Starting a Home-Based Food Production Business: Making Your Culinary Hobby Your Job
If
it is your passion to reap the rewards of your culinary skills by starting an
at-home catering or food business, you can find yourself at the center of a
very rewarding form of business ownership.
In
addition to providing the flexibility of a work-from-home business model, it
can also offer a low risk entry into the competitive and ever-popular
restaurant and food service business industry. And, it will allow you to learn
the ropes at your own pace, in the familiar surroundings of your own kitchen!
Take Martha Stewart, for example: She famously entered the food service
business with a basement-based catering company in 1976. From there she quickly
branched out and opened a gourmet food store, before entering the media
industry and becoming one of the most successful lifestyle brands in the U.S.
Of
course, before you start a home-based food business you will need to understand
the rules and regulations that govern the production of food for public
consumption in an at-home environment. For example do you need a separate
kitchen? What about product labeling? And so on.
You'll
also need to pay attention to the basic legal and regulatory requirements that
all small business start-ups have to address (registering your business,
getting a tax ID, e-commerce, etc.). And lastly, do you need financing for your
venture?
All
this can seem overwhelming, so here are five steps that you can follow that
will help comply with the rules and regulations that govern home-based catering
or food production businesses:
1. Ensure that You and
Your Home Are Properly Equipped for the Business of Food Production
While
this isn't necessarily your first step as a home-based food business owner, it
is something you will need to consider before you kick-off your new
venture.
If
you already know what product(s) you intend to produce, ask yourself if you
have the right equipment with which to adequately prepare, cook, store and
transport your product. Will you need to invest in a separate kitchen or
additional equipment to scale to your business needs (many states forbid the
use of residential kitchens for commercial food production)? How do you intend
to support the ebb and flow of production? Are you willing to hire employees?
And, once you share control of food production, how will you ensure consistent
quality standards?
Some
local governments also restrict at-home commercial food production, so be sure
to check out local zoning laws
and contact your local Public Health Department.
2. Finance your
Home-Based Food Business
While
starting a home-based food business can be low risk, you may need to consider
available financing options to help cover your start-up equipment or other
asset costs. The government's Small Business Administration (SBA) offers a
variety of loan programs - it won't lend you the money, but the government does
provide a guaranty to banks and lenders for money lent to small businesses. A
great option is the SBA's Microloan
program, which guarantees loans up to $35,000 but typically averages $13,000.
Find other loans using the government's Loans
and Grants Search Tool.
3. Register and
License Your Home-Based Business
Once
you are ready to start your business venture, you will need to take the
appropriate steps to "register" your business with your state and county
government; obtain appropriate food service and general business permits; as
well as register with the IRS. The government (through Business.gov) provides a lot of guidance on making sure your new
business is operating legally; check out this guide on Steps to Registering a Business.
4. Understand the
Regulations that Govern Food Production
Aside
from ensuring that you can produce food for commercial purposes from your home,
you will also need to understand and comply with a variety of laws that govern
food preparation, food safety, product packaging and labeling, etc. At the
local level, your county's Public Health Department is responsible for regulating commercial food
production activities, and regulations vary from jurisdiction to jurisdiction.
If
you produce a food product that is shipped across state boundaries then the FDA and Department of Agriculture both provide compliance guidelines. For an overview of
federal regulations that affect this industry, check out the resources on
Business.gov's Restaurant and Food Service Business Guide or visit www.foodsafety.gov.
5. Marketing Your Food
Product or Services Online
If
you intend to accept orders or even just advertise your food service business
online via a Web site, there are a few government laws that you'll need to
follow with regard to e-commerce, sales tax, truth in advertising, data
privacy, and so on. Find out more at Business.gov's Online Business Compliance Guide.
So
these are five basic steps you need to consider before embarking on a
home-based commercial food production or catering business. Since much of the
regulation is at the state level it's worth talking to a small business expert
in your community to get practical advice. The SBA has local offices
across the country; Small Business Development Centers and SCORE
can also help you get started.
Additional Resources
Food Entrepreneur Resources from Penn
State University
includes tips and guides to help you step back and understand some of the
general business ins and outs of operating an at-home or small food production
business.
Business Guide provides resources that
will help you learn more about working out of your house, starting a home-based
business, and managing your business within the law.
You Start Your Home-Based Business: Do Some Due Diligence
Doing
Business in Your Town: Navigating the State and Local Government Maze
Women Business Owners - Finding the
Right Loans, Grants and Financing
