Starting a food-based business is about to get easier in the Golden State.
Your friends can’t get enough of your homemade cakes (or pies, bread, cookies—fill in your own specialties). They say your creations are so delicious you should be sharing them with the world. So you dream a little. You see yourself starting small, just a few cakes at a time, offering them for sale at the farmers market and maybe your neighborhood grocery. Soon, you’ll be able to quit your day job and enjoy life as an entrepreneur with a growing bakery business. Well, why not?
Home baker Mark Stambler, a resident of Silver Lake (near Los Angeles), tried to live this dream when he started selling crusty loaves of French bread, baked in small batches in a wood-burning oven he built in his backyard, at a local cheese shop. In what turned out to be a prime demonstration of the principle of unintended consequences, the L.A. Times published an article in May 2011 praising this exceptional bread. Then the Los Angeles Department of Environmental Health came and shut Stambler’s operation down.
It had to do it. Selling food prepared in a home kitchen was illegal. By law, even the smallest business selling prepared food was required to rent space in a commercial kitchen.
This well-publicized closure was the genesis of AB 1616, sometimes called the California Homemade Food Act, which is intended to foster the incubation of small businesses while guarding the safety of the food supply.
AB 1616 was introduced in the State Assembly in February by Assemblyman Mike Gatto (D-Los Angeles) and coauthored by Assemblymembers Nathan Fletcher, Jared Huffman, Brian Nestande, V. Manuel Pérez, Bob Wieckowski and Senators Mark DeSaulnier and Lou Correa. Gatto feels strongly that the government ought to help, not hinder, an entrepreneur’s ability to start a small business. “Most of the players in the food industry began as small businesses: neighborhood restaurants, catering companies. With a really low barrier, manufacturing a food product is a good way for people to start in business. Instead we’ve gone in the other direction. There’s a ton of red tape. We’ve made it very difficult—almost impossible—to be a micro-entrepreneur,” he says.
When he read the story of the banned bread, which happened to take place in his own assembly district, Gatto—who’s adamant that helping his constituents is part of his job—resolved to do something about it. “Here’s a person having a problem with government in my district. What he was going through wasn’t fair,” Gatto says. He enlisted help from the Sustainable Economies Law Center (SELC) in Oakland. The SELC, which, according to its website, “facilitates the growth of sustainable, localized and just economies,” had been independently investigating laws in other states permitting sales of food made in home kitchens.
According to Christina Oatfield, food policy director for SELC, the earliest such law was instituted in Pennsylvania in the 1970s. At least 33 states have versions of this law, and they seem to be working well. “They’re typically called ‘cottage food laws’ or ‘home food processor laws,’” she says. “Almost all allow for nonpotentially hazardous foods to be made in home kitchens. By that, they mean shelf-stable foods that don’t require refrigeration, foods that aren’t conducive to growth of bacteria and are least risky for food-borne illness outbreak.” In most of these states, home food producers are required to register or to get a permit.
Oatfield says she and Janelle Orsi, director and cofounder of the SELC, put together the language for the initial draft of AB 1616. Since its introduction, the bill has been modified by legislative committees to strengthen assurances that foods will be prepared under sanitary conditions and that the law will apply only to very small businesses.
What the bill says
AB 1616 amends California’s Health and Safety Code to define a cottage food operation as a new category of food production: an enterprise with no more than $50,000 in gross annual sales that operates out of a home kitchen. It’s allowed to have no more than one employee, not counting the operator and members of his or her family.
Depending on how the products are sold, cottage food operations are divided into two tiers with different requirements. Class A businesses sell directly to their customers, at farmers markets or special events and through the Internet or mail order. Class B can sell both directly and indirectly, through third party retailers such as food shops or restaurants.
Class A operators are required to register with their county health department, complete a food handler course and fill out a checklist approved by their local enforcement agency (usually the county health department) showing they understand and maintain safe food handling practices. This means that, while the foods are being prepared, pets or small children must keep out of the home kitchen, and activities such as family meal preparation, dishwashing, clothes washing, kitchen cleaning or guest entertainment aren’t allowed. A cottage food operation isn’t allowed to use commercial equipment. And, as with all preparation of food for sale, operators are required to maintain sanitary conditions such as washing, rinsing and sanitizing all surfaces and utensils before using, washing hands before handling food, storing ingredients in sealed containers and making sure there are no insects or rodents in the area.
In addition to the Class A requirements, Class B operators must acquire a permit from their county health department, and their facilities must pass an annual inspection by a health officer.
