Home Is Where the Stove Is: Location
Whether your specialty food business operates out of your home only selling to your personal friends, has a retail shop as a minor component of the business, provides retail outlets with product, or is a direct-to-consumer national mail order operation will, of course, have a major impact on what type of location you need to set up shop in. This chapter will take each one into consideration.
Let’s start with the smallest of possible specialty food setups—food produced in the home, known as the “cottage food industry.” While this may be small in regard to the size of each individual business, it is by no means small in overall size within the food industry. The Harvard Food Law and Policy Clinic states that “the past few years have seen a marked increase in the amount of local and small-scale food production in the United States” (“Cottage Food Laws in the United States,” August 2013). Accompanying this increase “has come a push to allow individuals to produce and sell nonpotentially hazardous foods [baked goods, jams, jellies, e.g.] made in their home kitchens, outside of expensive permitting and licensing procedures. . . . therefore reducing the barriers to entry for small-scale producers while recognizing the low-risk nature of these products.”
By definition, a cottage business is set up in the home. And while there is no restriction that you have a commercial kitchen in which you make your product, it does not mean there are not rules to follow. And it typically means that it is difficult to sell your product across state lines since even states that permit cottage food businesses have differing regulations.
aha!
Even though you operate your specialty food business from your home, you should still set your business up as a legal entity, carry insurance on the business, and keep your financials for your business separate from your personal financials.
—“10 Tips for Starting a Home-Based Food Business” by Jennifer Goforth Gregory, for The News & Observer
How you proceed from the cottage business definition is up to you and the laws in your state. You do not need a commercial kitchen (although the next section outlines what is entailed and how one of our specialty food mentors did create a commercial kitchen in her home) and typically you do not even have to have your home kitchen inspected. However, that does not mean that you don’t want to consider the things that will be important to you and the success of your business such as:
Is your kitchen set up in some efficient way conducive to creating food products for sale?
Are other family members okay with your plans for a food business operated out of your home?
Is your family’s schedule conducive to your using the family kitchen for a food business? Are your spouse and children off to work and school all day making the 9 A.M. to 2 P.M. time period a great time to do the cooking for your business?
Is there a place in your home environment to store the supplies you will need to create your food product? Don’t forget it’s not just food items you will need, but you may need food containers, boxes, oversized cooking vessels, extra utensils, etc.
Does your home have a place that can be set up exclusively for the office work of the business, even if that is just a desk in the corner of the dining room that no one will disturb?
Does UPS, FedEx, and other carriers know how to get to your house? Can you get things shipped to you in a timely manner? Does your area have overnight priority or even Saturday delivery available? This might be more important than you realize!
tip
If you want good advice on equipment, go to the website of America’s Test Kitchen. There you will find equipment reviews. And you can find out where in your region ATK’s TV show is on or watch it on the website. These folks put cooking utensils, appliances, and all kinds of cookware to the test—everything from bench scrapers to cookie presses to colanders.
Supplies for Your Homebased Food Business
First and foremost, if you are going to be serious about your food enterprise, you should use separate supplies, utensils, and cookware for your business than for your family cooking. You perhaps won’t want two microwave ovens or two baking ovens, but a cupboard set aside for other items is a good idea.
Buy as high quality as you can afford. You can always trade up when you start to bring in some income—that’s what is meant by using the income in your first couple years to reinvest in the business.
Don’t just think about the equipment you need but also think about what can make you more efficient. Sure, you can get by with a hand mixer for quite a while but what else could you be doing if you weren’t standing there holding the mixer, but instead had a KitchenAid countertop mixer?
What you will need depends a lot on what you are planning to make for your specialty food. Some basics include:
Mixing bowls
Measuring cups
Measuring spoons
Spatulas
Large spoons
A set of knives
A knife sharpener
Egg separator
Spreading knives
Pastry cutter
Frosting bag and tips
Prep bowls (those little Pyrex bowls that you can measure things out ahead of time and just dump in when the time is right)
Corian cutting boards of different sizes
Baking pans (different sizes as well as glass and metal)
Cookie sheets of varying sizes
Muffin tins, mini and traditional sized cups
Cooling racks
Frying pans (several sizes)
Microwave oven
Mixer with variety of attachments
Food processor
Grinder
Graters
warning
If you are planning to start a cottage food business, read the brochure “Cottage Food Laws in the United States” by Harvard Food Law and Policy Clinic in its entirety at http://blogs.law.harvard.edu. While all states are different and you need to research the laws in your individual state, this brochure will give you a broad overview of potential laws and their purpose.
