How to Start a Food Business in California With the Cottage Food Law

Here ye here ye – Starting in January 2013, Assembly Bill 1616 (also known as AB-1616) California’s “cottage food law” allowing certain food products to be made and sold to certain people in certain quantities went into effect! On this page, I attempt to distill those certain nuances to answer the question: Can I sell the food I’m making at home in California?

And thanks to Fast Company for helping spread the word about this great new law asking: Can California’s New Law Start A Small Food Business Revolution?

Keep tabs on the latest and resources on The Sustainable Economies Law Center website, the folks who led this monumental bill through to success.

The rules are subject to change and you should not consider this blog post to be the be-all in terms of the most complete info. Check the  California Department of Public Health for details on the law.

Why this great law got passed

Across the U.S., states are recognizing that the high cost of starting a food business as well as inaccessibility to kitchens complying with the laws are preventing many a micro-entrepreneur from getting started on a budget or running a small food business to supplement their income.

SECTION 1 of the bill lays the case out well:

(3) These health conditions are preventable and curable through lifestyle choices that include consumption of healthy fresh foods.
(c) For decades, low-income and rural communities have faced limited opportunities to purchase healthy foods. Often, without cars or convenient public transportation options, low-income residents in these areas must rely for much of their shopping on expensive, fatty, processed foods sold at convenience and corner stores.
(d) There is a growing movement in California to support community-based food production, sometimes referred to as “cottage food,” “artisanal food,” “slow food,” “locally based food,” or “urban agriculture” movements. These movements seek to connect food to local communities, small businesses, and environmental sustainability.
(e) Increased opportunities for entrepreneur development through microenterprises can help to supplement household incomes, prevent poverty and hunger, and strengthen local economies.
(f) At least 32 other states have passed laws that allow small business entrepreneurs to use their home kitchens to prepare, for sale, foods that are not potentially hazardous.
(g) Even some bake sales are currently illegal in California.
(h) It is the intent of the Legislature to enact a homemade food act specifically designed to help address these challenges and opportunities.

What you can make?

Non-potentially hazardous foods are the type that if you found them in your sofa a month after falling through the cushions, you’d be able to eat them. Disgusting metaphors aside, here are the details:

114365.5. (a) The department shall adopt and post on its Internet Web site a list of not potentially hazardous foods and their ethnic variations that are approved for sale by a cottage food operation. A cottage food product shall not be potentially hazardous food, as defined in Section 113871.

(b) This list of nonpotentially hazardous foods shall include, but not be limited to, all of the following:
(1) Baked goods without cream, custard, or meat fillings, such as breads, biscuits, churros, cookies, pastries, and tortillas.
(2) Candy, such as brittle and toffee.
(3) Chocolate-covered nonperishable foods, such as nuts and dried fruit.
(4) Dried fruit.
(5) Dried pasta.
(6) Dry baking mixes.
(7) Fruit pies, fruit empanadas, and fruit tamales.
(8)  Granola, cereals, and trail mixes.
(9) Herb blends and dried mole paste.
(10) Honey and sweet sorghum syrup.
(11) Jams, jellies, preserves, and fruit butter that comply with the standard described in Part 150 of Title 21 of the Code of Federal Regulations.
(12) Nut mixes and nut butters.
(13) Popcorn.
(14) Vinegar and mustard.
(15) Roasted coffee and dried tea.
(16) Waffle cones and pizelles.

Caveats: This list can change, either expanding or contracting.

Licensing Requirements

“This bill would require a cottage food operation to meet specified requirements relating to

  • training,
  • sanitation,
  • preparation,
  • labeling, and
  • permissible types of sales and would subject a cottage food operation to inspections under specified circumstances.”

Per Section 5 110460. No person shall engage in the manufacture, packing, or holding of any processed food in this state unless the person has a valid registration from the department, except those engaged exclusively in the storing, handling, or processing of dried beans. The registration shall be valid for one calendar year from the date of issue, unless it is revoked. The registration shall not be transferable. This section shall not apply to a cottage food operation that is registered or has a permit pursuant to Section 114365.

Get a registration number to a “Class A” cottage food operation from your local health department that certifies you comply with the following. Registration number aside, imagine being one of your customers walking into your kitchen and seeing how you make your food. Following the Do Unto Others golden rule is a pretty good way to keep yourself in check. (Considering Ebay sellers often guarantee hard, non-food goods come from pet free homes, the more you can keep your pets away from your kitchen, the better.)

Take a class: (d) A person who prepares or packages cottage food products shall complete a food processor course instructed by the department to protect the public health within three months of becoming registered. The course shall not exceed four hours in length. The department shall work with the local enforcement agency to ensure that cottage food operators are properly notified of the location, date, and time of the classes offered.

Only some kitchens will require inspections, depending on your license: Thanks to Christina Oatfield for pointing out only for Class B licenses (selling indirectly to third parties, not consumers) will a home inspection be required, unless the local health department has suspicions (See: Do I need to have my kitchen inspected?). Use this law as the chance to exceed the bar in good health, good food and cleanliness! You don’t want to make the public sick

Pondering: The dried beans exemption fascinates me. Any idea where that came from?

 

Who can work in the home business

You, family and one full-time, non-family employee paid or unpaid. You can never make food when contagiously sick.
The fine print:
Per Section 7 113758. (b) For purposes of this section, the following definitions shall apply:
(1) “Cottage food employee” means an individual, paid or volunteer, who is involved in the preparation, packaging, handling, and storage of a cottage food product, or otherwise works for the cottage food operation. An employee does not include an immediate family member or household member of the cottage food operator.
(2) “Cottage food operator” means an individual who operates a cottage food operation in his or her private home and is the owner of the cottage food operation.
My take: This is a very generous provision, especially if you’re running a family business!

