In this past Monday’s post, we talked about how to start a work at home catering business. That’s great you if you like to cook and cater events. However, what if you just prefer to cook or bake? In that case, making a food product, and then selling it to area markets and grocery stores, is a better bet. How do you get started?
1. Check your neighborhood zoning laws.
As noted in Monday’s post, many towns and cities are very specific about where commercial activity will be conducted- or not. If you find out that your house or apartment cannot be the site of any commercial activity, don’t fret. You may have a friend or family member who lives in a more permissive neighborhood and can help you out with the cooking or baking of your food product.
Alternately, you may need to rent out a commercial kitchen for your food manufacturing activities. While doing so adds to your start-up costs, keep in mind that using a commercial kitchen is an inevitability for you, at least if you become successful in this line of work.
2. Obtain a food vendor’s license and insurance.
You should get a food vendor’s license from your local or state health authority; doing so enables you to sell your food product at fairs, farmers’ markets and food trucks. Doing so allows you to proceed directly to step #2 without having to worry about renting space in a commercial kitchen or obtaining a food processor license.
You should also enroll in what’s popularly known as a food liability insurance program, or FLIP. This protects you from the financial repercussions of lawsuits should a consumer get sick or otherwise injure himself while eating or dealing with your food product.
3. Test your product on the small market scale.
State-specific cottage food laws allow food product manufacturers to sell certain goods at small market venues like farmers markets without having to go through expensive and time-consuming licensing and kitchen inspections.
This is great news for you because it enables you to test out different food recipes, pricing options, packing colors and sizes, etc., without having to shell out a lot of investment money. You also get to hone your selling skills for the bigger markets down the road.
4. Rent out space in a commercial kitchen.
Once you’ve determined that customers like your food product(s) and that there is enough of a profit to be made from food manufacturing, it’s time to step up your game plan and rent out space in a commercial kitchen. There are probably several commercial kitchens in your area, even if you live in a small town. Consider that churches and community centers often make and serve refreshments or hold food festivals. To do so, they must have commercial kitchens.
Restaurants and bars naturally have commercial kitchens- but these establishments are not always open and thus serving food. You may wish to contact such places to find out if they would rent their kitchens to you.
5. Obtain a food processor license.
A food processor license enables you to sell your food product(s) at grocery stores and large commercial marketplace chains (e.g., Wal-Mart). You can usually obtain such a license from your state agriculture or health department.
To obtain a food processor license, you will need to show that you are generating a food product in a safe and clean manner- thus the reason for first renting out space in a commercial kitchen.
6. Label your product in a USDA/FDA-friendly manner.
You will need to procure packaging for your food product that is functional as well as tamper-proof. Your food will also need to include a label containing a complete list of food ingredients and (optional) nutritional information. Otherwise, no grocery store will be able to accept and sell it. Finally, if you plan to sell any food products that contain meat or dairy, you will also need to follow certain FDA regulations.
You may be able to short circuit your search for appropriate packaging by buying leftover boxes, bags and wrapping directly from restaurant suppliers.
7. File for an LLC and obtain business insurance.
Operating your food manufacturing business as a DBA or sole proprietorship exposes you to a lot of personal financial risk in case there is a food issue that results in a recall or lawsuit. You should highly consider incorporating your business as an LLC, which limits your liability to just your business (as opposed to your total net worth). Alternately, if you have many partners or shareholders, you may consider filing as an S- or C-corporation.
8. Don’t forget about sales tax.
Apply for and obtain a sales tax license from your state department of revenue. You will need to charge a given percentage above the price of your product, then return that money to the state, on a quarterly basis.
9. Study the bigger markets- and then market to them.
Analyze which stores in your neighborhood might have the space and be inclined to sell your food product. Some stores focus heavily on supporting local food vendors, Other stores, like Whole Foods, even help food vendors by offering loans (up to $100,000).
You can approach store managers directly, if the grocer is small enough, but for bigger grocery stores or chains, you will need to locate the corporate buyer. To this end, it’s best if you contract out and work with a food broker who can help you with finding the right contacts and knowing the issues that consumer marketplaces face.
Also, stores will be more likely to try out your product if you offer a marketing deal with them; Whole Foods is well-known for working with vendors who offer coupons or samples to customers. It also doesn’t hurt to create and hand out a food product sell sheet to entice your area store owner.
Should you make and sell your own food product(s)?
Making and selling your own food product through area farmers markets and grocers is a great work-at-home business opportunity. As with all food-related ventures, it is best if you start small and test your product on a small audience before investing a lot of capital and labor. By starting small and working your way into larger and more lucrative markets, you are more likely to be successful.