Guest Post: A Guide to Licenses for Food Businesses

Posted on September 05, 2019 by

Need help navigating the confusion of licensing? We're lucky to have a guest post from consultant Sari Kimbell to help you out.

Sari is founder of Sari Kimbell Consulting and creator of Food Business Success, an online course and accelerator for food business startups.

She helps early-stage packaged food and drink entrepreneurs start and grow profitable direct-to-consumer, wholesale, or online businesses.

And here's Sari:

Your Licensing Primer

I see many food business founders get too many licenses, not get all the licenses they need, not get the right testing, fail to put together a food safety plan, and confuse regulations. I am going to give you some easy ways to determine which licenses you need. First, let’s go over need-to-know vocabulary, agencies and license types.

Essential Vocabulary

Types of Licenses

Home Kitchen Production

Wholesale License

Retail Food License

How To Categorize your Business

Here is a guide to determine which licenses you will need and what additional regulation you need to follow:

Step One: Determine your sales channels

Where do you want to sell your product in the short to medium term? I usually ask clients to look at a one-year plan and a three-year plan.

Step Two: Put your product into a food safety category

Step Three: How will you sell your product?

Once you know the combination for your business model from these three steps, you can start the process of figuring out which license(s) you will need.

Some Practical Examples

A jam business that only wants to sell DTC at markets and fulfill custom orders for customers online

In most states this would qualify as a Cottage Food business: the business would be limited to selling within the state where the product is produced.

The business could get a retail food or wholesale license instead; then the product would need to be produced in a commercial kitchen and meet the other requirements for this license type.

A BBQ sauce business that wants to sell DTC only online nationwide and at markets

Sauces are usually not allowed under Cottage Food, so a wholesale license or a retail license would be required. Testing may also be required.

A cupcake business that uses buttercream with real butter and wants to sell to coffee shops and DTC pre-boxed in packages

A wholesale license is needed for the coffee shop, and a retail food license is also needed because of the buttercream, which is PHF.

A baked goods business that makes meat and cheese filled pastries and wants to sell at farmers' markets and to coffee shops

The business needs a wholesale license for the coffee shop. Products must be made in a commercial kitchen that has a USDA inspector because of the meat. A retail food license is needed for farmers' markets because the products are considered PHF. If they were ONLY selling DTC, then the USDA inspection would not be required.

A pretzel business that wants to sell at a farmers' market only but with a hot cheese sauce

Without the hot cheese sauce, as long as the pretzel is pre-packaged, the business would most likely fall into cottage food or could get the less expensive wholesale license. Adding the hot cheese changes the product to “Ready to Eat” in most states, actually making it a mobile food like a food truck and requiring a retail food license (check for a mobile-specific license). If they wanted to sell cold cheese sauce in packages, then a Retail Food license would be needed.

A Last Word

I know this can be incredibly confusing. Believe me, I have seen hundreds of dollars wasted because the entrepreneur didn’t take the time to find out the correct answers. It can be difficult to do so because the agencies don’t really “talk” to each other, so you will get one answer in one place and a different one from another agency.

I recommend starting with your State health department and emailing or calling their hotline. I have found Colorado’s to be very helpful, and hopefully your state’s will be too. This also may be an area where you want to get expert help, especially executing the process all the way to the end with a food safety plan, testing, shelf life, FDA labels, packaging and more.

I offer a ton of free resources on my website and free videos on my YouTube Channel all about starting a food business.

Learn something? Check out similar posts:
Getting Into Retail   Entrepreneur Interviews   Resources  

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