November 23, 2020

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 — by running a cottage industry bakery! This can be a quick and cost effective way to get started and put your baking skills to work. These small businesses let you bake for your local community without the startup costs or hurdles that come with the “traditional” bakery.

In this blog post, you’ll learn what a cottage industry bakery is, and 4 keys to making yours a success.

What is a Cottage Industry Bakery?

A cottage industry bakery is a small-scale bakery, 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 or 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 baked goods are shelf-stable.

Kneading dough on wooden board with rolling pins and knife and flour
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!

Expect to see even more of these home-based businesses appearing over the next year, as chefs and bakers look for ways to keep cooking outside of the traditional brick-and-mortar model. Auguste Escoffier School of Culinary Arts Pastry Arts graduate Hannah Rawlings, for example, has turned to her own cottage industry side business during the COVID-19 pandemic, baking sourdough loaves for her community.

This at-home model can also be a path to 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 food business is, here are four keys to success.

1. Learn Local Cottage Food Laws

Cottage industry bakeries are regulated on the state and local level, 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.

Female student taking notes while looking at computer with earphones
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 $50,000 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. And you’re practically pandemic-proof, since you can bake from your home kitchen. Plus, sales can be completed outdoors at local farmer’s markets or outside your front door, so there’s no need to mingle with others in enclosed spaces.

2. Have a Business Plan

A cottage industry bakery is still a business, so you’ll need a business plan to be successful.

How will you find customers? What is your marketing angle?

Will you sell at farmer’s markets? Online buy/sell groups? Local supermarkets or coffee shops? 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.

Woman selling organic bread at outdoors farmers market
Baking and Pastry Arts programs at Escoffier include a course in Building Your Own Business, which covers topics like business planning, credit management, government regulation, and legal issues. Students will 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 the Tax Man

Running a cottage industry bakery usually means it’s 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 Texas, for example, 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 will prevent you from overpaying or underpaying the government.

Cherry, apple, cranberry pie on top of a red scarf

4. Be Flexible

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.

Nahika Hillery, Escoffier Austin Culinary Arts Graduate“You have to learn to pivot in any given situation, and COVID has proven that. It is a learning experience for us all.”
Nahika Hillery, Escoffier Culinary Arts graduate and Owner, Krèyol Korner Food Truck

If the pandemic has shut down farmer’s markets, where else can you sell? From your home? Local bake sales? Outdoor community sporting events?

A high-quality education in baking and pastry could give you the baking 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, with a 100% online pastry program at Escoffier, which includes an industry externship.

Black female culinary student glazing dough on a baking tray
Online pastry school includes the same foundation as our on-campus programs, but offers unparalleled flexibility. Students can fit their education into their busy lives, while they grow their business and baking skills!

Start at Home

A cottage industry bakery can be a great way to bring in some extra income. This could help you stay afloat during the pandemic, 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!

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