How to Start a Food Business in 5 Simple Steps [2023 Update]

Starting a food business online can be a lucrative and exciting venture.

Like any other online business, you enjoy low overhead costs, a large potential customer base, and the ability to reach customers globally.

But the world isn’t a perfect place. So challenges exist, like fierce competition, the need for constant innovation, and the difficulty of navigating food regulations and safety during transportation.

All these are in a constant battle to reduce your chances of success. However, quoting Alexander Graham Bell, Preparation is the key to success.

While there are chances of failing, careful planning and execution can put you on the winning side.

This five-step guide will show you how to start a food business online without failing.

How Profitable Is Owning a Food Business Online?

The Food Service Industry in the US is projected to reach $231 billion in revenue in 2023, with more growth potential in the coming years.

This presents a significant opportunity for entrepreneurs like you looking to start an online food business.

While profitability will depend on location, market demand, and business model, most food business owners earn between $45,000 and $262,000 annually, according to ZipRecruiter.

Starting and running costs, like rent, equipment, ingredients, labor, and marketing expenses, also affect profitability.

However, you might not need all of these when starting online, hence, a higher earning possibility.

What You’ll Need to Start a Food Business Online [& Associated Costs]

In the process of starting a business, the right resources can help increase your chances of success.

We’ll highlight some resources you’ll need in an online food business.

• Appliances and Supplies: Purchase commercial cooking equipment and supplies like electric cookers, pots, etc. Cost can range from $1,000 to $100,000.
• Food Items and Packaging Materials: You’ll need to buy food ingredients and other supplies. This will cost between $100 to $35,000.
• Online Ordering System: Build a website from scratch or use an online sales platform like Shopify to receive orders. Costs can vary between $30 to $1,000.
• Marketing and Advertising: Reach more audience through social media, online ads, or traditional media. This can cost between $100 to $5,000.
• Legal Fees: Consult a legal adviser to prepare the documents you need. Expect to pay at least $500 for legal services.
• Accounting Fees: Keep track of your finances through accounting or bookkeeping. This can cost between $200 to $400 per month.
• Labor Costs: Prepare to pay employee salaries and benefits, depending on the size of your operation and the number of employees you hire.

Do I Need a License or Certificates to Start an Online Food Business?

Yes, in most cases, you’ll need to obtain some licenses and certificates to start a food business online.

The specific requirements will depend on your business location and the type of food business you plan to start.

For one, you’ll need a retail food establishment permit from your local health department.

This will require you to comply with food safety laws, including proper food handling, temperature control, food preservation method, and nutrition labeling.

If you plan to serve alcohol, obtain a liquor license. A transport license is also necessary, especially if you plan to do home deliveries.

Why You Should Consider Starting an Online Food Business as a Side Hustle

Besides making a profit or having an extra source of income, here are some reasons to consider starting this home-based business.

• High Demand: Food is a basic human need; people always look for delicious and convenient options. So, you have a higher chance of making sales if your meals can satisfy them.
• Low Startup Costs: Compared to opening an offline store, starting a food business online can cost less. You can start small from your domestic kitchen and scale into a full-fledged business.
• Creative Freedom: A food business allows you to create and experiment with new recipes and flavors.
• Growth Potential: With the right strategy and hard work, you can quickly expand your online food business.

How to Start a Food Business Online in Five Simple Steps

To increase your chances of success when starting a business, it’s only ideal you follow a set of steps.

Here, we’ll highlight five steps to help you open a successful food business online.

Step One: Conduct Market Research

What market are you getting into? Who are your customers? And where are they at?

These are some of the questions market research aims to answer. Without addressing them, you’ll likely be walking in the dark.

So, research and learn about current trends, preferences, and demands of potential customers. This will help you determine the type of food business to start, its location, pricing, and marketing strategies.

For example, when starting, research the popular online food vendors and popular food types most customers are ordering.

Market research for a food business doesn’t have to be a ten-page document. You can simply do the following:

• Ask people around you what they’ll love to buy from an online food vendor.
• Check other online food stores to see what they’re selling.
• Read industry reports to learn about current market size and trends.
• Check Reddit and Quora sections to see questions people ask about online food business for extra knowledge.

Step Two: Develop a Business Plan

For a start, developing an elaborate business plan won’t be necessary. You can use a simple one-page business plan to outline your goals, objectives, and strategies.

In your business plan, include this information:

• Mission Statement
• Target Market
• Marketing Plan
• Associated Starting Costs, Budget, and Allocation
• Business Goals
• Description of Your Products and Service

Step Three: Obtain Licenses and Permits

Your state or local laws may require some licenses, like retail food establishment permits and health department permits. This is to ensure food safety according to the US Food and Drug Administration (FDA) quality standard.

Besides that, get a general business license to become a recognized entity.

Step Four: Create a Menu

You already identified your target audience, what they like, and why they buy from competitors through your market research. So, draft a menu using those details.

You can also use a survey form to ask friends and family members for suggestions.

The aim is to create a menu that offers options people want to pay for. So, consider the level of demand for each item before adding it.

Step Five: Hire Employees

You can hire extra hands to help with the on-ground operations, such as cooking and cleaning. However, ensure this is something your business can support.

Things to Consider When Building a Food Business

When building your online food business, these points can impact your level of success:

• Food Safety Regulations: Several health regulations surround selling consumables like food. You’ll need to follow them to prevent legal and financial consequences.
• Competition: High competition is expected in an industry with one of the highest annual revenue in the US, especially with the cottage food laws. However, you should be able to succeed by offering unique products or services and using effective marketing strategies.
• Time Commitment: Running an online food business can be time-consuming, particularly during peak hours and busy seasons. So prepare to put in long hours and hard work to make your business successful.
• Financial Considerations: The online food business requires good initial capital to cover expenses. You’ll need a solid business plan and budget.
• Can You Run a Food Business By Yourself? Consider that you might need to hire staff if you can’t run the business yourself.

INSPIRATION: Online Food Business Ideas

For ideas on online food businesses, you can consider the following ones:

• Specialty Food Product Sales: Sell a unique recipe or specialty food product you’re passionate about. This is a food business that you can start from home and generate continuous income.
• Cooking Classes and Recipe Sharing: Leverage social media platforms to share your favorite homemade meal recipe, tips, and tricks. There’s even more money when you offer private cooking classes.
• Meal Delivery Service: You can earn some good cash by running food delivery services. You’ll deliver meals to busy professionals, families, and individuals with limited cooking time. 

Frequently Asked Questions

Similar Businesses to Consider Starting

Here are other businesses that you can consider starting:

• How to Start a Food Truck Business: If you like the idea of preparing meals on the go, learn how to start a food truck business that makes consistent profit daily.
• How to Start a Catering Business: If you love preparing large quantities of food and managing orders, this business might be the best fit.
• How to Start a Vending Machine Business: This money-making method is becoming popular. Learn how to buy and set up a food vending machine with low capital.

Wrapping Up

An online food business has a high chance of profitability due to the fast-growing food industry. But this also makes it competitive and time-consuming, thus, the need to follow a set of planned steps when starting.

To improve your chances of succeeding as a new food business owner, research your market to know the target audience, competitors, and market size.

Then, develop a plan that outlines your goals and strategy for success. Above all, create a menu based on the demand and interests of your target audience.

What steps are you taking to start your online food business? We’ll love to help beyond this article if you have questions. Share this post and comment if it’s helpful.