The list could go on much longer, but much of what you will need will depend on what kind of food you plan to make. Jams and jellies will require different preparation tools than baked goods like whoopie pies or specialty cakes. Some foods will require frying pans and stovetop ware, others will require baking pans and egg beaters.
The dreaded “commercial kitchen” does not have to be dreaded at all. If you want to do anything more than a simple food business selling to your personal friends, you will need to embrace the idea that the kitchen you operate out of needs to be of a grade that would at the very least pass inspection by a licensing body in your state. In Washington State, for example, where our mentor Susan Desjardins Burns and her Confectionately Yours toffee business is located, “no food service can be approved in a home kitchen, unless there are two separate kitchens. A commercial kitchen must be totally separate from the kitchen used by the people who live there.”
Susan tried first renting commercial kitchen space but got frustrated with the lack of attention to cleanliness and detail from other renters of the space. She decided if she was going to make the toffee operation a success, she was going to need her own commercial kitchen. Susan went about carefully researching everything she needed to know and keeping in touch with the food safety authorities who would be inspecting and giving the kitchen the stamp of approval. She took no chances that her kitchen would not be approved—if she had a question, she didn’t guess the answer, she asked. And now her garage has been transformed into a commercial kitchen a step away from home.
warning
Many states that allow for cottage food businesses still require that certain regulations are followed such as that it is the actual seller who is producing the food and that labels indicate that the food was not processed in a commercial kitchen subject to health department inspections. Some states have limits on gross annual sales.
Homestead Food Operations
Prior to June 2012, home food manufacturing in New Hampshire required a homestead license. In June 2012, the state signed legislation changing the licensing requirements for home food operations. Now, you do not need a homestead food license if:
You sell nonpotentially hazardous (which mostly means cooked products but even some of those are not legal to make at home) only from your own residence
You do not exceed gross annual sales of $20,000
Still required, however, is proper labeling that includes the name, address, and phone of your operation, ingredients in descending order of predominance by weight, any major food allergen, a product code which identifies batch number, and the phrase “This product is exempt from New Hampshire licensing and inspection” in at least 10-point font. (source: NH Department of Health and Human Services, www.dhhs.state.nh.us)
You can see that even with more lenient regulations such as the homestead license in New Hampshire, it is still important to check with your licensing health department and make sure you are doing everything absolutely legally for your food business.
The main focus of a commercial kitchen is the creation of safe food products—and who wouldn’t want to guarantee their customers as safe a product as possible? Think stainless steel—countertops, appliances—that don’t harbor food contaminants and is highly cleanable. Other considerations are getting running water and dishwasher water to a high enough temperature to kill any bacteria.
A commercial kitchen is not cheap but it also doesn’t have to be cost-prohibitive. Burns’ garage renovation commercial kitchen came in at around $24,000. Obviously it is not the right move for a very small operation that never plans to get bigger—it’s going to take a lot of cupcakes to break even on a $24,000 investment. However, in an example like Confectionately Yours, you can also count in the potential added value to your home.
stat fact
According to the Harvard Food Law and Policy Clinic, all but eight states (CT, HI, ID, KS, NJ, ND, OK, WV) and the District of Columbia allow “cottage food operations.” However, keep in mind that there is no consistency among each of the 42 states that do permit cottage food operations so you need to check carefully with the laws in the state in which you set up shop. Some states create definitions of such terms as “food establishment” that allow for local laws to apply to cottage food businesses.
These are some key things to think about before deciding to use your home as your base of operations. A good thing to do is visualize a busy day in the life of your business from start to finish and think through everything that might come up in that day. Also, talk with a couple of people who have been there, done that. Ask for the good and the bad stories. Then decide if your home has, or can have, all the right stuff from which to operate.
fun fact
The Hispanic market continues to be a growing force. According to the article “For the Hispanic Market, the Future Is Now” in the September 8, 2015, online edition of Food Business News (www.foodbusinessnews.net), in the decade between 2000 and 2010 the U.S. Hispanic population grew by 43 percent, is predicted to grow by 167 percent between 2010 and 2050, and currently accounts for 17 percent of the U.S. population.
Of course, the idea of a zero commute can be very appealing and can add to the profit you can make on your business. On the other hand, a zero commute means you can find yourself in your home 24 hours a day. You might want to make sure to schedule mixing it up a little. Depending on how much product you plan to sell, you could set aside two days a week to make product, two days a week to bring it to wherever you plan to sell it, and one half day a week doing your bookkeeping and supplies ordering.
One thing about working from your home on your own small business is the beauty of flexibility. While you need to be serious about your business to make it successful, don’t trap yourself into not enjoying the flexibility this setup should afford you.
