food preparation.

2. Create a budget for your food business

Creating a business plan and budget will help give you a better idea of exactly how much money you need, as well as help you to work out if your ideas can realistically be turned into a business. A business plan will normally also be required if you apply for a start-up loan or more generic business loan.

For a detailed guide, read our article on how to write a business plan.

You will also need to put together a budget for your food business. Here are some costs you might need to consider:

  • Premises: Unless you are making and selling food from your home, you will need to buy or rent premises. This could be a food truck, a market stall, a commercial kitchen or a brick-and-mortar space for your café or restaurant. 
  • Equipment and furniture: Think of all the equipment you will need to make the food and drink you want to sell. This might range from a large oven to pots and pans or potato peelers. You also need to consider equipment your customers will use, like plates and cutlery. If you’re starting a café or restaurant, you will probably need to buy some tables and chairs too.
  • Food and supplies: Work out how much you will need to spend on ingredients, cleaning supplies, napkins and other supplies you will need to purchase regularly. Remember that buying in bulk can save money, but buying too much could lead to surplus and spoilage.
  • Bills: If you want to keep the lights on and the food cooking, you will need to pay your electricity, water and gas suppliers, as well as any other monthly bills. Make sure you do not fail to account for these crucial expenses. 
  • Qualifications: There are no mandatory qualifications for people hoping to start a food business, but the Food Standards Agency recommends new business owners obtain a food hygiene qualification. Contact your local authority for advice about courses that will suit your needs.

For a detailed guide, explore our five-step guide to creating a small business budget.

3. Register your food business

One of the first official steps you will take when starting up is choosing a business structure and then registering your business. You should take your time and research which business structure will best suit your needs:

  • Sole trader: A sole trader is the exclusive owner of a business and can keep all post-tax profits. It also means there is no separation between you and your business – making you personally responsible for any losses your business makes. You will need to register for self-assessment
  • Partnership: A partnership is when two or more people, labelled as partners, share the responsibilities, risks, profits and losses of a business. The three main types of partnerships are business partnerships (also known as general partnerships), limited partnerships and limited liability partnerships. You will also need to register for self-assessment if you are the ‘nominated partner’ responsible for sending the partnership’s annual tax return. All partners will also need to complete their own tax returns.
  • Limited company: If you choose to incorporate as a limited company, you will be legally and financially distinct from your business. As a limited company, you will have shares and shareholders and can keep any post-tax profits. Register as a limited company at Gov.uk.  If you’ll be running your business as a limited or limited liability partnership, you will also need to register your business at Companies House.

» MORE: Should I register as a sole trader or limited company?

Depending on the type of business you are running, you will need to acquire certain licences. You should always check with your local authority about what licences are required in your area. Here are some of the common legal requirements and licences food businesses might need to consider:

Register with local authorities

All businesses that sell, cook, store, handle, prepare or distribute food need to register with their local authority. You need to do this at least 28 days before you commence trading. Fortunately, doing so is free and local authorities cannot refuse registration requests. This applies to basically all food businesses, so you must ensure you take this step.

Food safety and hygiene inspections

After registering with local authorities, food hygiene inspections can happen at any time and you will likely not receive advance notice. These visits will assess the safety and hygiene of your preparation areas and procedures. 

Failing these inspections can result in you receiving a notice that may ban you from using certain equipment or processes. These bans can be lifted if future health inspection visits show improvements.

To properly equip your business for these inspections, make sure you have food hygiene training or a strong understanding of UK food safety regulations.

Premises licence

Certain activities require a premises licence. For example, it is a requirement for any business seeking to sell or supply alcohol, late-night food, or entertainment to obtain a premises licence from its local authority. 

So-called ‘licensable activities’ include:

  • selling alcohol
  • serving hot food and drink between 11pm and 5am
  • film screenings
  • sporting events
  • live or recorded music
  • dancing
  • theatrical performances

For most local councils you can apply online or by post. There are some differences in the licence depending on where your business is in the UK. 

