The path to bakery entrepreneurship doesn’t have to start with an expensive commercial lease and a 40-quart industrial mixer.
There’s another way—running a cottage industry bakery! This can be a quick and cost effective route to put your baking skills to work and get your name and products into the community. These small businesses can allow you to bake for your local community without the startup costs or hurdles that come with starting a “traditional” bakery.
In this article, you’ll learn what a cottage industry bakery is, and four keys that can help make yours a success.
What Is a Cottage Industry Bakery?
A cottage industry bakery, also known as a cottage style bakery, is a small-scale bakery that is usually operated out of someone’s home. These home-based businesses are regulated by “cottage food laws” rather than commercial restaurant and health codes.
The law usually limits cottage food businesses to “low-risk” foods, like baked goods, vinegars, and spice blends. While regulations vary from state to state, they usually stipulate that cottage foods do not require refrigeration. This is why bakeries are great candidates for this type of business, as many baked goods are shelf-stable.
The cottage food industry has been growing recently, as consumers become more interested in eating local and supporting their local economies. The U.S. market has grown from a $5 billion market in 2008 to an estimated $20 billion market in 2019!
And when the COVID-19 pandemic arrived in 2020, the industry continued to increase. Auguste Escoffier School of Culinary Arts Pastry Arts graduate Hannah Rawlings, for example, turned to her own cottage industry side business during the COVID-19 pandemic, baking sourdough loaves for her community.
Not only did the pandemic increase the number of home bakers looking to churn a profit, but it also lead to a decrease or erasure of regulations, making it easier for this business model to work.*
While some people may intend on sticking with a cottage bakery, this at-home model can also be a path to other types of entrepreneurship. Famous cake baker Duff Goldman from Ace of Cakes started out with a cottage industry bakery before he opened his first brick-and-mortar location of Charm City Cakes.
Now that you understand what a cottage style bakery is, here are four keys to success.
1. Learn Local Cottage Food Laws
Cottage industry bakeries are regulated on the state and local levels, so you’ll need to do some research before you get started.
You may need a permit or license to operate, and you may need to pass a food handler’s course. You may also be required to open your home kitchen to inspection by a local governing authority, so make sure to get these details locked down before you invest any money into your business. If you’re looking for more information about cottage food laws, contact your local health department or the state department of agriculture.
States may also have labeling requirements, such as listing all ingredients and/or specifying any allergens that may be present in your food.
Many states also have limits on how much product your cottage industry bakery can sell in the course of a year. In Florida, for example, sales can’t exceed $250,000 annually. Once Florida bakers reach that threshold, they must either stop selling for the year or transition their businesses into a commercial kitchen space and out of the home.
While there are limitations to what you can do with a cottage industry bakery, there are benefits too. Working from home keeps overhead very low since you don’t need to rent or lease a separate space.
2. Have a Business Plan
A cottage industry bakery is still a business, so you’ll probably need a business plan to be successful.
How will you find customers? What is your marketing angle? Where will you source your ingredients?
Will you sell at farmers’ markets? Online buy/sell groups? Local supermarkets or coffee shops? Again, remember to check the laws in your area! Some states only allow cottage industries to sell directly to consumers, not to businesses. And some prohibit online sales altogether.
Some Baking and Pastry Arts programs at Escoffier may include a course in Building Your Own Business, which can cover topics like business planning, credit management, government regulation, and legal issues. Students can also complete and present a business plan for their final project. Many students find that this education helps them in their future entrepreneurial pursuits!
“The knowledge from Escoffier has given me the skills and confidence not only in my baking, but to take my baking and creations to the next level.”*
Trista Besecker, Online Pastry Arts Graduate
3. Prepare for Taxes
Running a cottage industry bakery is usually a business of one. You’re responsible for the menu and baking, marketing and sales, and your business finances. If you don’t keep careful records and set aside money to cover your tax liability, you could be hit with a nasty surprise come tax time!
Your business finances need to be clear, organized, and separate from your personal finances for you to stay in compliance with local, state, and federal tax requirements. Students studying for the Associate of Occupational Studies Degree in Baking and Pastry from Escoffier will take Foodservice Math & Accounting and Food & Beverage Cost Control, which can help them to keep a firm grip on their business finances.
Even with a culinary education that includes coursework in accounting and finance, you should consult a tax expert with experience in cottage food law in your area to help you navigate complicated tax codes.
In some states, ready-to-eat foods are taxable, but bakery items are not—when sold without plates or eating utensils. Tax laws are full of odd exceptions like these, so the help of a pro can prevent you from overpaying or underpaying the government.
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4. Be Flexible With a Changing Business
One of the benefits of a small business is its flexibility. Operating a cottage industry bakery allows you to easily change your food offerings and business model (within the limits of the law) to make it work.
As a member of your community, you’re perfectly positioned to meet the specific needs of your local area. If you notice a rising trend in demand for gluten-free pastries in your area, for example, you can adjust your menu to match. If a new bouldering gym opens in town, maybe you can start baking shelf-stable protein bars for the climbers.
“You have to learn to pivot in any given situation, and COVID has proven that. It is a learning experience for us all.”*
Nahkika Hillery, Escoffier Culinary Arts Graduate and Owner, Kréyol Korner
While a business plan is helpful, don’t be afraid to tweak your plan once you’re on the ground running. By remaining flexible in both what you sell and how you sell it, you can create a business that works for you.
A high-quality education from a baking school could give you the foundation you need to respond to consumer desires and preferences. And you can get that education in the same place as you run your business—from your home kitchen! Escoffier is a 100% online baking & pastry school, which includes an industry externship.
Online pastry school includes the same foundation as our on-campus programs while offering unparalleled flexibility. Students can fit their education into their busy lives, while they grow their business and baking skills!
“I was online. I honestly could not have done it in person. It just wouldn’t have worked out. I’m not in a town near that has a culinary program. I have a kid. My life would not allow me to go to school somewhere. So it really was perfect.”*
Tara Bissell, Escoffier Online Baking & Pastry Student and Owner/Baker, Andy’s Artisan Bread
Start Your Bakery Business at Home
A cottage industry bakery can be a great way to bring in some extra income. This could help you get a business idea off the ground, stay at home with your family, or let you practice your skills (and make money) while you’re in pastry school!
It can also be a precursor to opening your own brick-and-mortar bakery. One survey showed that a third of cottage food producers plan to expand their businesses in the future, often by opening a storefront.
If you’re thinking about opening your own cottage industry bakery, contact our admissions department for more information about baking and pastry education at Escoffier!
Interested in learning more about culinary entrepreneurship or baking & pastry school? Try these articles next:
- What Is It Like to Be a Pastry Chef?
- Six Skills Every Baker Should Have
- How Ghost Kitchens & Ghost Restaurants Lower Startup Risks
*Information may not reflect every student’s experience. Results and outcomes may be based on several factors, such as geographical region or previous experience.
This article was originally published on November 23, 2020, and has since been updated.