Click to Print

Food for Thought

How to stay on the right legal track when starting an organic food business
May 1, 2005
URL: http://www.entrepreneur.com/article/77650

Q: I want to start a business making organic baked goods from my home. Will I have any problems with legal authorities?

A: Your sense of the market is right on--organic food is one of the fastest--growing segments in the food industry. A 2004 study by Synovate, commissioned by Whole Foods Market, found that 27 percent of Americans are using more organic foods than they did the year before. And baked goods, right after organic produce, are the second-largest type of organic food purchased.

But producing and selling food for human consumption at home means you must surmount more legal hurdles than most homebased businesses. First, like all homebased businesses, your business needs to be permitted by your city or county zoning. What one community permits to be done in a home may be completely different than what's allowed in an adjacent community. If you live in a common-interest development, chances are you're out of luck for home baking--but to be sure, check your homeowners association's covenants, codes and restrictions. An exception from a prohibition in a zoning ordinance, called a variance or a conditional use permit, is easier to get than a waiver or a variance from a homeowners association.

Your next hurdle is determining whether state law allows the commercial sale of food made in a home. This varies from state to state. If you plan to sell your baked goods retail, you'll be dealing with your city or county board of health. However, if you plan to sell your organic food products wholesale, chances are, what you produce will need to be inspected by your state Department of Health.

You'll need to have a commercial kitchen, unless you're in a state like Iowa that allows food prepared in residential kitchens to be sold when gross sales are below a certain dollar amount. We've seen people put commercial kitchens in their basements or in additions to their homes.

Commercial kitchens are expensive, so first determine if the business you plan to develop will justify the investment of remodeling your home. Meanwhile, you can rent a commercial kitchen in a church, state park, campground or fire station that doesn't use its commercial-grade kitchen in off-hours or off-season. Some states even fund incubator kitchens that can be shared to encourage startups. Check out your state's small-business resources to see if this is an option for you.

Still another option is to use a mobile kitchen, such as one manufactured by Carlin Manufacturing, which makes fully equipped catering kitchens capable of serving 200 to 750 people. However, this is not a suitable solution unless you have no neighbors nearby.

While food provided by catering services is subject to the same restrictions as food produced for sale--retail or wholesale--the fact is, many catering services start by cooking in residential kitchens at home, taking the chance they won't get caught. Keep in mind, the problem for a business like yours--one that will be selling baked goods wholesale, as you probably will--is that when you take your baked goods to a retail store or a restaurant, they are apt to insist you produce a state or local health department license.

Since you'll be selling baked goods, chances are you'll be selling locally and won't be shipping via interstate commerce. This is good, because the FDA regulates goods made in home kitchens and requires compliance with all food safety and nutrition labeling laws. You also probably won't be able to count on institutional buyers, like colleges, as potential customers because they typically have their own policies prohibiting the sale or use of food prepared or stored in private homes in their facilities.

It is feasible to make organic baked goods for sale at home. There's a ready market, but to tap into it, you will first have to do some homework and probably surmount some hurdles.


Authors and career coaches Paul and Sarah Edwards' new book is The Best Home Business for People 50+.Send them your questions at www.workingfromhome.com or in care of Entrepreneur.