For example, in Northern Ireland, the licence equivalent, known as a liquor licence (from the county court), is a simple permit to sell alcohol. The application process is slightly different, as you will need to declare your intention to apply for the licence in local newspapers, as well as displaying information about the application near or on your premises. 

Personal licence

In a business that sells alcohol in England, Wales or Scotland, at least one person must obtain a personal licence. This person is the designated premises supervisor and must authorise others working for the business to sell alcohol. 

To obtain this licence, an individual must be 18 years old, hold a licensing qualification and be willing to disclose relevant criminal convictions to their local council. 

Once you have obtained this licence, you can serve as the designated premises supervisor for any business. There may be exemptions if you are on community premises or operating within a members’ club. 

In Northern Ireland, no licence is required beyond the premises licence.

Pavement licence

If you’re running a food business such as a café, restaurant or food truck and want to provide your customers with outdoor seating on a public pavement, you will need to obtain a pavement licence. 

To obtain a pavement licence, you must apply to your local authority and provide information such as descriptions of the furniture that will be used and the area of public highway you plan to place it on. 

Even if you have spacious premises, putting tables and chairs outside in the summer months can increase the number of customers you serve and make your business more attractive. 

4. Fund your food business

To feed your customers, you are probably going to need some start up funds. At this point in the process, you will have drawn together a budget and registered your business, leaving you ready and prepared to seek funding. 

Here are some of the best ways to fund your food business:

  • Personal savings: Using your savings to start a business will let you retain full ownership and control. However, your savings may not be enough and it could squeeze your personal finances.
  • Friends and family: Seeking financial help from friends and family is never the easiest thing to do, but they can help get your dream business off the ground. Make sure to create a formal written agreement to avoid any future disagreements.
  • Small business grants: The UK has many start up business grants, with some specifically available to businesses in Scotland, Wales and Northern Ireland.
  • Government business loans: Depending on where you are in the UK, you can choose from several government business loans.
  • Business loans: A small business loan from a financial institution could kick-start your food business.
  • Angel investors: Wealthy individuals who invest in small businesses to get them off the ground are known as Angel investors. Bear in mind that they can be hard to find and will want equity or convertible debt in exchange for their investment.
  • Crowdfunding: This is funding from a wide range of investors, who normally chip in small individual amounts in exchange for perks, early access or equity in the business. Crowdfunding often takes place through an online campaign. 

Then there’s the matter of where to keep both your start-up money as well as any income you generate. While sole traders can choose to use a personal account (if their bank allows), limited companies and partnerships must have a separate business bank account as it is a legal requirement to keep their personal and business finances separate. In any case, you may decide to opt for a separate business bank account as it can also make managing finances easier, as your various financial comings and goings will not get muddled with personal spending.

5. Feed your first customers

It does not matter how good your food is – if nobody tastes it, then your business will never be a success. The good news is that there are a multitude of ways to attract your first customers:

  • Word of mouth: Tell everybody you know about your new business. Family, friends, acquaintances and everyone else. Boast about your exciting new food business and some of them are sure to become paying customers.
  • Business cards and flyers: Pin these on notice boards or post them through letterboxes to spread the word about your business far and wide. 
  • Host events: If your business has licensed premises, why not host a comedy night, quiz night, live music or another type of event? People will come through the door for the activity and spend money on food and drink. 
  • Be a vendor: Get your brand name out there by serving food to attendees of major events in your town or city. Bear in mind that you will need to contact festival and event organisers to have a stall at most events and you will probably have to pay pitch fees.
  • Do delivery: If you can make it work without compromising on quality, offering delivery of your food and drink can net you many extra customers. If you are selling fresh food to order, get your business online with food-delivery services such as Deliveroo, Uber Eats and Just Eat. It’s important to note that these websites take a commission on each order and may charge sign-up fees. 
  • Social media: Social media can be huge for lead generation. A Facebook page can build your online presence while uploading short videos to TikTok, Instagram or YouTube could even send your business viral. Food businesses of all types, from restaurants to food trucks, have racked up hundreds of thousands of views by displaying their skills, food or just what makes them different.
  • Ask for reviews: Make sure satisfied customers leave positive reviews on sites such as Google Reviews and Tripadvisor.

