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How to start a home-based Cookie Business - With detailed, step by step guideance.
Starting Your Own Home-based Gift Wrapping Business Determine Start-Up Costs. First you have to determine the start-up costs. Since you would be running the business from home, this eliminates a big chunk of what your investment costs would be. There won’t be a need for office space, remodeling, utilities, permits, etc. Most people who are motivated to start a home-based business have a real passion for their work, Fagnani says. Greater sense of accomplishment. When you make a sale or shatter a goal that you set, you get a greater sense of accomplishment knowing that you made these strides as a business owner, Fagnani says. The disadvantages of a home-based. The Small Business Administration's 10 Steps to Start Your Business includes the licenses and permits you need to run a home-based business. Home Office Deduction If you use a portion of your home for business, you may be able to take a home office tax deduction.
There must dozens of websites claiming to tell you 'how to start a cookie business from home', all offering vague, general advice. We'll lead you through the process and provide links to detailed further information. The reason the other pages are so vague is because every state has different requirements and regulations; and even local zoning and health ordinances vary. So, we'll lead you through the process and take you to the state and local resources.
Start-a-Business 101 will help you start any size of business from a one person home-based business to a larger business. And it will work for any type of business including all service businesses, product businesses and Internet businesses.
First, the overview
1. State and local laws and rules
Each state has different regulations and allowances for home-based food business, usually called 'dottage foods businesses'). Fortunately, baked goods that do not require refrigeration, like most cookies, are generally included in most state's cottage foods definitions. See the page for your state below to find out what types of cookies are allowed. Verify that the cookies that you want to make are acceptable for home-based production and sales in your state.
States with Cottage Food Laws
The vast majority of us now live in states that either have cottage food laws or exemptions. So, unless you live in KS, ND, MT or RI, click on the link below:
States without Cottage food laws or exemptions:
2. Check local zoning and business license requirements.
You probably do not need to get a lawyer for this. Usually, you can just go to your local city hall and ask! Your local Chamber of Commerce can also advise you if any other business permits are required. This SBA article has much more detail.
Here are some of the more common licenses and permits:
- Business license is is required of most types of home businesses, no matter how large or small.
The following MAY be required - every state and locality is defferent, so you'll need to investigate:
- Home occupation permit: Required IF your community regulates Home-based businesses
- Food permit: if you state's cottage food laws don't exempt cookies, you will need one.
- Seller's permit: All businesses that sell taxable products in states with sales tax, that are NOT exempted as a cottage food law, will need one of these.
- Federal export licenses: If you want to ship the cookies to another country, your business will be subject to all kinds of federal regulation. Get more information on this from the Department of Commerce.
- A number of optional certifications can help in some situations: You may want to look into being certified as a small business, minority-owned, woman-owned, or a disabled-veteran-owned enterprise.
- Select your state from the list to discover which licenses or permits you'll need, together with information and links to the application process.
3. Set up the business
Even a home-based business needs to have
How To Start A Home Based Business
- a name, (verify on your state's Secretary of State's website that the name is not already in use) and (see this page for a link to each state's Secretary of State website)
- a web presence. Really. If you are over 60, you probably don't 'get it', but you must accept that EVERYTHING is done via the internet these days. You can't grow as a business without a web presence. Weebly, Wix, GoDaddy and even a dedicated BUSINESS Facebook page (not a personal page) are all viable options. You can add a business page to your personal Facebook page (in fact, that's the only way to do it). Hiring a professional designer to create your first cookie website is an idiotic idea that you will see on other websites. It is ridiculously expensive; stay with something simply and cheap, until you know you're going to be profitable. Find a geek friend with a sweet tooth. The combination of free cookies and flattery will get you a decent free website.
- Apply for local permits and licenses. Most cities/towns require a business permit or license even for home based businesses. You should check with your local health department to see if you need any other permits and if you need to collect sales tax tax. See step 2.
- Get a dedicated separate phone to use for your business. Google voice or just a second number for your existing phone are very inexpensive options. Check with your cell phone provider.
The next most important steps are:
- a separate business bank account,
- to register the business ((typically as an LLC, which protects your personal assets much more than a sole proprietorship; you can do this yourself or through NOLO.com ) with your state's Secretary of State, done on their website; (see this page for a link to each state's Secretary of State website)and to protect your home and other assets,
- an umbrella insurance policy from the insurance company that insures your home (these usually cost $100 to $200 per year). You don't want to lose your home because someone claims they got sick from one of your cookies.
And if your business takes off, you will definitely need to get an accountant and consult a business attorney.
