The cottage food industry, made up of entrepreneurs who make and sell food from their home kitchens, is big business in America and is part of the $120.5 billion in annual specialty food sales in the United States. These aren’t your grandma’s cookies and chocolates.
Now, thanks to new state laws and a growth in kitchen incubators, these food entrepreneurs have more opportunities to hone their crafts and make big money, as consumers look for alternatives to the usual grocery store offerings for their loved ones and special events.
So-called cottage food laws, which broaden the kinds of businesses that cooks and bakers can run from their homes, have grown in popularity since the Great Recession. The sharp economic downturn (including widespread job loss) forced state officials to seek ways to help people find new sources of income and fuel local economies, according to forrager.com.
Food sold to the public typically must be made in kitchens that meet rigorous health and safety codes and are licensed by state and local authorities. But setting up and even renting a licensed kitchen is an expensive proposition for, say, a cake maker with just a handful of sales. Cottage food laws enable some home-based food businesses to use their own appliances in their own kitchens.
Today, nearly all states have some form of cottage food law, making it easier for home cooks to whip up treats and delicacies, and eventually grow booming businesses. Now, with more kitchen incubators across the country, cooks have new options when it’s time to expand business outside their homes.
Breaking into the food industry
Inspired by their tech counterparts, kitchen incubators are essentially business incubators for food enterprises that don’t have the resources to invest in their own professional kitchens.
The number of kitchen incubators in the U.S. has grown by more than 50 percent between 2013 and 2016, according to a report from American Communities Trust.
This growth should come as no surprise, as these businesses capture three big 21st century trends: the food movement, the sharing economy and the current spike in interest of entrepreneurship as a career.
Kitchen incubators come in many sizes and serve a wide variety of businesses; some focus on high-end foods, while others cater to immigrant and low-income communities.
They’re not just churning out small-time conveyors of jams, jellies and cupcakes, either. A notable success story out of a kitchen incubator includes Brazi Bites, makers of Brazilian cheese bread. Now a multimillion-dollar company, Brazi Bites began in a kitchen incubator in Portland, Ore., and eventually was featured on “Shark Tank.”
Recipe for food business success
For foodies with dollar signs in their eyes and “Shark Tank” in their dreams, a booming food business isn’t built with only polished recipes and perfectly designed packaging. Like any founder, food entrepreneurs must get their business plans and paperwork lined up, a process that’s especially critical for anybody serving consumables to the public.
Here are five tips to ensure your new food business is a smashing success:
Protect your personal assets by incorporating or forming a limited liability company. Forming a business entity means your home, car, retirement plan and other personal holdings are protected if a customer sues after getting sick or an employee is injured while operating equipment.
Register to do business in any state where you plan to conduct business, not just the state where your business is based. If you don’t submit the appropriate paperwork, you could face fines, penalties and back taxes, among other consequences.
File an assumed name certificate if your business will be conducted in a name (Peter’s Pickles, for instance) that is different from the one on your articles of incorporation or articles of organization. Failure to get the right documents squared away could lead to monetary penalties and even criminal fines.
Work with a professional registered agent to ensure important legal documents and communications from regulators are handled in a timely manner. They’ll also help you keep track of the ever-changing regulations that govern corporations or LLCs and the food business.
Ensure your business is properly licensed before it starts operating and anytime an expansion or new direction is planned. New rules could apply if you switch from making lollipops to canning pickles or baking cakes.
After all, you’ve spent time perfecting recipes and seeking the best ingredients so your products will attract a following. Doing the same for your business (taking the time to ensure it is set up properly from the start) is paramount to growing a successful enterprise.