How you have to label it

In addition to following the labeling rules in 114365.2, consider following the FDA guidelines for labeling allergens
(e) A cottage food operation shall properly label all cottage food products in compliance with the Federal Food, Drug, and Cosmetic Act (21 U.S.C. Sec. 343 et seq.). Additionally, to the extent permitted by federal law, the label shall include, but is not limited to, all of the following:
(1) The words “Made in a Home Kitchen” in 12-point type on the cottage food product’s primary display panel.
(2) The name commonly used for the food product or an adequately descriptive name.
(3) The name of the cottage food operation which produced the cottage food product.
(4) The registration or permit number of the “Class A” or “Class B” cottage food operation, respectively, which produced the cottage food product and, in the case of a “Class B” cottage food operation, the name of the county of the local enforcement agency that issued the permit number.
(5) The ingredients of the cottage food product, in descending order of predominance by weight, if the product contains two or more ingredients.

For non-labeled / packaged items: SEC. 12. 114088.A cottage food product, as defined in Section 113758, that is served by a food facility without packaging or labeling, as described in Section 114365, shall be identified to the consumer as homemade on the menu, menu board, or other location that would reasonably inform a consumer of its homemade status.

If you’re selling unwrapped cookies at a pop-up market, you’d identify them as homemade through signage.

Where / to whom you can sell

There are two classes of licensing — which opens up possibilities for selling beyond the direct-to-consumer. As described in Section 7 113758:
(1) A “Class A” cottage food operation, which is a cottage food operation that may engage only in direct sales of cottage food products from the cottage food operation or other direct sales venues described in paragraph (4) of subdivision (b).
Here’s that paragraph: (4) “Direct sale” means a transaction between a cottage food operation operator and a consumer, where the consumer purchases the cottage food product directly from the cottage food operation. Direct sales include, but are not limited to, transactions at holiday bazaars or other temporary events, such as bake sales or food swaps, transactions at farm stands, certified farmers’ markets, or through community-supported agriculture subscriptions, and transactions occurring in person in the cottage food operation.
(2) A “Class B” cottage food operation, which is a cottage food operation that may engage in both direct sales and indirect sales of cottage food products from the cottage food operation, from direct sales venues described in paragraph (4) of subdivision (b), from offsite events, or from a third-party retail food facility described in paragraph (5) of subdivision (b).

Here’s that paragraph: (5) “Indirect sale” means an interaction between a cottage food operation, a third-party retailer, and a consumer, where the consumer purchases cottage food products made by the cottage food operation from a third-party retailer that holds a valid permit issued pursuant to Section 114381. Indirect sales include, but are not limited to, sales made to retail shops or to retail food facilities where food may be immediately consumed on the premises.

Geographic boundaries for selling

(D) (i) A “Class B” cottage food operation shall be authorized to engage in the indirect sales of cottage food products within the county in which the “Class B” cottage food operation is permitted.
(ii) A county may agree to allow a “Class B” cottage food operation permitted in another county to engage in the indirect sales of cottage food products in the county.

How much you can sell before you have to leave your kitchen

Per Section 7. 113758. (a) In 2013, the enterprise shall not have more than thirty-five thousand dollar ($35,000) in gross annual sales in the calendar year. (Gross means before subtracting any costs.)

In 2014, the enterprise shall not have more than forty-five thousand dollars ($45,000) in gross annual sales in the calendar year.

Commencing in 2015, and each subsequent year thereafter, the enterprise shall not have more than fifty thousand dollars ($50,000) in gross annual sales in the calendar year.

My take: Unless you have a very high margin food, meaning you can make it for almost nothing and demand a good price when selling, e.g. $1,000 wedding cakes — sans cream of course — you won’t “get rich” from your cottage food operation. The intention is to help people grow local food economies, supplement income,  prove a market for your food, and get started.


The law goes into effect January 2013, just in time for your new years resolution to start a food business!
Check The SELC website and Facebook page for updates

Parting words

Follow the law. Much like a driver’s license, the cottage food law is a privilege, not a right. The more California and other states see these laws working, the more the laws will be expanded to allow increased venues for selling, food types, etc.

Should I start my food business at home just because I can?

The choice is up to you and depends how quickly you want to grow and how well you can dedicate your kitchen to your business. Using your home for a food business is a huge commitment in keeping clean, complying, and having space to make and store your food. A commercial kitchen is all set up and ready to go, with the utilities generally covered in your hourly fee. For dry goods, you may find a commercial kitchen the best investment.

Weigh the tradeoffs and make a decision based on your particular circumstances.

NEXT STEPS TO GET STARTED:

  1. Find your county’s Department of Public Health web page which will have licensing information as well as what’s required as far as your home / kitchen / storage facilities. Also see California’s Department of Public Health which oversees the law.
    Some health depts: Alameda County | San Francisco County | Kern County | Los Angeles County | Orange County
  2. Find insurance. Talk to Charlie Massie at ISU Massie & Beck whose company insures many Bay Area food artisan companies and startups. He is focusing on helping new California home-based food businesses navigate the insurance landscape.
  3. Join the Facebook group to connect with other people starting California cottage food businesses. Also search to see if folks in your county have started their own group.

I’d love to hear any additional knowledge or reports of changes in this exciting but evolving new law! Would be excited to potentially interview those who start at home and transition to a commercial kitchen.

Susie