Gabriella Agostinelli is back, this time to dispense some much-needed advice for cottage food entrepreneurs; make us something delicious, but cover your assets. Cottage food production is not as simple as getting a permit and turning the oven on.
Small-scale food entrepreneurs have recently celebrated the passing of long-awaited “cottage food laws” in several U.S. states. Formerly, foodies with a recipe and dream were required to either process their goods in a commercial kitchen at high cost, or establish a normal bricks-and-mortar enterprise of their own. Today, cottage food laws allow home cooks/bakers to process “non-potentially hazardous” food products in their own kitchens, to be later sold directly to the public. Cottage foods typically include nonperishable shelf items (think: baked goods, preserves, nut mixes, etc.).
Aspiring “cottage” food processors need only complete a few steps to receive a government stamp of approval. Depending on one’s state of residence, interested parties may only need to participate in a food safety course, attain a local zoning permit, comply with labeling requirements, and agree to have their kitchen inspected in the case of a complaint.
Considering the incredibly low entrance costs associated with this business model, it is obvious why cottage laws are attractive. In these tough economic times, it seems a lot safer for budding food entrepreneurs to test the waters by selling goods processed from home rather than to open shop elsewhere at great expense and even greater risk of failure.
A bit of skepticism, however, is a healthy thing to consider for anyone making food under cottage food laws. Food product liability is as much of a concern for the cottage food entrepreneur as it is for giant producers like General Mills of Tyson Chicken. In an article for the Orlando Weekly, Bob Jones, an owner of a commercial kitchen well-versed in food-safety standards, Voices a typical critique. He equates running a cottage business with playing a game of “Russian Roulette,” warning, “eventually, you’re going to lose.” These risks are largely generated by a lack a “controlled environment” in home kitchens, unlike in his business, which must employ stringent food-safety standards and is subjected to great state oversight (certification/licensure, inspections, etc.).
Mr. Jones makes some very good points. Simply because a law allows you to do business in a certain way does not mean it will exempt you from responsibility if things go awry. Business Law 101: if you run a sole proprietorship, you are the business. If the business’ food made a person sick, you must pay for hospital bills. Because standard homeowners’/renters’ insurance policies usually do not cover home business operations, I highly recommend purchasing liability insurance to protect your personal assets. (Colorado is the only state whose law mentions liability insurance, but merely encourages cottage food businesses to purchase it – C.R.S.A. § 25-4-1614). If you are thinking about starting a cottage food operation, consider establishing an LLC or another business entity to minimize your liability. It is also imperative to buy some liability insurance before you sell your product, and factor the cost of the insurance into your business plan. After all, we want those foodie dreams to live on.
–By Gabriella Agostinelli