A specialty food business that is focused on selling at retail will mean that from the outset you will be looking for the best location and type of physical space for a retail operation. Retail is a very special business type where you have a set base of operations and the expectation is that your customers will find you, visit your shop, and buy your products.
fun fact
No matter where you set up shop, if you are hanging your toque on sustainability, recyclability, and fair trade you need to be aware of the trends and places in your business where this matters. Even the big companies pay attention to these trends—Nestlé announced that beginning in 2016, “cocoa used in the formulation of its KitKat branded bars will be sustainably sourced” according to “Nestlé Shifting KitKat Brand to Sustainably Sourced Cocoa” in Food Business News’ online magazine, September 8, 2015.
Are you a high-end specialty food business? Locate in an area with specialty boutiques—Main Street downtown or an upscale shopping mall. More day-to-day food like bread or cupcakes? You can still produce a topnotch, upscale product but an individual cupcake or loaf of bread is still accessibly priced so a busy location along a main thoroughfare might work fine.
Your storefront will be the first impression your customer gets of your business—unless they found you on the internet, in which case your website will be their first impression. Of course, if you enticed them with a fabulous website that is professional and classy, your store had better live up to their expectations. A customer could drive to your location excited by what they saw on your website only to be turned away from ever entering your door because the view from the street is rundown, dirty, sloppy, or just simply not what they were expecting. Branding your business includes keeping with a particular style from your computer presence to your physical presence as well as the look of your product labeling. For example, if you decide on a country primitive style for your product labels, it would be inconsistent to have your physical store showcase a contemporary, artsy look.
Landscape in front of your store—even if that just means a couple of whiskey barrels with flowers in them—but if you do, make sure the landscaping is kept neat and the plants are watered. Dead plants in broken wood barrels with trash littering them are a sign of how the rest of your business is run.
A leased site means you need to make sure the landlord keeps up with fixing broken stairs, cracked concrete, and difficult doorknobs. If you choose to buy or even if you lease, make sure the windows are always clean (a window cleaning service is typically worth the money). If you are open, make sure the “open/closed” sign is turned the right way. These all may seem like small things, but turning customers off before they ever get a chance to sample your exquisite whoopie pies is not a way to make a business thrive.
Once you get them in the door, you need to once again wow them with your appearance. Food businesses have an extra special need to appear squeaky clean. Make sure displays are fresh—so don’t create display areas so huge that it is expensive, time consuming, and takes a lot of product to keep them appetizing.
warning
If your retail food business includes take-home meals and you cook aromatic foods for prepared meals, you do not want to locate your business next to a fancy dress shop. You will soon have a disgruntled neighbor who is unhappy that their haute couture smells like your haute cuisine. If the fancy dress shop moves in next to you, well, they probably should have done a little more homework!
Be sure to leave room to browse around and for customers to not feel crowded, which just encourages them to leave quickly. If you are a one-, or at most, two-person shop, many times (hopefully) you will be tied up with customers either in front of you or on the phone (more on that in a minute). Make sure there is enough on display to browse to keep a customer occupied for a few minutes while you finish up with your customer.
You’ll want to decide on a look before you start outfitting the public area of your retail shop. If you want a vintage feel, use some antique tables and thrift shop doilies for display. If contemporary is your style, you can use modern furnishings with bold colors as backdrops. Maybe you would like a theme—or even to change themes with the seasons. Best to use basic furnishings that won’t give off one style or another but will let you use decorations to create the look.
Whatever you decide, keep the shop clean, dust and dirt free, smelling fresh, and looking tidy. No one wants to buy food in a store that seems dirty or smells bad.
Some retail items do need specialty displays to show them off at their best. Greeting cards, for instance, are best displayed in racks that are designed for greeting cards. These racks are specially made to take up the smallest amount of space to display the cards. You may think you can display cards in baskets, and you certainly can. But as they are taken in and out of the basket to look at them, you risk their getting bent edges, which makes the next customer not as likely to purchase the card. Special display racks can end up being worth the extra cost not only because they show off the item at its best but because they often display more of the item in a smaller space, leaving room for other product.
warning
You can’t get away from politics, Congress, and legislation, even in the specialty food business. Food Business News reports in their September 8, 2015, issue that food safety programs are threatening to be funded by user fees, considerably increasing food businesses’ fees, rather than through appropriated funds.
