Sunday, December 08, 2013

Is my business idea half baked?

A reader in Southern California thinks she may be running afoul of her state's laws.

She's a cake decorator who has made cakes for friends' parties. She reports that her cakes receive many accolades of "Ooooos! and Ahhhhs!" as well as requests for her business card and encouragement to start a business selling her cakes.

"I've actually done two orders for pay," she writes. "I would love to do this on a regular basis to earn extra money, as well as to test the waters to see if I could develop a customer base to start an actual business."

But she's concerned that she might be running afoul of state laws if she starts a business baking in her home rather than renting space in a commercial kitchen. She figures she'd be making one or two birthday cakes a month and even renting a small facility for three hours to complete each cake would cost far more than any profits she could bring in.

"I would be doomed to fail if I were to go all out and start a bakery with no faithful customer base," she writes.

Yet, she knows from talking to others and reading articles on other businesses that have started in this field that most of the people started out "right where you're not supposed to: in their kitchen." Should she follow suit, even if she thinks she might be violating state law?

Regardless of what others have said they have done to get their businesses started or what articles she may have read about storied bakery startups, my reader should not do anything if she knows it will run afoul of state regulations.

My reader should thoroughly research what's required to start a for-profit bakery in her area of the country and to comply with those regulations. Assuming that it's OK to operate in a particular way simply because others have claimed to have done so is foolhardy. Any penalties incurred for doing something that is in violation of state or local regulations could far outweigh the cost of renting a commercial kitchen for a couple of hours if that's what's required.

But from a business perspective, my reader should closely analyze all costs and thoroughly explore whether what her friends are telling her is required to run the business is indeed true.

As it turns out, while California regulations might once have restricted operating food businesses out of home kitchens that changed in 2012 with the passage of the California Homemade Food Act -- AB 1616, which deals with "cottage food operations." For-profit bakers can operate out of their home kitchens as long as they register their business and comply with the specifics of the bill -- none of which are onerous for a baker like my reader. The new state law became effective on January 1, 2013.

The right thing for all new business owners is to research the laws and regulations affecting the type of business they want to start and to comply with those laws and regulations. If they can't afford to do so, then they should not deliberately try to circumvent the rules so they can more cheaply start their businesses. My reader is permitted to operate out of her home kitchen, as long as she complies with the new state law. 

Follow him on Twitter: @jseglin 

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William Jacobson said...


Your reader should check with your city business licensing department on restrictions for startup bakeries. You likely can run a small bakery out of your house, especially since customers wouldn't likely be coming to your residence. There are other overheads to consider including insurance - most homeowner's insurance won't cover commercial bakeries run from the home. You may well not break even for some time - most small businesses run in the red while they are establishing their name. I doubt two cakes a month will cover your overhead but its a start.

William Jacobson
Anaheim, CA

Anonymous said...

Jeff is correct. Investigate the laws and, on the surface from what Jeff did, it seems like she is sort of OK.
I have a small business (car dealer) and know a little from doing the same thing. Start with the license board and they will refer you to the proper places (PROBABLY BOARD OF HEALTH IN HER CASE). And, now a days, the internet probably has the regulations. When I did it, I had to go to the library and copy an actual book.
Once you know the rules, make your decision to try or not try. I found all involved in my case to be fair and cooperative.

Alan Owseichik
Greenfield, Ma.

Anonymous said...

A further warning - these days, although the subject seems to be doing everything right in her planning, there now seems to be something about this country where there is someone lurking around whereever you are, just waiting to try to get you in trouble with authorities. I think the subject should keep all her dealings "quietly within friends" and forget the idea of doing anything commercial, especially when the product is food.

Charlie Seng

Clint Shaff said...

Good points, Jeffrey. It’s all about doing research and asking for professional advice regarding these matters. Any idea is still half-baked, unless it has been established at a larger market, following due protocol. And I guess, your reader had already made her plans; however, still confused on how or when she could execute it.