4. Think through the details of your business
Business professionals will say you need to write 'a business and marketing plan'. That's great if you are planning to quickly become the next Apple Corp.. but really for a soccer mom who's planning to sell cookies from home, is overkill, and nonsensical. You simply need to think through and understand what you're planning to sell, what makes it different from the competition, and how you plan to make, store, sell and ship the cookies. How will you find and reach new customers?.
5. Finding customers
Word of mouth is good; but that's usually a very slow process. Social media, a Facebook page, Instagram, Pinterest and media exposure will help. Maybe donating cookies to local bake sales with a stack of postcards with phoitos and how / where to buy the cookies? Think outside the cookie box in getting the word out.
6. Where to sell the cookies
To a big extent, that de[ends upon the cottage food laws in your state. IF you are trying to stay within the cottage food / home-based business regulations in your state, then there are usually limitations on where you can sell. Typically, that means direct sales, no cross-state lines, or mail order. So, perhaps a stall at a local farmer's market? Check with local cafes and stores to see if they'll sell your cookies. But maybe your state will allow you to sell them through the internet and mail them. Again, gotta check this out first (see step 1)
How will you accept payments from your customers? A PayPal account can be used for online payments. In person, you will probably need to add a Square credit card device to your phone. Again, you should have a separate checking account (usually a free add-on to your existing bank account) for your business.
8. Packaging and labels
How will you package the cookies so they don't become a bag of cookie crumbs by the time your customers open them? Look at cookie packages in stores, then Google 'cookie packaging' You can find them online, or often at your local Sam's Club or Costco. Labels? You can design and print then on your home computer, and a color printer. Office supply stores, like Staples, sell many types of label stock. Most states have very specific requirements as to what must appear on a food product label. And example from Colorado is shown at right. Again, see your state page for specific requirements.
9. Delivery and Shipping
If you are selling selling to local stores and at a farmer's market, you'll probably transport them in your own car. Be sure they are secure and meet any health department requirements.
If you are fulfilling orders that you take online or over the phone, you will likely be shipping them by DHS, FedEx or the USPS. Check out each of them, find out which offers the best service at the best price. And close; you don't want to have to fight traffic every day to ship cookies!
10. Understand what it takes to make a profit
Before you make your first cookie, you need to understand how many you will need to sell at what price in order to at least break even and then make a profit. What price do you need to get for that to happen. It's basic math. The simplest way is to make a spreadsheet in Excel to identify all of your costs (one-time costs, like purchase of a KitchenAid mixer, recurring costs, lice annual licenses; and ongoing costs, like flour, postage, raw materials, hiring additional helpers, etc.)
At the end of the day, as much as you enjoying making cookies, remember, it is a business. If you are not covering your cost and earning a reasonable wage in the process, is it worth doing? So keep up with the accounting, and be sure to include ALL costs, including your TIME! Save all business related receipts!
12. Trial runs and working out the kinks - in advance
Making cookies to sell as a business is different than making them for your child's class at school. You need to have consistency, so customers can count on the quality, taste and appearance. You'll want to make some trial runs, and in the process look for any points of failure, things that can go wrong, things that would slow you down or undermine quality and consistency. Work out your methodology and routine for baking and delivering your cookies. You may want a routine like baking in the morning after the kids go to school, then delivering those fresh cookies to your local customers. Then spending the afternoons, cleaning up and developing new customers, doing marketing and accounting.
And take photos to use in marketing and on your website.
Finally, continue to innovate and improve
Expect to make mistakakes and have setbacks from time to time, but especially in the beginning. Learn from each mistake, and improve. Don't just fix the mistake; fix the cause of the mistake. Continually evolve and learn from the competition. Try new flavors and combinations. ANd when you become the next Mrs. Fields or Famous Amos, tell people you started with this checklist! :)
If you are thinking about opening a food business, there are many regulatory requirements that you will need to meet. Some of these requirements apply to all food businesses, and some are specific to the particular food product, such as low-acid canned food, seafood, or juice.
This information provides a cursory overview of regulatory requirements that relate to starting a food business. In addition to the Food and Drug Administration's (FDA's) requirements, your food business will be subject to other federal, state, and local requirements. These will vary depending on the your product and the type of facility you operate. If you are planning to operate a food business, you may want to discuss your specific product and facility with the FDA District Office and the state and local regulatory agencies that have jurisdiction. These discussions will help you identify what state and local regulations must be met related to operating a food business.
On this page:
- Additional Information
Food Businesses Subject to FDA Regulation
FDA regulates all foods and food ingredients introduced into or offered for sale in interstate commerce, with the exception of meat, poultry, and certain processed egg products regulated by the U.S. Department of Agriculture (USDA).