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You don’t have to purchase new equipment—often you can get a higher level of equipment or display space by purchasing used. Shops go out of business all the time. You can capitalize on their need to sell their equipment, or check out state surplus outlets and, of course, online listings for deals. Just make sure to buy what you need and not just what happens to be out there at a good price. It’s not a good deal if it doesn’t suit your purpose.
And speaking of customers, it is critical to be able to juggle more than one customer at a time. So if you are in the midst of working with a customer on an order of whoopie pies for their wedding and another potential customer walks in the door, at least acknowledge the new customer. Once a person in your shop has been personally engaged, it is more uncomfortable for them to walk out. And if you are going to be a while with your wedding whoopie pie customer, excuse yourself for a moment and go talk with the new customer—perhaps they just wanted to grab a couple whoopie pies to bring home for a treat or they wanted to pick up a brochure or they wanted to know if you ship across the country. You may be able to quickly answer their question and get back to your wedding customer and keep both customers satisfied.
Phone conversations are similar. Priority should go to the person who has taken the time to walk in your door. If business over the phone is a significant part of your business, you need to invest in the personnel so that someone can deal exclusively with in-person customers while someone else focuses on phone orders. Once again, if you are the one-person shop, acknowledge your walk-in customer, excuse yourself from the phone for a minute to see if there is something you can do for the walk-in customer to get them on their way, or get the phone customer’s number and call them back after retail hours so you can give them your undivided attention and give the walk-in customers the attention they deserve.
aha!
If you are opening a specialty food business in the bakery category, you may be surprised to find yourself suddenly interested in wheat futures and bakery ingredient indexes. Food Business News will keep you up to date, either in their print magazine or online edition at www.foodbusinessnews.net.
The back office area of a gourmet food retail shop may include a place where food is actually produced for sale on the retail floor. This means giving careful consideration to any space you look at for a potential retail space. If the space seems absolutely perfect for the retail operation you envision, perhaps you can think through whether there is a way to have the production space somewhere else. If you are doing large-scale production, that may be a necessity. A large warehouse-style setup for production may have a great retail space opportunity but is rarely in an area that is conducive to a retail market. Vice versa, a good retail space rarely has an area large enough for large-scale production. But then you might get lucky; you never know unless you look and ask around.
Back office functions also include the space to do the unavoidable paperwork of any business. You might be able to get away with a hybrid operation where you have your retail space, and your deskwork is done from a corner of the living room at home.
Perhaps you are totally into creating your unique whoopie pies but you do not want to be burdened with a retail space to sell them from. You arrange with a retail shop in each of the surrounding five towns to provide them with fresh product daily. And you are selling direct to consumers for special events, weddings, anniversary parties, and other private functions.
This is a great scenario where you get to focus on the part you love—food production. In this case, you would need to find a location where production of the food is the focus of the space. It might mean a commercial kitchen is already set up, or that you need to be able to renovate an existing kitchen to make it a commercially licensed kitchen, or create one from scratch (see section on commercial kitchens earlier in this chapter). Unless you are buying the space—which can be a great way to build business assets—be sure to negotiate leasehold improvements (see “The Lease” on page 87 for more tips) to create the space you require to be successful (and to be able to pay the rent!).
stat fact
The U.S. Food and Drug Administration Food Code is a model code and reference document intended for use by state and local governments regarding food safety laws. This is not law and states are not required to adopt the code but many do.
In an operation like this, where production of the product is the focus, you will still need to have storage space for supplies for both making the whoopie pies and for packaging them for shipment to your retail outlets. And your space will need to include a clean, open space for the actual packaging and arranging into shipment lots.
Perhaps you have five outlets—one in your own town and one in each of four surrounding towns—that will regularly carry your whoopie pies. The contract with each is that you will make deliveries to them twice a week on specific days. Your personal vehicle may be perfect for this—a minivan or one of those square cargo-like vehicles like a Kia Soul or Honda Element. Just don’t use your personal vehicle that your two golden retrievers thrash around in on your daily trips to walk them on the beach. This would make a vehicle a very legitimate part of your startup financing.
tip
BakingBusiness.com online magazine shared tips on how to identify the trends that are here to stay for a while. In an interview for the article “Expo East 2015: Identifying the Next Big Thing,” Eric Pierce, director of strategy for New Hope Natural Media, points to something he calls “consumption occasions.” How many consumers and opportunities for consumption comprise the product demand?
While some foods—delicate pastries, for example—are not conducive to the mail order market, many specialty food businesses start out with a retail outlet and add mail order to their business offerings. Winnipesaukee Chocolates in Wolfeboro, New Hampshire, does shipping but states on its website that they do not ship their chocolates during warm weather months where the temperatures are consistently in excess of 75 degrees (specifically June to mid-September) because they have not set their business up with the extra packaging needs that warm weather shipping would require. Although a puddle of chocolate would probably taste just fine, it would not represent the beautiful presentation that Winnipesaukee Chocolates has worked so hard to create.
