Many a food entrepreneur, including Martha Stewart, Debbie Fields – the famous Mrs. Fields – and Paul Newman began their food empires in their home kitchens. For people skilled in cooking and baking, starting businesses in their home kitchens might sound easy enough, since they already have the equipment and ingredients needed to launch. However, owning a home-based food business has its challenges, including legal requirements and costs, which make some entrepreneurs wonder whether selling food from home is worth it.
Cottage Food Laws
Many states have enacted cottage food laws to create more income-earning opportunities for their residents. Cottage food laws, which are enacted by state legislatures and enforced by local health departments or state departments of agriculture, are designed to eliminate some of the red tape involved in commercial food production and make it easier for home-based businesses to sell food.
However, these laws limit the types of food that home-based entrepreneurs can sell. They also prohibit the amount of money that people can make; entrepreneurs who achieve financial success from their efforts may be required to submit to the same requirements as commercial food businesses. Cottage food laws vary among the states, and those interested in selling food from home should consult their local laws before launching their businesses.
States also require home-based food business owners to have food-handlers permits, which typically requires a brief training course. Most states charge a nominal fee that covers the course and the permit.
Prohibited Foods and Labeling
In a nutshell, people who sell food that they make at home are prohibited from selling any food that promotes food-borne illness, which typically boils down to foods that require refrigeration. This limits entrepreneurs from selling home favorites such as cheesecakes, ice cream, certain types of pies, and meat, poultry and dairy products. People who manufacture food at home can only sell low-risk foods such as coffee and tea blends, dry foods such as granola, chips and popcorn, baked goods such as breads, cookies and some cakes, and jams and preserves. Many food items fall within the acceptable parameters.
Home-food business owners also must label their products. The labeling requirements are simple and involve including language along the lines of “This product is made at home and has not been inspected.” Some states limit the places that home-based food manufacturers can sell their goods, which often includes farmers' markets, roadside stands and individual consumers. For their own safety, home-based food entrepreneurs should carry business insurance.
In most cases, the local health department only inspects a home-based food manufacturer’s kitchen if a consumer makes a complaint. States also require business owners to have their kitchens inspected if they’re planning to sell food to third parties, such as grocery stores. People who sell food only at farmers' markets, roadside stands and directly to consumers should take the normal precautions to keep their kitchens clean. To pass inspection, people who want to sell food to third parties may need to invest in additional kitchen equipment, such as refrigerators, sinks and storage areas, at their own expense.
Is It Worth It?
Figures are scant when it comes to determining how much money home-based food business owners make. Some earn a few hundred dollars a month from regular participation in farmers' markets and stands selling popular niche products, while others may earn more money by focusing on festivals and larger events. Still, others earn enough to call their home-based businesses a career, with the Bureau of Labor Statistics reporting that people who raise bees and sell honey can earn as much as $60,000 annually.
It's important to note that states set limits as to how much home-based food businesses can earn before needing to comply with commercial food manufacturing laws. Texas sets the bar as high as $50,000, while California’s limit is $35,000. To determine whether it makes financial sense to start manufacturing and selling food from home, a person must start with a solid business plan, itemize the costs of getting into business and conduct market research.