The Center for Food Safety and Applied Nutrition (CFAN), works with FDA field offices to ensure that the nations' food supply (except meat, poultry and some egg products, which are regulated by USDA) is safe, sanitary, wholesome, and honestly labeled and that cosmetic products are safe and properly labeled.
Examples of Food businesses NOT regulated by FDA:
- Retail food establishments (i.e. grocery stores, restaurants, cafeterias, and food trucks), which are regulated by state and local governments.
- Farmers markets
If you are starting a home-based food business, you will need to understand the regulations of FDA and your state and local health department. Local and county health agencies inspect food service and food retail establishments, provide technical assistance to food facilities and educate consumers about food safety.
Under federal regulations at Title 21, Code of Federal Regulations (CFR), section 1.227 (21 CFR 1.227), a private residence is not a “facility” and thus, is not required to be registered with FDA.
A private residence must meet customary expectations for a private home and does not otherwise include commercial facilities in which a person also happens to reside. Thus, a private residence (domestic or foreign) that meets customary expectations for a private residence that is also used to manufacture, process, pack, or hold food need not be registered.
Be sure to carefully review the regulations to understand how they apply to your unique set of circumstances.
Requirements governing what FDA regulates:
- Public Health Service Act (several provisions of this act provide FDA with important statutory authority, such as the authority to issue regulations for the control of communicable diseases)
Food Facility Registration
Facilities that manufacture, process, pack, or hold food that is intended for human or animal consumption in the United States must register with FDA before beginning these activities. The registration requirement applies to any facility that conducts these activities, unless a facility is specifically exempt under 21 CFR 1.226. For example, farms, retail food establishments, and restaurants are exempt from food facility registration requirements.
For a full list of exempted facilities please visit the links below.
Requirements governing food facility registration:
- Public Health Security and Bioterrorism Preparedness and Response Act of 2002 (Bioterrorism Act)
How To Start A Home-based Business Webinar
Food imported into the United States must meet the same laws and regulations as food produced in the United States. It must be safe and contain no prohibited ingredients, and all labeling and packaging must be informative and truthful, with the labeling information in English (or Spanish in Puerto Rico).
All imported food is considered to be interstate commerce.
As of December 12, 2003, FDA must be notified in advance of any shipments of food for humans and other animals that are imported into the U.S., unless the food is exempt from Prior Notice.
Prior Notice of imported food shipments provide FDA with an opportunity to, review and evaluate information before a food product arrives in the U.S., inspect and intercept contaminated food products
Food manufacturers, processors, packers, transporters, distributors, receivers, holders, and importers are required to establish, maintain, and make available to FDA upon request certain records that will allow the agency to identify all food products handled by the facility.
For instance, if your business is required to register under the Bioterrorism Act and makes cookie dough that is subsequently baked and packaged by another facility, your records must include the names and addresses of the facilities from which you get your ingredients, plus the names and addresses of the facilities where you send your dough to be baked and packaged. This is also known as 'one up, one down' in the distribution chain.
Depending on the type of food business you operate, your food business may have to keep records in addition to those required under the Bioterrorism Act and to make them available to FDA. You may want to consult Title 21 of the Code of Federal Regulations to determine what records are required for a specific type of facility and operation. Requirements may vary depending on the food commodity and the type of food processing in your business.
Requirements governing recordkeeping:
- Public Health Security and Bioterrorism Preparedness and Response Act of 2002 (Bioterrorism Act)
Good Manufacturing Practice Requirements
Current Good Manufacturing Practice (cGMP) regulations require that food offered for sale or introduced into interstate commerce be produced under safe and sanitary conditions.
Certain food commodities have additional requirements because of inherent hazards, particular attributes, or specific manufacturing processes. For instance, certain egg producers must follow the Egg Safety Final Rule in order to reduce the spread of Salmonella Enteritidis, a known pathogen of eggs.
Requirements governing cGMP:
- Commodity Specific Information (Eggs, Milk, Seafood, and more)
Food manufacturers are responsible for developing labels (including nutrition information) that meet legal food labeling requirements. All labeling of FDA-regulated food products must be truthful and not misleading. Proper labeling, including nutrition labeling and labeling for the major food allergens, is required for most prepared foods.
Note: The labels of food products sold in U.S. interstate commerce must be in English. However, foods distributed solely in Puerto Rico may bear labels in Spanish instead of English. See Compliance Policy Guide Sec. 562.750 Labeling of Food Articles Distributed Solely in Puerto Rico.
Requirements governing the labeling of foods:
- Manufacturers may choose to hire a commercial laboratory to perform analyses of foods to determine nutrient content. FDA cannot recommend any particular laboratory.
