In 2013, a bill passed called the cottage food laws. These laws made it legal to sell small amounts of food using a home-based kitchen. While not all types of food businesses can be opened with the help of a cottage food law, the new law could create opportunities for you as a food truck vendor as well.
In a nutshell the cottage food laws were created to make it easier for micro-food businesses to get started. At the time of writing the maximum gross revenue a cottage food business can generate is $50,000 during any one calendar year. If you’re an established vendor this restriction will make the entity not worth pursuing. However, if you’re just getting started in the mobile food business or only want to operate the business part-time during the summer months for extra cash this could be a viable way to start the business even if you don’t plan to operate this way permanently. This could also work well if you have a BBQ trailer that you plan to use on weekends only or a hotdog cart. When the business gets to the point of surpassing the $50,000 threshold you can always change the business entity to something like an LLC when the time is right.
One important point is that these cottage food laws vary depending on the state you live. Jennifer Lewis of SmallFoodBiz.com has created a helpful resource that can point you in the right direction for figuring out the laws in your state. If you happen to reside in California, FoodStarter.com offers the most straight forward explanation of the laws. Forrager.com also does a nice job laying out all the requirements in California.
From a food truck operator perspective there are two key limitations that you should keep in mind before considering this type of a license.
Revenue Restrictions: Most states will limit the amount of gross revenue you can make per year to $50,000. This makes it difficult to turn this into a full-time business. It is designed more as a way to supplement income or start a food business with less financial barriers to entry. If your goal is to grow a big business this entity is not appropriate.
County: In many areas the law states that you must sell food only in the county it was produced. This could be a major restriction if you operate a concession trailer since you’ll be limited further on where you can vend.
Cottage Food Law: Licensing Requirements
Although one of the goals of cottage food laws is to make it easier for artisan vendors to sell their food there are some common sense requirements that these business owners must have to operate legally.
Food Handler Training: To start a cottage food business you will need the right safety training. In many situations acquiring your food handler card will accomplish this goal. The requirements will differ by county, but this is a great opportunity to learn ways to make your food safer, prevent cross-contamination or food-borne illnesses. Some districts like Riverside County in California may even allow you to complete the course online from the comfort of your home. The fee to get your license is usually reasonable and will run you between $25 – $50 on average.
You will also need to select the class of operation you plan to run. In most situations, a food truck or cart could operate under the “Class A” distinction since most sales will be done at events.
“Class A” Cottage Food Operation: This is what you will need to acquire if you have a truck. This allows you to sell directly to consumers at events like farmer’s markets.
“Class B” Cottage Food Operation: If you want to sell your food online or at a retail location this is the classification is what you will need to acquire.
Bottom line if your goal is to dip your toes into food entrepreneurship the cottage food industry can be a great way to accomplish the goal. You won’t get rich, but it will allow to supplement your income while perfecting your recipes.
More Reading on this Topic:
Cottage Food Laws: Bake and Sell From Home via MoneySideofLife.com
This article does not constitute legal advice. Please consult your county for up-to-date cottage food laws that are applicable to your situation / region.