The law states that only foods that don’t require refrigeration—those that are unlikely to develop harmful bacteria at room temperature—are eligible to be designated cottage foods. Such items as jams and jellies, candies, granolas, nut mixes, dried fruit, roasted coffee and dried tea, dry baking mixes, dried pastas, herb blends, vinegars, mustards and baked goods and breads without cream, custard or meat fillings can be sold as cottage foods.
Generally the bill has had a favorable reception, says Gatto. “When we had the public hearing, almost 100 people testified in favor of the bill. There was nobody who wanted to go into production who testified against it.” What’s more, he adds, “More than 6,000 people have signed a petition advocating for the Act on the SELC website.”
The bill also responds to many consumers’ desires to buy more locally grown and manufactured products. It puts cottage food operators in competition with larger merchandisers and manufacturers, and Gatto says he expected opposition from such organizations. But at least one market chain has spoken out in favor of the bill. Harvindar Singh, a regional executive with Whole Foods Market, wrote in support of AB 1616, “Whole Foods Market makes special efforts to find and sell unique products that are grown and processed locally. We support legislative efforts such as AB 1616 to stimulate local food production to meet the growing demand for artisan, specialty and locally produced foods that cottage food operations, empowered by the bill, are sure to provide our state.”
The bill passed in the Assembly on May 29 with a vote of 56 to 19 and was sent to the State Senate. Says Gatto, “It was first heard in the Senate by the Senate Health Committee—where it received a unanimous, bipartisan 8-0 vote. Because of its fiscal impact, it was then sent to the Senate Appropriations Committee on August 16 where it passed with a unanimous, bipartisan 7-0 vote.
“It will be voted on by the Senate, and sent back to the Assembly for a procedural concurrence vote [in late August]. Upon passage of both houses, the bill will be delivered to the Governor.”
One of the “nay” votes in May was Assemblyman Curt Hagman (R-Chino Hills), who favors fewer rules and regulations for businesses and says AB 1616 is just another example of the “nanny government.” He’d prefer leaving policy on cottage food sales up to individual counties rather than setting statewide regulations. “It seems every time the state tries to enact a rule or regulation, it goes overboard. This law was made very expensive for the industry with requirements like home inspections. Other states made the law simpler. I think this is so restrictive, it’s going to harm the people it’s meant to help.”
He notes that the law says a county is entitled to recoup the expense of investigating infractions, which, he says, could be so expensive that “there goes your profit for a whole year.” And finally, he says, “We have a whole lot of bigger issues we should be dealing with.”
According to the Senate Appropriations Committee, the bill’s fiscal impact would be, “One-time costs of $150,000 to $300,000 [General Fund] for the Department of Public Health to adopt regulations regarding foods that may be produced by cottage food operations,” as well as “unknown costs to local environmental health departments to regulate cottage food operations.”
The law lets local health departments set appropriate fees to cover their permitting and inspection costs; the fees are expected to vary depending on the county. Oatfield says the highest fees are likely to be in San Francisco and Los Angeles, where they might be $400 to $500 annually [this would likely apply to Class B operators only]. In a rural area, they’ll be less because the local agency’s overhead is lower.
“So much easier…”
People who are already in business creating foods that would be eligible for AB 1616 are generally supportive of the idea, although many have misgivings about the likelihood of maintaining sanitary conditions in a home kitchen.
Successful pie baker Chris Milne says she could have benefitted from such a law when she started her business 25 years ago. She began in 1987 by picking wild berries and baking them into pies in a houseboat anchored in the Point San Pablo Yacht Harbor. Now she operates Upper Crust Handmade Pies in a full-time commercial kitchen she leases on East Francisco Boulevard in San Rafael. While she agrees that a homemade food law must have requirements to guarantee food is prepared under sanitary conditions, Milne insists that her houseboat kitchen was cleaner than most bakeries she’s seen. “I had no pets and no children living with me at the time, and I happen to be a neat freak—I barely had any furniture. The boat wasn’t funky or dirty or built with old wood.”
In her early days, she managed to bake 13 pies per day, using her own built-in oven plus a countertop oven and her neighbor’s houseboat oven. She sold her creations “on the flat rock in front of the Mill Valley Market.” Her first regular account was the Depot Bookstore Café across the street, which began ordering in October 1987. Shortly, she went to the Civic Center to get a license, and, over the next six years, she rented space in two different bakeries before landing her own commercial kitchen. She’s been at her current location, with her own equipment, for 18 years.
