19/06/2025
Insights
Cafes, restaurants, mobile food businesses and catering companies have notoriously high failure rates. The insolvency rate in the hospitality and catering sectors hovers at around 10%, which is far higher than the economy as a whole. Of course, there are plenty of successful hospitality firms out there, but those high failure rates mean catering businesses are closing all the time.
When you’ve put all your efforts into running a successful catering business, the prospect of closing it will seem daunting, and you may not be familiar with the process. This checklist for closing a catering business covers the basics so you can bring it to an efficient and responsible end.
How to close a catering company
Choose an appropriate closure method
Business failure is just one reason people choose to close catering companies. Alternatively, you may want to retire, return to employment or no longer need the business. Whatever your reason, it goes a long way to determining the procedure you must use.
- If the business can afford to pay all its debts and you no longer need it or want to retire, you can dissolve it by striking it off the Companies House register. You can also try to sell it.
- If the company is struggling financially and cannot pay its debts, you must liquidate it.
Inform your team
Regardless of the procedure, the first step in ending your food service business is to inform your team. Giving your staff as much notice as possible and setting a firm date for when the company will cease trading will enable them to start the process of finding other work.
You must also inform customers, suppliers and other parties with an interest in your business.
Contact an Insolvency Practitioner
If your company has debts it cannot pay, you cannot close it yourself. Instead, you must contact a licensed Insolvency Practitioner. They will assess the business’s financial position and explain your options. There may be informal and formal company rescue methods they can use to turn the business around. For example, you may be able to make a payment plan with your creditors or arrange alternative funding.
If that’s not possible, liquidating the business may be in everyone’s best interests. Acting as the liquidator, the Insolvency Practitioner will take control of the company and close it on your behalf.
As part of that process, they will sell your assets at an insolvency and liquidation auction to raise money to repay your creditors. And, as long as you have run the business responsibly and met your legal duties, any debts the company cannot repay will be written off.
List the business for sale
If your catering business is solvent, you can close it yourself. An effective way to maximise your return is usually to sell it as a going concern. A specialist business sales broker can help with that. They will value the business, create a listing and advertise it widely to help you achieve the best possible price.
Wind down its affairs
If you cannot sell the business as a going concern - for example, if it cannot continue without you - you should start winding down its affairs. You should look at your current lease to determine your notice period. If your lease doesn’t have a break clause, you may have to explore your options to end the lease early, which may incur penalties.
You must also bring any ongoing contractual agreements to an end. It may be easier and more cost-effective to fulfil your contractual obligations with suppliers and business partners rather than trying to end them early. Once you have fulfilled or ended contracts and planned an exit from your lease, you can cease trading and make your employees redundant.
Sell its assets
When the business has ceased trading, you can sell any assets you don’t want to keep. Commercial ovens, restaurant furnishings, stainless steel prep tables, mobile food vans, coffee machines, steamers and vacuum packers are all assets you can turn into cash.
There’s a thriving market for good quality, used catering assets, and specialist catering equipment auctions are a quick and cost-effective way to sell them.
Dissolve the company
You can now start the process of dissolving the company. You must inform HMRC, pay any tax you owe, submit final accounts and close the business’s bank accounts.
You can then apply online to dissolve the company voluntarily. As long as you are eligible and have met all the requirements, Companies House will strike the business off the official register and it will no longer exist.
Draw a line under it and move on
Whether the business failed or you wanted a new challenge, closing your catering company is a big step, and you may be emotional, particularly when turning the lights off for the last time. However, you can now look to the future.
If you sold the company’s assets at auction, you may have the funds to start something new. Even if the company failed, you can still set up a new business in the same sector, or you may prefer the stability of employment.
Expert assistance when selling catering company assets
At Eddisons Asset Auctions, we can help you work through your checklist for closing a catering business with our catering equipment auctions. Find out more about our professional asset valuations and sales service, and get in touch for a free asset appraisal.
Get in touch with the Eddisons team
Please contact us for more details and information