Can you start a food business from home?

As long as you have registered with your local authority, you can start a food business in your own home and you can sell homemade food. However, it is a good idea to check with your mortgage provider or landlord, as well as the local planning office and council as you may need their permission as well. To avoid the risk of invalidating your home insurance policy, you will need to inform your insurer that you are running a business from home.

You will also need to be prepared for your home to be inspected by an environmental health officer, just as a café or restaurant would be subject to.

Additionally, turning your home into a business may require you to pay business rates on the part of your property you use for your food business. 

Food hygiene regulations and ratings

As the owner of a food business, you must meet certain food safety standards:

  • Your food must be safe to eat.
  • Your food must be of the same quality that is advertised.
  • Customers must not be misled by labels or marketing.
  • You must be open about where you got your food and ingredients from.
  • Unsafe food must be withdrawn.
  • Customers must be alerted about why unsafe food is withdrawn.
  • Food hygiene ratings should be displayed when selling directly to the general public.

Food hygiene ratings are given following food hygiene inspections, which are run by local authority Environmental Health Departments and the Food Standards Agency. All food businesses are subject to the inspections and receive a subsequent rating that can stretch from 0 to 5. 

A 5 is a good score, while a 0 means that improvements need to be rapidly made. 

Inspectors will rate each business based on hygiene standards, the hygiene and structure of the premises and how the business handles and stores its food. 

Businesses which pose a higher risk are more likely to receive frequent visits from food safety officers. This risk is calculated based on the type of food being prepared, the number and type of customers being served and the strength of food hygiene standards at the last inspection. 

Remember, your food hygiene rating will be publicly available online, and businesses in Wales and Northern Ireland are required to display their ratings at the customer entrance to their establishment. Do everything you can to ensure your business does not receive the kind of rating that could keep customers away. 

What insurance do food businesses need?

There are no legal requirements for food businesses to have insurance, but there are many reasons that it could be a good idea. 

Public liability insurance covers claims made against your business by members of the public, covering accidents, injuries or damage to people’s property on your premises or caused by your employees. Restaurants and cafés can be busy places where accidents happen, so public liability insurance might be a sensible way to protect you and your business. 

You should also consider product liability insurance, which will protect you against claims arising from the food and drink you provide. This will help you out if customers are unwell after eating your food.

One situation where insurance is a legal requirement is if you are employing somebody. If this is the case, you need employer’s liability insurance, which will cover you for injuries and accidents your employees might suffer at work. You can be fined for not having this form of insurance after hiring employees

Obtaining buildings and contents insurance to cover any premises your food business uses is also a good idea. This will ensure property and equipment are protected against damage and theft.

Finally, goods in transit insurance can be key for a food business. This can give you protection if you or your customers’ property or stock is damaged, lost or stolen during transportation. This is a particularly important type of insurance for companies that deliver food, such as a fast food pizza restaurant that delivers to customers’ doorsteps.

» MORE: How to start a cleaning business

Image source: Getty Images

Dive even deeper

Top 6 Crowdfunding Sites UK

Top 6 Crowdfunding Sites UK

Raising money through crowdfunding could help you to start a business, launch a new project or expand the business to the next level. But determining the best crowdfunding platform for your business is a step that can turn crowdfunding failure into success.

What is Invoice Financing and How Does it Work?

What is Invoice Financing and How Does it Work?

Invoice financing can make it possible for businesses to borrow money against unpaid customer invoices. But how does invoice financing work, and is it right for your business?

What is Equity Finance?

What is Equity Finance?

Equity finance allows your business to raise money by attracting investors to buy an ownership stake. It’s a way of funding growth without having to worry about loan repayments and eligibility.

Back To Top