Though she started in her home kitchen all those years ago, Milne isn’t sure she likes the idea of legalized homemade food, since she knows not everyone is as obsessed with cleanliness as she is.
In contrast with Milne’s well-established pie business, Starting from Scratch Bakery in Windsor is still very new: only a little more than one year old.
“If we could have licensed our home kitchen it would have changed our situation dramatically,” says Tammy Skye Long, who operates the business with her husband, Greg, an experienced chef. It’s not the expense of renting a commercial kitchen that’s her biggest problem, she says. Rather, it’s having to work around other people who are sharing the same space for a variety of diverse uses. “I’d rather know what’s going on in my kitchen,” she says. “There may be 11 or 12 people sharing the same space, sometimes at the same time.” At the kitchen space she uses, different businesses sign up through an online calendar and pay a monthly plus an hourly rent.
Long bakes small cakes, cinnamon rolls, cookies, lemon bars, muffins, cupcakes and quiches and sells them at farmers markets in Santa Rosa and Cloverdale. She wouldn’t be able to sell quiches from her home kitchen under AB 1616, since their egg custard filling puts them in the high-risk category.
Nevertheless, she says legalized baking from her home kitchen would be “so much better. I’d so much rather do it on my own. A lot of times, I’m baking at two a.m.”
Small businesses begin in many different ways, and AB 1616 would have been helpful for many of them. Armida Scopazzi is now a caterer and baker who sells organic cookies at the Corte Madera farmers market. Before their divorce, she and her ex-husband used to own and operate a successful family-style Italian restaurant in San Rafael.
“Yes, it definitely would have helped me,” she says. “Right after the divorce, trying to find kitchen space was the hardest thing. There’s a shortage of commercial kitchen space in this county.” She says the community of local food producers is small, and some took sides in the divorce, making it even more difficult for her to negotiate her own rental space. She notes also that kitchen spaces in Marin are expensive, a minimum of $25 per hour (not easy for someone starting out in business), and you have to work around someone else’s schedule.
“It would’ve been so much easier in my own space,” she says. “I mean, I’m selling a packaged cookie. If I could demonstrate that I know about food safety by passing a test, what difference does it make if I bake them at home or some other facility?” Eventually, Scopazzi found In the Kitchen (ITK) in Sausalito. It’s no less expensive than other locations, but she is able to use it on a regular basis for catering, baking and even teaching some cooking classes.
Whitney McEvoy has been making granola for 30 years. After her kids grew up and left home, she “decided to give it a fling.” With two partners, she started Not Yer Momma’s, which sells creative granola mixes (such as cardamom apricot and blueberry ginger) online and at farmers markets in Sonoma County. She thinks AB 1616 is a great idea as a way to minimize risk for fledgling businesses. “Most people start small and cook the food themselves,” she says. “This would be a way to test the waters. At most commercial kitchens you have to commit for a year’s lease. It’s very daunting when you sign on the bottom line. It puts a lot of people off.” She further notes that AB 1616 might be especially helpful for entrepreneurs who may not have much starting capital.
While talking with food producers, you’re likely to hear that everyone knows someone who’s preparing—or once prepared—food in a home kitchen for sale. In 2010 and early 2011 the Homegrown Marin Market made a splash among food bloggers as an underground market for unlicensed food preparers,a “unique culinary club that serves as a launching pad for new food businesses, as well as an opportunity for those cooking just for enjoyment to share their creations with others.” It’s since disappeared from view.
The bottom line
“It’s not government’s job to make a business thrive, but it is government’s job not to kill a business before it has opportunity to thrive—not to interfere to such a degree that it’s over before it has a chance to start,” says Assemblyman Gatto. If AB 1616 is voted in by the Legislature and signed by Governor Brown, it’ll make selling food prepared in a home kitchen legal in California and unleash a new class of small entrepreneurs into the marketplace. Perhaps you’ll be one of them, making your homebaked dreams a reality.
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Located at 1410 Neotomas Ave. in Santa Rosa,NorthBay biz magazine is a monthly business-to-business publication covering Napa, Sonoma and Marin counties. This year, the magazine is celebrating 43 years of continuous operation. It originally hit the stands in 1975, when it was called Sonoma Business, and only covered Sonoma County. Norm and Joni Rosinski and John Dennis, acquired it in 2000 and changed its name to cover an expanded market. Today, the magazine is part of Amaturo Sonoma Media Group. More here..