You may want to open a specialty food business that is exclusively mail order. That is a completely legitimate and potentially lucrative approach to your business. But what does that mean as far as location? It probably means you can set up your business just about anywhere. But there are some considerations.
tip
Like any industry, the food industry has its own terms. For instance, “potentially hazardous food” typically is determined by the acidity of the food and whether the food is likely to develop bacteria or viruses. High-acid foods like tomatoes and certain cooked items have a low potential for being hazardous while meats, seafood, and dairy have high potential to be hazardous.
If you plan to be completely mail order, you will want to be located in a place that is accessible for the kind of courier/shipping service you need to be able to come to your business site. It wouldn’t take too many times standing in line at the USPS or other courier shipping locations for you to realize that your time could be better spent if the shipper came to you.
Depending on your size, you may need to pick a location that has a loading dock. If you are shipping out pallet-sized shipments each day, the shipper will want to back up to your loading dock.
tip
When choosing a carrier for fragile product, be sure to choose one that has experience shipping fragile items. You might check around with other purveyors of your type of product to see who they use and what their experiences have been.
If you have a product that requires refrigeration, this will have implications on both the shipper that you can use and the area that you hold your packages until the shipper arrives. That area may need to be at the very least cooled or perhaps even refrigerated. You may even want to locate a walk-in cooler near the loading dock where product is stored while awaiting the shipper.
Fragile items may also require special needs. This might be in the form of packaging. At the very least, you will need a package that indicates it is fragile and what kind of special handling it needs—do not tip, always carry with this side up, etc. It may even require you to go so far as ordering special packaging inserts such as circular cardboard loops that hold cupcakes or mini cheesecakes upright.
tip
Put “customer” in the forefront of your mind when thinking about a retail space. If yours is a high-end product, where do those customers typically shop? What kind of parking do you need to make your location convenient to that customer base you wish to draw?
The Lease
Unless you are setting up in your existing home, chances are you will lease a retail or production space rather than purchase a building—at least at the beginning. There are a few important things to remember when negotiating a lease contract:
Be realistic about the time frame of the lease. The SBA recommends that small businesses negotiate one- or two-year leases with the option to renew.
Whatever that first lease agreement says will be the starting point for yearly lease negotiations from here on out for the rest of the life of the lease. Don’t start at the top amount you can possibly afford since you can be certain that your lease will only go up, not down.
Make sure it is clearly spelled out who is responsible for everything, such as leasehold improvements, which light fixtures (e.g., exterior lights may be for more than just your space so the leaseholder should probably cover those), the plumbing, etc. The SBA says be sure to look for hidden fees and that CAMs (Common Area Maintenance) are covered by landlords.
One of the benefits of leasing over owning is that when something goes wrong, you can call the leaseholder. Not only should you make sure that person is accessible or has a property manager who is accessible, but the SBA recommends that you make sure that the landlord and not the tenant is actually responsible for the maintenance since it is not the same as with residential leases.
Always spend the money to have a lawyer look over something as important as a long-term lease.
Perhaps you are planning to create your specialty food and ship it out to other distributors that take it to the retail market that they service. You can create a setup similar to a mail order center with the difference being that your shipments will be a lot larger than your individual mail order packages. You will need a larger space that accommodates a warehouse-type setup. While you should heed the advice of this book’s mentors and start small, look at the space you choose with an eye to the future. Is there any chance your business could grow while staying right where it is? Or do you go into your initial space fully aware that it is likely you will need to move in order to expand?
tip
If at all possible, lease a space that is a bit larger than what you think you currently need. Few business owners start out with no plans for growth. The first few years of your business venture you will likely be growing exponentially while customers find you and the word gets out—you don’t want to be spending your startup years moving from place to place to accommodate every growth spurt.
The Food and Drug Administration controls food labeling under the Federal Food, Drug, and Cosmetic Act and its amendments. According to the FDA’s website, food labeling is required for most prepared foods, such as breads, cereals, canned and frozen foods, snacks, desserts, drinks, etc. It is your job to keep up with labeling requirements and find out what is necessary for your product. The FDA states that uniform compliance to food labeling regulations that were issued in 2015 and 2016 is by January 1, 2018. Bookmark their website at www.fda.gov/Food/default.htm and check the site at least quarterly to find out if any new regulations will impact the specialty food category your business falls under.