- The United States Department of Agriculture’s Food Nutrient Database can be used to develop appropriate nutrient information for products. This information may be used in conjunction with food product recipes to calculate nutrition information required for food labels.
- FDA's Nutrition Labeling Manual provides technical instructions to manufacturers about how to develop and use nutrition databases for food products.
Registered facilities must report when there is a reasonable probability that the use of, or exposure to, an article of food will cause serious adverse health consequences or death to humans or animals. Information is available about how to report these situations to FDA's Reportable Food Registry.
FDA allows conventional food manufacturers, processors, packers, transporters, distributors, receivers, holders, and importers to forward reports of serious adverse events in connection with their products to FDA by filing Form 3500.
FDA requires reporting of serious adverse events involving dietary supplements. See Dietary Supplements - Reporting an Adverse Event and Guidance for Industry: Questions and Answers Regarding Adverse Event Reporting and Recordkeeping for Dietary Supplements as Required by the Dietary Supplement and Nonprescription Drug Consumer Protection Act for additional information.
The FDA Food Safety Modernization Act (FSMA), signed into law in January 2011, enables FDA to focus more on preventing food safety problems rather than relying primarily on reacting to problems after they occur. See Preventive Standards Under the Food Safety Modernization Act for more information.
Unless specifically exempted by FSMA, the owner, operator, or agent in charge of a facility will be required to:
- Evaluate the hazards that could affect food manufactured, processed, packed, or held by the facility;
- Identify and implement preventive controls to significantly minimize or prevent the occurrence of such hazards;
- Provide assurances that such food is not adulterated under section 402 or misbranded under section 403(w) of the Federal Food, Drug, and Cosmetic Act;
- Monitor the performance of those controls; and
- Routinely maintain records of this monitoring.
Note: FDA is currently developing proposed regulations to implement requirements under the FSMA. Information about FSMA implementation is posted on the FDA website. You can sign up for FSMA updates to receive updates on implementation and progress via e-mail.
Investigators with FDA's Office of Regulatory Affairs (ORA) inspect FDA-regulated facilities. Alternatively, FDA may arrange for state regulatory officials to conduct inspections on behalf of the agency. ORA offices are located throughout the country. A list of local ORA offices provides a point of contact for manufacturers and distributors located within each jurisdiction. State regulatory agencies can provide information about their state and local agencies' contacts, requirements, and inspections.
FDA inspects food facilities on a varying schedule based upon the risk level of the product, time elapsed since previous inspection, and compliance history, as well as other factors. For instance, infant formula facilities are inspected annually.
FDA regulates both finished dietary supplement products and dietary supplement ingredients. Dietary supplements are regulated under a different set of regulations than those covering 'conventional' foods and drug products.
Dietary supplements are regulated under the Dietary Supplement Health and Education Act of 1994 (DSHEA). However, dietary supplement manufacturers and distributors are not required to obtain approval from FDA before marketing dietary supplements. Before a firm markets a dietary supplement, the firm is responsible for ensuring that the products it manufactures or distributes are safe; any claims made about the products are not false or misleading; and that the products comply with the Federal Food, Drug, and Cosmetic Act and FDA regulations in all other respects.
Responsibility of a Food Facility
Under provisions of the Federal Food, Drug, and Cosmetic Act (FFD&C Act), and FDA's implementing regulations found in Title 21 of the Code of Federal Regulations, food manufacturers, processors, and distributors are responsible for ensuring that their products that are intended for distribution in U.S. interstate commerce are safe, sanitary, and labeled according to federal requirements.
Specific Food Product Requirements
Certain foods, such as low-acid canned foods, milk, eggs, juices, seafood, and infant formula, have additional product-specific regulatory requirements to ensure that they are healthful and free of contamination.
- Local Health Department: Please speak with your local health department to determine if you will be required to meet state and local laws.
- Advertising: The Federal Trade Commission (FTC) primarily regulates advertising. See Advertising FAQs: A Guide for Small Business for additional information on advertising regulations.
- Business Development: The U.S. Small Business Administration (SBA) can assist you with developing a business plan for your food or beverage company.
The information provided on this webpage is an informal communication that is not intended to be guidance. FDA's good guidance practices, its policies and procedures for developing, issuing, and using guidance documents, are set forth in 21 CFR 10.115.
CFSAN's intent in posting this information is to provide an overview of the subject matter, with links to more detailed information such as federal laws, regulations, guidance documents, and other federal agency websites. Additional information about state and local laws, regulations, requirements, and guidance may be available from state and local agencies and resources.